From Static to Dynamic – Assets Generating New Streams of Financial Data

Assets, previously seen as one-off purchases and thus either “sunk” investments (costs) or mere tools that are depreciating, are generating ever-increasing amounts of data thanks to the Internet of Things (IoT).

Sensors and digital platforms now track everything from shipping containers to farm equipment. The data generated by these systems is not limited to optimizing logistics and maintenance schedules. It is also providing an additional source of valuable information for financial institutions.

We are no longer merely tracking assets but monetizing their movement.

Sensors, Contracts & Capital

A fuel tank used to be simply a tank. Today, thanks to the integration of IoT sensors and digital platforms, it generates a stream of data regarding volume, rate of fuel consumption, location, and condition of the tank.

Once captured digitally, this information not only informs dispatchers and drivers but also feeds smart contracts. Smart contracts are self-executing and generate payments based on predetermined rules and conditions when verified against data provided by the sensors. The sensors, therefore, enable the creation of self-executing financial processes.

Smart contracts rely on trustless automation meaning it has  no need for intermediaries to validate transactions, and the IoT provides the exact same capability. Therefore, when data verifies that a shipment has been delivered, funds are released. Similarly, when sensor data indicates a decline in asset health, lenders receive notification. The financial process is therefore self-executing and relies entirely on the data generated by this process.

Converting Expenses into Capital Tools

This financialization is further applied to operating expenses. Real-time fuel data collected via sensors not only optimizes route planning for fleets, but it also enables them to dynamically manage fuel-related risks.

For example, fleet operators that can demonstrate transparency and predictability of their operational expenses related to fuel, such as those provided by FHG Fueling through their comprehensive reporting capabilities, gain the ability to negotiate better fuel pricing agreements, reduce exposure to fluctuations in the market price of fuel, and demonstrate to lenders a stable cost structure.

Therefore, this shift fundamentally changes how companies perceive their balance sheet and how they view fuel. No longer is fuel merely an expense, but rather a measurable, hedgeable, and financeable resource. The data associated with each asset creates transparency, and transparency attracts capital.

Asset-Backed Financing Redefined

The concept of using assets as collateral for loans is not new. However, the integration of the IoT in asset tracking fundamentally alters the underpinnings of traditional asset-backed lending. In the past, lenders have required manual verification of the status of the assets being offered as collateral, static reports, and premium interest rates for risk.

With the advent of the IoT, however, lenders are able to continuously monitor and verify the status of the assets being used as collateral in real-time. As such, a financed bulldozer equipped with GPS and tracking of usage becomes a “living” collateral. The bulldozer can be geo-fenced, monitored for performance, and automatically reported.

The increased visibility associated with continuous monitoring of the assets reduces the lender’s risk associated with defaults. Additionally, the reduced risk associated with defaults enables lenders to extend financing opportunities to smaller operators who were unable to meet the reporting requirements of legacy systems. It is no longer solely dependent on credit scores and annual audits, but rather on what the machine did yesterday, what it is doing today, and where it will be tomorrow.

Liquidity That Follows Movement

As the accuracy and frequency of asset tracking increase, so does the liquidity that follows movement. Companies are able to secure financing that is not only based on the assets they own but also on how they utilize them. An idle generator in a warehouse is essentially static capital. However, once connected and enabled to transmit data, and subsequently analyzed, it becomes capable of securing financing through various means, including pay-per-use leasing, performance-based insurance, and real-time securitization.

That which was previously static is now liquid. The convergence of IoT and finance has created a new generation of programmable assets. The outcome is not only more efficient operations, but also greater financial flexibility.

In this new paradigm, motion is more efficient and also generates liquidity.