Informed recently commissioned an industrywide, unbranded survey of auto finance executives to identify the key areas where they are leveraging artificial intelligence in their workflows and processes, as well as the challenges they face in implementing automation.
Financial Institutions and auto lenders have been using AI software to make their operations smarter, cheaper and faster, yet there is a lot the industry can learn from implementing the following trends and insights.
This is important because, according to the online survey presented to more than 2,500 professionals in March, approximately one-third said a quarter of their deal jackets had defects in 2022. Today’s new AI-powered compliance software spots common defects during loan origination for F&I add-ons, GAP waivers and debt cancellation agreements.
Key survey takeaways:
- 95% of lenders are beginning to leverage AI tools in some aspect of their business (i.e., credit decisioning, loan servicing);
- 51% of lenders cited regulator audits as their biggest concern;
- Nearly 44% of lenders are interested in leveraging AI to compete with lenders who are also using these tools;
- 30% of lenders said the top metric automation that has improved in the lending process is reduced cost; and
- 34% of respondents cited industry trade publications as their top information source.
Auto lenders can more stringently mitigate defect scenarios by implementing AI-powered systemic controls that help them avoid audits. Today, most lenders do not have systemic controls in place to audit the contents of contracts and deal jackets.
However, lenders are looking at implementing these controls through adding in-house staff, which is difficult in today’s tight labor market; relying on existing manual controls, which often are susceptible to human errors; or through external vendor partners, who provide AI-based software-as-a-service solutions to automate much of the process.
According to the survey findings, nearly half of respondents (43%) said deal jacket errors cost them roughly $1 million in 2022.
The majority of lenders surveyed said they average between eight and 12 minutes to remediate a deal jacket and manually onboard it — time that adds up when considering thousands of loans in a portfolio.
Meanwhile, half of lenders surveyed said they are most concerned about regulatory audits while 36% say they’re concerned about the increasing number of staff hours to scrutinize accuracy and/or rectify errors.
Auto Finance Summit East, Auto Finance News’ new spring event, kicks off May 10-12 at the JW Marriott Nashville. To learn more about the 2023 spring event and register, visit autofinance.live/afs-east.