As tax season rolls around every year, many lenders find themselves inundated with paperwork, forms and the looming deadline, set for April 18th this year. For people in accounting and finance fields, this can be an incredibly stressful time working to process the vast amount of tax information.
Meanwhile, auto lenders face several challenges that make their operations more difficult, including:
- Rising wholesale prices for used cars;
- Smaller tax refunds; and
- New IRS requirements for 1099-K forms and “side hustles.”
Given all the above, lenders are navigating a landscape requiring them to be more agile, efficient and fraud-resistant than ever.
For lenders with high volumes of auto loan applications, additional staff ramping and training often happens in advance of the crunch. However, with the right tools and strategies in place, lenders can navigate the market more efficiently, streamline their operations, reduce errors and inaccuracies, and minimize the risk of fraud.
By implementing automation, businesses can “do more with less” and improve their overall processes, making tax season less stressful for everyone.
Here are a few ways automation is a game changer during tax season:
- Faster processing times: As mentioned in the Auto Loan Defect Survey Report, automated systems process information more quickly than manual processes. This is especially important during tax season when deadlines are tight. The tailwinds of the current tax season can create a surge in demand for auto loans, and lenders might struggle to keep up. Automation helps lenders manage the higher volume of applications by streamlining the loan-approval process. Automated systems quickly process applications, reducing the time it takes to approve loans and disburse funds.
- Improved accuracy and reduced costs: Automated systems reduce errors in the lending process. This is also true in the tax season when one small mistake can result in penalties, fines or even audits. This not only helps lenders lower their operational costs but also enables them to offer more competitive interest rates to borrowers.
- Reduce headcount and training time: Automation can reduce hiring needs, training and ramp time required for agents to manually review credit documents and ancillary product contracts, especially as volume fluctuates, as well as reduce the need for internal domain expertise that could be lost with turnover. Automation reduces costs in the lending process by eliminating manual processes and reducing the risk of errors and inaccuracies during tax season’s high volumes, automation reduces the need for additional manual labor and the associated costs. By analyzing loan packages in real time, Informed immediately identifies incomplete, inaccurate or mismatched information — enabling agents to focus on tasks requiring attention, increasing review velocity and improving queue management.
- Enhanced risk management: Another benefit of automation is enhanced risk management. Automated systems provide real-time data and analytics on borrower behavior and loan performance. This enables lenders to quickly identify and mitigate potential risks, such as defaults or delinquencies. By having access to accurate and timely information, lenders can make informed decisions and reduce the risk of fraud.
- Improved customer experience: Automation provides faster processing times and more personalized decisions, improving the overall customer experience. This holds true during tax season when customers are looking for quick and efficient service. Automation also improves the overall customer experience. Automated systems provide faster processing times and more personalized lending decisions, enabling lenders to build stronger relationships with their customers. This increases customer loyalty and Net Promoter Scores, leading to better results for lenders.
Measuring the ROI of automation investments is an important way to assess their success. Metrics such as the net present value of automation investments or the payback period of automation projects provide valuable insights into the effectiveness of automation in improving lending operations. This is especially important during tax season when lenders are looking to maximize their returns.
Overall, automation can streamline and improve the tax season process, making it more efficient, accurate and cost effective. Auto lenders can still help their customers by doing more with less. By offering flexible loan terms, competitive rates and personalized customer service, nonprime auto lenders help customers get the most out of their tax refund.
In today’s lending market, staying ahead of the curve requires agility, efficiency and a commitment to minimizing fraud. By leveraging automation, lenders can achieve all three — streamlining their operations, reducing costs and improving the customer experience. As tax season continues, it’s clear that automation is a critical tool for lenders looking to succeed in this dynamic market.
Jessica Gonzalez is the director of lending strategies at Informed.IQ and has more than 15 years’ experience in the financial services industry, including tenures at Santander Consumer USA and Visa.