Traditionally, the verification process for an auto loan involves several back-and-forth steps, often beginning with the lender stipulating a series of required verifications to the dealer. Next, the dealer will request the necessary documents from the borrower. The customer then provides the information back to the dealer, who then sends the documents to the lender. And finally, the lender verifies the documents provided.
The process seems counterintuitive. These steps are inefficient and introduce multiple risks of human error, posing a huge threat to information security and data privacy.
It doesn’t have to work like this, especially when there are several options available for lenders to digitize the end-to-end verifications process.
Option 1: Open Banking verification
For direct lending, open banking can be used to digitize the identity verification process as well as eliminate manual data entry.
Rather than the laborious task of the borrower having to type out all the details of their address, phone number, employment, income and personal information, they can simply and quickly approve the information request using their banking app via an open banking technology provider such as Yodlee or Plaid in the U.S.
This helps eliminate data errors and smooths the whole application process for the customer.
Option 2: Third-party verification services
For indirect lending, an open banking solution might not be available because the lender can’t see the borrower’s information until after the application is received from an external point–of–sale system.
In this scenario, there are several third-party verification service providers that can help digitize either the complete end-to-end verification process or several parts of it.
LexisNexis offers an integrated service to verify the borrower’s identity with detailed information from their Social Security number and date of birth. Other providers, like The Work Number and Neustar, specialize in verifying income, employment and residential information.
Managing exceptions without the hassle
As more digital sales channels are being adopted by lenders, reducing additional paperwork should be a key focus. By taking advantage of these verification services, lenders can reduce manual errors and create a seamless, consistent experience for their customers across all channels.
However, even with digital verification services in place, lenders will sometimes have to obtain and verify additional documentation.
SMS options from providers like Solutions by Text can be a simple but powerful tool for collecting verification documents from borrowers and ensuring the financing process remains pain-free.
According to the Pew Center, 96% of Americans own a mobile phone, and 82% open every text message they receive. With this approach, borrowers receive a unique link to upload any required documents. This allows lenders to receive information quickly without needing to involve the dealer.
Once the documents are received, they must be verified. This process can be digitized using AI in the form of machine learning. There are several providers offering this type of service, such as Informed.IQ.
Instead of using in-house funding teams to inspect the documents and perform manual data entry, the data can be passed to a machine learning tool already trained to recognize verification documents, classify them, extract data, and confirm their authenticity.
The digital verification win-win
The verifications process can be time–consuming, complex and error prone. But there are many industry-proven tools and services available that save time and reduce headaches during the onboarding process.
Lenders don’t need to digitize every part of the process simultaneously. The key is finding the right technology partner and understanding that digitization is a journey that should be completed step by step.
Shim Mannan is executive vice president of product and business development in the Americas for White Clarke Group. White Clarke Group helps lenders digitize the customer journey.