Leveraging technology to maximize efficiency in auto lending

Financial institutions are turning to fintechs more often to access their advanced technologies. Makes sense, since lenders need advanced verification methods to enhance customer experience, prevent fraud and become more competitive. With fluctuations in interest rates, high refinancing activity and evolving regulations, lenders must adapt to meet the demands of the digital age — and fintechs are the enablers. 

Maximizing efficiency is a common goal, and there are a few strategies to achieve it. Following are technology-enabled “levers” that lenders can pull to  overcome their current challenges. 

Reducing operational costs 

The objective of “doing more with less” is achieved by reducing operational costs. One way to do that is by automating document-related processes. Streamlining daily tasks and minimizing manual labor required for repetitive activities such as data entry, validation, transformation, reconciliation and compliance results in a reduced need for human resources and a more than 50% reduction in document-processing expenses. By letting the software handle the boring, repetitive, low-level work, the extra “human time” can be reallocated for higher value or customer-facing work. 

Establishing consistent and scalable processes 

Consistent and scalable processes can be established through automation combined with policies, procedures and standards. Implementing a set of policies, procedures and standards that define how the organization will streamline and reduce operational expenses is crucial for long-term cost savings and scalability. 

Mitigating risks 

Proactively conducting a comprehensive risk assessment of the lender’s potential risk exposure is essential for effective risk mitigation. Following the assessment, lenders can develop a risk management strategy that aligns with business objectives and risk management approach. Continuous monitoring and adjusting to changing threats, technologies and regulatory requirements is key to success.

North American auto lenders have recognized the benefits of automation, but often have concerns about accuracy and scalability, which are critical for lenders looking to grow their loan or lease portfolios.

Automation companies, or fintechs, should be asked to provide performance metrics demonstrating the accuracy and scalability of their systems. This includes metrics such as error rates, processing times, and throughput as well as case studies highlighting real-world successes where the automation system has improved efficiency, reduced errors and scaled to meet the needs of the lender.

Providing accurate data for insights 

Manual document processing — prone to human error — can have disastrous consequences such as non-compliance and penalties if data is inaccurate. Decisions must be based on accurate data. Automating document processing can help lenders increase accuracy. 

Intelligent document processing platforms provide benefits such as document intelligence, which helps businesses interpret, capture, validate, transform and reconcile data from documents. This leads to informed business decisions and simplified analytics, even from unstructured documents.  

Lenders can use these quantitative and qualitative insights and data to see and assess more deals, win competitive deals and nurture their portfolio for follow-on investment or mergers and acquisitions. 

Measuring success 

To ensure success, establish key performance indicators (KPIs) to measure the effectiveness of the program and identify areas for improvement. Providing ongoing support to customers helps ensure that their systems remain accurate and scalable over time, which is important to long-term return on investment. This includes regular updates and maintenance to address issues and ensure that the system continues to perform optimally. Best practices include an account management team with quarterly customer success meetings and quarterly business reviews.  

By providing KPIs and best-in-class practices that showcase the accuracy and scalability of their systems, fintechs build trust with their customers. The end-state accomplishments will vary depending on the lender’s specific needs and goals but often include achieving compliance with industry standards and regulations, reducing the organization’s overall risk profile, doing more with less and improving their security posture. 

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.