Looking at the transformation of the automotive industry over the past two years, we have met more than our share of challenges. As we faced unprecedented lockdowns, many lenders and dealers realized their internal systems were outdated. Going back to the pre-pandemic era, lenders – especially auto lenders – were among the first companies to adopt modern and innovative technology, but that means they have adopted some of the earliest pre-internet systems available.
Until 2020, the industry mostly operated with inflexible on-premises solutions that could run decades-old code, making it nearly impossible to make changes and adjustments to workflows fast enough to meet the changing market needs.
The auto finance industry continues to be innovative and resilient, as do the consumers served by lenders. Together, we have mastered the art of completing online applications and contracts using sophisticated next-generation LOS solutions.
Although car sales efforts have been particularly focused on in-person sales, showroom interaction and paper contracts, the pandemic has forced everyone to lean on technology and learn how to make deals. business in a much more versatile way. Lenders were forced to adopt new solutions if they were to survive, and in doing so they began to realize the many efficiencies that these rapidly evolving technologies could offer.
3 points on automation
By migrating to automated systems based on software as a service, lenders and dealers have gained advantages that they can leverage in the future. Here are three key takeaways that savvy lenders have learned from the challenges of the past two years that have helped them become more strategic and successful:
1) Reduce friction with automation and artificial intelligence (AI). A great way to ensure that customers close the sale, leave satisfied, and return for future purchases is to remove as many disincentives and disruptions from the loan origination process as possible. Less complexity means more competitive advantages. Automation and AI-powered alternative data can be integrated into the online lending process, helping dealers close more loans faster and with less risk, creating additional value.
The more fluid and flexible a lending platform can be, the easier it is for financial organizations to take advantage of changing market trends and seize new opportunities. An effective LOS solution enables lenders to adjust their online application processes as needed, create new promotions on the fly, and quickly and accurately support new loan products.
2) Use technology to diversify sales channels. Many lenders are moving to cloud-based electronic systems to better enable them to sell beyond the traditional showroom. Lenders and dealers can use a variety of tools to attract buyers, generate leads, and close deals through online portals.
For example, some lenders have introduced direct-to-consumer sales techniques through their corporate websites with specific sales messages and unique promotions. This approach is particularly advantageous for branded financial institutions that already have a market presence and a well-visited website. Adding a loan origination portal to the site leverages online infrastructure and builds traffic to increase sales.
Realigning solutions with market expectations is also important, as many potential buyers have decided that visits to the dealership are no longer necessary, especially users accustomed to doing everything online, from gaming to shopping to the conduct of business. A lender’s ability to respond to this trend and offer electronic fitment options gives them a better chance of retaining this growing demographic of car buyers, a generation with many vehicle purchases ahead of them.
3) Integrations are essential. As lenders migrate to cloud-based loan origination and loan management solutions, integration has become a key driver of innovation. There are many beneficial features and services available to lenders from innovative third-party vendors that improve user experience, improve efficiency, reduce costs, and enable vendors to become more competitive.
At its core, cloud infrastructure enables all of these innovations to work together to support financial institutions and consolidate functionality in a simple and intuitive way. Seamless and integrated cloud computing allows lenders to compete for speed and increase their ability to process and service more loans.
Financial platforms that integrate with leading third-party providers can provide a roster of enhanced capabilities for lenders and consumers alike, whether it’s better risk mitigation and compliance, faster underwriting with enriched alternative data, improved document management and storage, or the ability to efficiently manage loans throughout their lifecycle. Ultimately, the technology should bring these capabilities together on a single, unified platform for a complete and superior experience.
Agility wins
In summary, business agility is essential for any industry, but it has never been more true than during the recent crises we are emerging from. Lenders have proven to be an unstoppable bunch – more resilient and versatile than many imagined. They leveraged technology to keep pace with changing customer expectations, competition, and lending programs while creating a competitive advantage that will endure into the future.
Vlad Kovacevic is the founder and CTO of Inovatec Systems. Inovatec provides LOS, LMS, and direct systems that aim to eliminate friction in the loan process and automate much of the manual work of loan origination and management.
The 23rd edition 2022 Big Wheels Auto Finance Data Report is now available, providing exclusive statistics on the auto loan and lease industry and a ranking of the top 200 automotive financiers in the country. Order your report.
