Today’s automotive and auto lending industry continues to move more toward a digital retailing environment. And while the consumer-facing side of the digitized process continues to make great progress, 2022 finally saw a lot of momentum with digital transformation and adoption for back-end processes.
The digitization of the back end is complicated, and there are many moving parts. It takes more than just a website to successfully purchase a vehicle online. There is an entire ecosystem working behind the scenes that also must be digitized, and it involves several parties including the dealer, consumer and lender.
What Is an eVault?
Central to this behind-the-scenes ecosystem is what has been known as the eVault. For auto lenders, one of the major concerns inhibiting the adoption of digital finance technology is the legality and enforceability of electronically signed documents as secure assets. These electronically signed documents need to be stored and managed in a way that ensures they retain the same legal enforceability as paper — and this is where the eVault comes into play.
However, even the eVault has evolved significantly and it’s no longer enough to just store everything electronically. There are many eVault providers now available, but what lenders need in 2023 is a fully functioning eAsset management platform for financial assets.
Why It’s Not Enough Just to Have an eVault
eAsset management platforms and solutions for financial assets are important because they are industry trusted loan compliance management systems that support originators, warehouse lenders, custodians and investors, along with servicers to close, manage and monetize digital assets.
Today’s leading solutions are purpose-built to deliver digital asset certainty, which is the assurance that digital loans are created, stored and assigned in full accordance with all compliance standards for the industry, while maintaining the highest level of legal enforceability throughout a digital loan’s lifecycle.
Following are important reasons why eAsset management solutions for financial assets are more trusted than simple eVaults, and here are some key indicators to look for:
eAsset management for financial assets requires much more than a simple eVault, which is often equated to “secure storage.” Secure storage includes encryption, tamper evidence, access controls and access logs. However, an eAsset management solution includes all of that, plus the ability to assign/transfer control over a financial asset with a tamper-sealed registry of the history of control. It also includes the ability to assign/transfer security interest in a financial asset (or a pool of financial assets) with a tamper-sealed registry of security interest; also the ability to apply appropriate legends to designate both control and assigned security interests on copies of financial assets; the ability to spring control to the secured party; and the ability to grant “partitioned access” to third parties to perform specific functions against the financial asset.
It’s wise for lenders to find a solution that offers support across any asset class for complete portfolio visibility and improved risk mitigation and control. Furthermore, it’s extremely critical that your solution includes an authoritative copy and digital asset certainty, compared to just being a document storage solution.
The right solution upholds the laws and safe harbor to make an authoritative copy legally enforceable and is a tried-and-true solution. This is important because state and federal evidentiary rules are applied to the creation and printing of certified digital original or authoritative copy documents. And to this end you’ll need eAsset certainty with tamper-sealing, encryption and end-to-end audit trails so you can track every action on a loan digitally as a digital chain of custody and evidence.
Completing the Back-End Digital Transformation Process
With an immutable digital record, financial institutions can pledge, sell and securitize digital assets with full compliance and maximum return of investment. Today’s leading solutions afford the necessary protection to securely manage the electronically originated documents and assets. Issuers, legal counsel and rating agencies that support secondary-market transactions have accepted these trusted solutions as meeting securitization requirements.
As lenders move to digitize their consumer-facing processes with back-end functions, the right solution is a vital component to providing fully compliant and contactless digital loan transactions. With the adoption of this technology, auto lenders and their dealership partners will ensure they are providing the efficient experience consumers want today while also remaining in compliance with new and evolving regulations built for a digital economy.
Tim Yalich is head of auto strategy for Wolters Kluwer, a global provider of professional information, software solutions and services for the automotive and auto lending industries. For more information, visit www.wolterskluwer.com.
