Timothy Yalich is Head of Motor Vehicle Strategy for Wolters Kluwer, and Jessica Gonzalez is VP of Customer Success, Lending at Informed.IQ.
As the automotive industry evolves, so do the challenges facing auto dealers and lenders. In today’s market, dealers and lenders are encountering an array of obstacles, from rising competition and shifting consumer preferences to economic uncertainties. In their work to simplify and streamline the complex landscape of automotive transactions and financing, automotive dealers and financiers need an automated technology solution that modernizes the vehicle transaction and lending lifecycle by using digitized processes and artificial intelligence (AI).
Today’s Vehicle Lending Process is Complex
Today’s vehicle shopping and lending process has a complex mix of intricate, diverse systems—and often manual processes— to collect and validate disparate data from various sources. As a result, the financing workflow suffers from inefficiencies in contract tracking, portfolio management and data consistency. The industry is at a crossroads and is looking to leverage the power of AI to help address the need for accelerated, automated vehicle loan operations without sacrificing compliance.
Adding paper processes or a hybrid of paper and digital processes on top of these complexities creates inefficiencies in tracking where contracts are, managing them within the portfolio and ensuring all systems are populated with the same consistent and accurate data. Consumers and motor vehicle retailers expect lenders to support a fully digital buying experience. This is driving the critical need for innovation, greater efficiencies and a compliant funding strategy.
A large part of improving the car shopping experience is making it faster, yet secure and reliable. A recent survey showed that the majority of lender and dealer respondents (62.7%) said it takes customers longer than 30 minutes to complete a sale when the customer has to sign all documents via traditional paper-based materials. However, 95.5% of respondents using digital tools said it takes customers less than 30 minutes when signing documentation digitally1.
Digitizing Documents is the New Normal
AI-powered technologies can now automate the review and validation of consumer and dealer documents. The seamless integration of these technologies with digitized eVault asset management solutions ensures a holistic approach to eAsset lifecycle management for lenders. This collaborative suite of digitization solutions is poised to redefine efficiency, reduce friction in the loan process and expedite the journey from paper to digital processes from borrower to the secondary market.
This leading-edge combination of technologies is needed to effortlessly integrate into existing loan origination and process workflows, offering flexibility for use at underwriting, funding and portfolio asset management. Furthermore, a dual approach to consumer and dealer stipulations aligns with the eVault’s capabilities, preventing held offerings and ensuring a smooth transition to funding and future monetization. Lenders enjoy a user interface that displays real-time statuses and highlights, delivering a transparent view for funding analysts and underwriters.
Lenders also understand that the verification process remains critical, and these new solutions go beyond standard verification, offering valuable insights into income misrepresentation through documentary and non-documentary validation. With access to millions of records, these solutions shed light on prevalent issues such as income overstatement and understatement. What’s more, the insights are vital for dealer reward programs, fraud detection, legal compliance and optimizing loan terms.
These insights also lead to greater documentation accuracy and fewer errors in deal jackets which can contribute to significant losses at the bottom line. Another industry survey found that 44% of dealers and lenders said errors in their deal jackets in 2023 cost them an estimated $1 million in 2023. Nearly a third (30%) said deal jacket errors cost them between $1 million to $5 million in 20232.
The Importance of Integrating AI Decisioning Into Digitized Documentation
With all of this in mind, the seamless integration with the eVault enhances the overall efficiency and security of auto loan operations. Acting as a secure digital repository of transferable records, the eVault provides a comprehensive solution for lifecycle eAsset management from origination to secondary market sale. This integration brings forth accelerated loan operations, enhanced compliance and verified, consistent reporting capabilities.
Auto lending has traditionally relied on conventional risk assessment methods, such as credit scores and historical data analysis. However, in today’s fast-paced world, these traditional approaches fall short in capturing the nuanced dynamics of borrower behavior and market trends. This is where the combined power of AI, automation, data modelling, enhanced verification and eAsset management are emerging as a combined game-changer, offering unparalleled capabilities in data analysis, risk assessment and decision-making for lenders.
This new integration of technologies accelerates automated verifications and funding for lenders by removing tedious integration work and providing a holistic approach to funding. As the automotive industry continues to undergo a digital transformation in front of the consumer and at the back-office for workflows, lenders must adapt to changing consumer expectations for seamless, digital experiences. AI-powered solutions enable lenders to offer intuitive digital interfaces for loan applications, approvals and servicing, meeting the demands of today’s tech-savvy consumers.
By harnessing the power of AI and digitized document storage in their portfolios and loan decisioning processes, lenders can gain a competitive edge, improve risk management, enhance operational efficiency and deliver superior customer experiences.
1: Wolters Kluwer Industry Data collected from a third-party commissioned survey in November, 2023.
2: InformedIQ Industry Data collected from a third-party commissioned survey in January, 2024.
