Technology January 4, 2019 Last updated January 2nd, 2019 316 Reads share

Is Your Auto Lending Process Stuck in 2004?

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Auto financing is increasingly becoming commoditized. In this space, the price is no longer a focal attraction point for customers. This issue resonates with both non-captive and captive lenders. As a result, the new differentiating factor of loan originators is the customer experience. In fact, customers are willing to spend an 18% premium for this excellent, comfortable customer service.

The Digital Age:

 

The habit of today’s average customer is to live a digital lifestyle. Companies like Apple, Google, Amazon, and Microsoft have exemplified how to use service, design, and technology. Each company shows how to meet the needs of these demanding customers. Corporations have developed new standards, systematically analyzed customer needs, and found ways to satisfy them with less effort or higher quality. We’ve all recently become accustomed to receiving orders placed online the same day or the next. The lives of consumers are continually being simplified with technology.

Expectations of what companies should provide have grown as a result of this constant simplification. It has never been easier for customers to research lenders to compare their products and prices. Mobile technologies are partly responsible for raising consumer expectations, with today’s users expecting simplicity in design and experience. As a result, customer loyalty has vanished. A mere 23% of people say they have a relationship with a brand. Today, customers have the power to switch from one lender to the next in an instant. A frustrating, time-consuming customer journey can well be the difference between a completed and abandoned loan application.

The New Arena:

Offering the best rate is no longer adequate to outshine competitors. Today, factors like attitude, professionalism, intuitiveness, information-sharing, and accessibility are driving growth. A recent report found that 60% of consumers have taken their business elsewhere due to poor customer service and nearly 70% of younger consumers have moved on due to inadequate support.

Streamline Processes to Compete:

To compete, auto lenders must transform the way they interact with consumers. Digital processes have become more pervasive across customer segments worldwide. For lenders, this is an opportunity to consider more fluid and virtual ways to secure customer loyalty and optimize costs.

Yet, companies are not realizing this opportunity. Abandonment rates for online loan applications are at an all-time high of 97.5%.

Why are Applicants Dropping Out?

For an industry that relies on the completion of forms, these abandonment rates are a major problem. There are several recurring reasons that applicants are dropping out of the application process:

  • Download PDF: Applicants are sent application forms to complete in PDF format. Upon downloading these forms, the PDF becomes available exclusively on the device in use. Consequently, it is difficult to return to the application on any other device. Also, some formats are only digitally fillable if the customer possesses a particular app.
  • Print and sign: These PDF documents require the customer to print and sign the applications, but most of them don’t have a printer handy when applying for a loan online, certainly not when they’re on the go. 
  • Submit docs: Applicants are either asked to scan original docs, such as proof of identity or proof of income, or to make copies and send them by mail. Thing is, many applicants do not have access to a scanner or copier. They also do not have time to stand in line at the post office.
  • Fill in forms: The long application form daunts, and sometimes overwhelms the applicant. Borrowers often bail on the process before they even start because of all the fields to fill in and documents to provide.
  • Re-work: When vital documents are missing or an applicant has entered information incorrectly, they are expected to redo the form or re-submit the docs. Then, they must wait, yet again, for a lender to contact them and confirm that the new info is accurate.

The high cost of outdated application processes:

A recent Kelley Blue Book survey found that 40% of car buyers are most frustrated with tasks like filling out paperwork (27%) and applying for financing (13%). The greatest customer pain point, anger over the amount of time invested after customers have agreed to purchase, is produced by these process inefficiencies. Not knowing what the next step is and frustration over idle time are driving away prospective customers.

One recent survey found that application abandonment rates have shot up by 35% over the past two years. As a result of process inefficiencies, companies are losing between 20% and 30% in revenue every year.

The auto originator’s challenge:

Financing and lending technology has been stagnant since about 2004. That’s when the internet began to offer consumers the option of financing a vehicle online. By and large, auto lenders haven’t adjusted to the heightened expectations of today’s consumers. Most lenders continue to inefficiently manage process flows and operations across diverse platforms. They rely on the completion of manual tasks for a smooth daily workflow. One survey found that a significant percentage of auto lenders don’t have the technology required to streamline their processes, everything from origination to servicing through collections. With such an outdated approach, it’s virtually impossible to maintain a competitive advantage in today’s increasingly customer-centric market.

 

The solution to this loan application challenge:

To increase application completion rates auto lenders in this increasingly commoditized market need real-time digital engagement tools to speed up customer-facing processes. An effortless customer journey is one that enables prospective car buyers to digitally sign documents, complete forms and share customer documents/ID. Auto lenders that incorporate instant collaboration solutions are likely to increase loan application completion rates. 

Only through IT innovation can simplified operations and a seamless customer journey be put into practice. Today, there are intuitive and easy to implement technologies that are optimizing LOS to quickly bridge the CX gap in auto lending.

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Howard Schulman

Howard Schulman

I've worked with several call center technology companies delivering marketing and sales insights and strategy.

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