Digital Auto Finance Done Right

David Bocek, July 2, 2021

In early 2020, the auto finance industry implemented social distancing measures, requiring dealers to adapt to business no longer being conducted at dealership locations. Digitization efforts targeted a 100% online auto lending process, and as a result, web and mobile apps became the primary channel for many car owners to apply for an auto loan. Today, with operations in many countries returning to pre-pandemic activity, the remote digital process and related digital transformations are here to stay.

As the industry reopens, investments in digital retailing solutions are on pace for continued growth as they prove their effectiveness in working with car buyers in a post-pandemic world. In fact, a recent Cox Automotive Covid-19 Consumer Impact study found that “60% of auto shoppers would prefer to do more of their purchasing steps online as opposed to the last time they purchased a vehicle”.

In our recent webinar, Seal the Digital Auto Finance Deal with eContracting from Identity Verification to eVaulting, Theodore Papailiou, VP Pre-sales & Value Engineering at eOriginal, a Wolters Kluwer Company, joined OneSpan to discuss key insights about the impact of COVID-19 on the auto financing sector, the challenges auto lenders had to contend with, and the tools they leveraged to transform their businesses to compete during the pandemic.

Early Drive Towards Digital Auto Lending

Before the pandemic, auto finance companies were already looking for ways to reduce operational bottlenecks at car dealerships caused by inefficient and time-consuming paper-based processes. A poll conducted during the webinar revealed that trend is accelerating with 77% of participants planning to expand their organization’s ability to digitize the lending process in 2021.

With approximately 3% of paper forms in auto finance loan applications reportedly missing at least one signature or initial, auto lenders spend millions each year correcting errors. To make matters worse, the high level of friction in the paper process leads to lost bookings when loan applicants fail to return their completed forms in-person back to the dealership.

The Cox Automotive Impact Study also showed than when dealers were asked how digital retailing makes them more efficient, 78% responded “Customers spend less time at the dealership”, and 59% also said it “reduces the time dealership staff spends completing a deal”. Half of respondents also felt that the steps to purchase a new car were reduced.

An end-to-end digital auto lending solution can fully automate the entire car buying process from start to finish by bringing together some of the following key component solutions. 

E-Signatures

An e-signature solution keeps documents for car loans moving through a remote signing process, enforces mandatory signatures, and applies digital signature encryption at each stage to produce a fully tamper-evident record. In addition, comprehensive audit trails can show in precise detail every action, ID verification pass, and the customer’s intent to sign. With e-signature workflows, documents are completed in good order, friction in the sales process is minimized, record-keeping is simplified, and customers enjoy a better experience.

ID Verification

The increased use of online and mobile channels means the potential for identity fraud continues to grow. With face-to-face meetings not always possible, it is important to leverage an identity verification solution that provides a higher level of assurance with a minimal amount of friction. For instance, government-issued ID cards can be paired with an applicant’s live image through biometric comparison.

E-Vault

Special consideration should also be given to the post-execution of a loan document as a negotiable instrument traded on secondary markets. The single authoritative copy of the loan contract that is produced at the end of the signing process must be stored with its integrity maintained and in a secure environment.

While e-signature technology produces a legally binding document, it cannot alone produce a digital transferrable record, leaving either the dealer holding on to an auto loan they cannot sell or an unaware buyer/investor with an asset they cannot perfect on. Either way, eroding the needed trust between these symbiotic partners. This is why a digital vault is needed from origination to the contracts end-of-life.

In addition, An e-vault enables audits, custody controls, registration, and the ability to digitally move the original asset to a new owner securely. In the case of an audit, digital assets are accessible from anywhere and viewable as originals, eliminating the need for on-site visits as auditors can produce the necessary evidence remotely.

Challenges to Adoption of Digital Channels at Dealerships

Digitization in auto lending processes can be of concern to dealers due to the reduced number of face-to-face meetings with clients. Dealers may feel they have less of an opportunity to maximize the value of a new sale.

For high-value engagements where customers need a little more handholding, human-assisted digital workflows can help dealers maintain a high-quality hybrid interaction with their clients. Solutions like OneSpan’s new Virtual Room recreate the face-to-face meeting by engaging with clients through video conferencing and collaborative tools. As a result, less time is spent working through paper forms and more time can be spent on discussions that provide value and improve the bottom line.

Key Insights from the Field

CDK Global is a great example of a company that stayed ahead of the curve and launched Sign Anywhere, a remote e-signature component powered by OneSpan Sign for their dealer management system to improve the customer experience during the pandemic. More than 500 Volkswagen dealerships leveraged the solution, reducing the time to fund new loans from 4-6 days down to under 24 hours. Another auto finance lender experienced 20% growth in contract bookings while cutting costs by 15% per contract and also cut their time to fund by a half day.

What the Future Holds for Digital Auto Lending

As trends indicate that many consumers expect a 100% digital process for their next vehicle purchase, dealerships must equip themselves with the right tools like ID verification, e-signatures, and an e-vault platform to allow their customers to keep the auto lending process completely paperless, from origination to close.

Only an open ecosystem with accessible integrations like those provided by OneSpan Sign and eOriginal create a seamless end to end workflow that can guarantee and maintain the integrity of loan documents throughout their lifetimes, all while updating a perpetual audit trail and keeping in compliance with regulations.  

Learn more about digital auto lending with OneSpan and eOriginal by watching the recording of our May 25thth webinar, Seal the Digital Auto Finance Deal with eContracting from Identity Verification to eVaulting.

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