Over the past few years, auto finance providers have watched consumers evolve into tech-savvy, digital-first users. While the pandemic certainly accelerated this transformation, the reality is that the auto lending industry had been undergoing a massive overhaul long before the global pandemic.
As auto finance providers fast-track their shift toward digitization, compliance must not fall by the wayside. Recent high-profile breaches and abuse of consumer information demonstrate the importance of continually adapting your compliance management to modern challenges.
Balancing compliance and competitiveness requires auto finance providers to anticipate and readily respond to industry trends. Where should auto finance providers focus their efforts to ensure they’re meeting the demands of both consumers and regulators? Here are the top three trends that auto finance providers should pay attention to right now.
Trend #1 – Full speed ahead with digitization
Remember when buying an automobile used to be an in person, all-day affair? It involved wandering the lot to find the right vehicle, taking it out for a test drive, haggling for the best deal, and eventually driving the brand new or new-to-you auto off the lot? Times have changed, and so have consumer preferences and sales approaches. Many of today’s consumers have grown up with mobile devices and social media. Vehicle purchases now begin online – researching brands and prices, and securing financing before even stepping foot in a dealership.
Digitization has not only delivered more remote, self-service, and automated options but auto finance providers have also seen significant workflow enhancements, including faster processing, more reliable document handling, and mitigated risk.
As auto finance providers continue their digital journey, it’s important to strengthen partnerships with technology providers who understand the auto industry and offer purpose-built solutions to digitize their lending business. The goal is to streamline processes and create greater speed and flexibility for consumers. The resulting improvements in service are what ultimately increase market share.
Trend #2: Put the brakes on cyberattacks
Cyberattacks and data breaches are on the rise within the financial services industry, resulting in significant harm to consumers. In response to the increase, the Federal Trade Commission (FTC) recently amended the federal Standards for Safeguarding Customer Information (Safeguards Rule) under the Gramm-Leach-Bliley Act (GLBA). The updates put pressure on financial institutions, including auto finance providers, to develop, implement, and maintain a comprehensive security system to keep their customers’ information safe.
As auto finance providers know, keeping customer data and digital loan documents protected is about much more than confidentiality. With such stringent requirements, auto finance providers need technology that ensures compliance with the GLBA Safeguards Rule and delivers Digital Asset Certainty with their lending transactions. Only available from Wolters Kluwer eOriginal, Digital Asset Certainty guarantees the highest level of enforceability. This gives auto finance providers assurance that their digital loan documents containing customer information are encrypted, compliant, and meet all legal requirements and industry best practices.
Trend #3: Step up securitization
Securitization is one of the many parts of the auto financing business that benefits from digitization. Creating the electronic documents, or eContracts, and digitally securitizing the assets in an eVault increases efficiencies, improves transparency, and mitigates risk, particularly around the ownership of assets.
Another advantage of storing and managing an eContract in a secure eVault is the ability to streamline securitization and sale of the asset-backed security (ABS). By speeding up the delivery of eContracts to the secondary market, an effective eAsset management solution decreases loan dwell time and increases capital efficiency. It also empowers auto finance providers to tap into a broad digital ecosystem of secondary-market partners – including warehouse lenders, custodians, servicers, and investors.
Fast-track your digital adoption
With auto sales booming, it’s never been more critical to embrace digitization. Our Wolters Kluwer Digital Auto Finance Index reports a nearly 79 percent growth in digital financing transactions between 2020 and 2021, up from 38 percent growth in the prior year (2019 – 2020). The Index also reports a 98 percent increase in digital transactions when comparing Q4 2021 with Q4 2020.
Whether auto finance providers should implement digital technologies is no longer the question. As the need for digitization continues to accelerate, leadership may instead focus on how quickly they can adopt the technology to avoid the risk of being left behind.
Ready to discover how digitization can transform your business? Schedule an appointment with our product experts here.