As has become an annual tradition, much of the discussion at the Auto Finance Summit 2019 this week was centered around the next steps in the digital transformation of auto finance. Whether it was the use of artificial intelligence, addressing cybersecurity, or managing legacy systems, there is a clear commitment to innovation across the industry.
Much of that discussion centers around the borrower experience and the need to engage buyers earlier and earlier in the process to expedite and improve the buying and lending experience.
Across the industry, for both direct and indirect lending, there is a race to launch clean and intuitive lending portals. This can be seen with innovators like Carvana and CarFinance, but also with non-bank lenders, like Westlake, and traditional banks, like Bank of America. Both industry stalwarts have invested heavily in their online auto lending portals.
However, while the borrower experience gets the bulk of the attention, there is also a clear understanding and commitment in the industry to go beyond the portal, build end-to-end digital lending systems that connect loan documents and data captured in the portals, and enable them to flow seamlessly into the growing digital ecosystem for auto finance.
During the session “Designing an Extraordinary Auto Finance Online Portal,” panelists Ryan Brooks, director of digital lending at WSECU, and Craig Hewitt, CEO of CarFinance, spoke about creating seamless user interfaces, how to modernize your existing online platform, and web elements that promote engagement. However, they also discussed the ‘less sexy’ part of digital auto finance: connecting to back end systems.
While user interface and user experience get a deserved amount of attention, there is also an acknowledgement that the portal is just the beginning, and to maximize value for originators, lenders, and investors, there needs to be an end-to-end digital process. “It is work,” Brooks acknowledged, when asked about connecting the front end to the back end.
In Las Vegas this week, the eOriginal team met with many lenders investing in the digital process who want to make sure that all of the right tech and processes are lined up after a sleek new portal is in place.
This is particularly vital for auto loans, which are classified as chattel paper and must meet the compliance requirements of the Uniform Electronic Transaction Act (UETA) and the Federal Electronic Signatures in Global and National Commerce (ESIGN) Act and the Uniform Commercial Code (UCC) Article 9-105.
While using a portal application process can be extremely valuable and help drive business, the digitization of loan origination systems, dealer management systems, and portfolio management systems can help borrowers and dealers identify and connect with funders more efficiently.
And on the furthest part of the back end, where lenders and investors engage, there is growing comfort – and even demand – to go digital. Some lenders are placing fees on the paper transactions created by online originators, while rating agencies are referencing the use of best-in-class digital systems to manage auto loans through the securitization process.
The industry’s race to intuitive and engaging portals is an exciting and revolutionary development, but its impact will go beyond just the borrower experience. It can be the spark to moving the entire financing process into an environment where lenders and investors can have complete confidence, while funding moves at the speed of digital.