3 ways lenders can take advantage of emerging tech


Looking back at the transformation of the automotive industry over the past two years, we’ve faced more than our share of challenges. As we’ve dealt with unprecedented lockdowns, a huge number of lenders and dealers realized that their internal systems were obsolete. Looking back to pre-pandemic times, lenders — especially auto lenders — were some of the first businesses to adopt modern and innovative technology, but that meant they adopted some of the earliest available, pre-internet systems.

Up until 2020, the industry was run primarily with inflexible on-premises solutions that could be running decades-old code, making it nearly impossible to make modifications and adjustments to workflows quickly enough to accommodate the evolving needs of the market.

The auto finance industry is continuing to innovate and proving to be very resilient — as are the consumers who lenders serve. Collectively, we have mastered the art of completing applications and contracts online using sophisticated, next-generation LOS solutions.

Although car sales efforts were particularly devoted to in-person sales, show-floor interaction and paper-based contracts, the pandemic forced everyone to lean on technology and to learn how to conduct business in far more versatile ways. Lenders were compelled to embrace new solutions if they wanted to survive, and in the process began to realize the many efficiencies these quickly advancing technologies could deliver.

3 automation takeaways 

In migrating to automated, software-as-a-service-based systems, lenders and dealers gained benefits they’ll be able to leverage going forward. Here are the three crucial takeaways savvy lenders have learned from the challenges of the past two years, which have helped them become more strategic and successful:

1) Reduce friction through automation and artificial intelligence (AI). A great way to ensure that customers complete the sale, leave satisfied and return for future purchases is to remove as many deterrents and disruptions from the loan origination process as possible. Less complexity means more of a competitive advantage. Automation and AI-powered alternative data can be incorporated into the online lending process, helping dealers to close more loans faster and with less risk, creating additional value.

The more friction-free and flexible a lending platform can be, the easier it is for finance organizations to take advantage of changing market trends and capture new opportunities. An efficient LOS solution allows lenders to adjust their online application processes as needed, create new promotions on the fly, and quickly and accurately support new lending products.

2) Use technology to diversify sales channels. Many lenders are opting for cloud-based electronic systems to better enable them to conduct sales beyond the traditional show floor. Lenders and dealers can use a variety of tools to attract buyers, generate leads and originate deals through online portals.

For example, some lenders have introduced direct-to-consumer sales techniques through their corporate websites with specific sales messaging and unique promotions. This approach is especially beneficial for branded financial institutions that already have a market presence and a well-visited website. The addition of a loan origination portal into the site takes advantage of the online infrastructure and establishes traffic to increase sales.

Realigning solutions to market expectations is also important, since many potential buyers have decided that visits to the dealership floor are no longer necessary — especially users attuned to doing everything online, from gaming to shopping to conducting business. A lender’s ability to cater to that trend and offer electronic origination options gives them a better chance of building loyalty with this growing demographic of car buyers, a generation with many vehicle purchases ahead of them.

3) Integrations are key. As lenders migrate to cloud-based origination and loan management solutions, integration has become one of the biggest drivers of innovation. There are many beneficial features and services available to lenders from innovative third-party providers that enhance user experiences, improve efficiencies, drive down costs, and empower providers to become more competitive.

At its core, cloud infrastructure makes it possible for all these innovations to work together to support financial institutions and consolidate features in a straightforward and intuitive manner. Seamless, integrated cloud computing is what allows lenders to compete based on speed and increase their capacity to process and manage more loans.

Finance platforms that integrate with top-flight, third-party providers can deliver a roster of improved capabilities for both lenders and consumers, whether it’s better risk mitigation and compliance, faster underwriting through enriched alternative data, improved document management and storage, or the ability to efficiently manage loans over their full lifecycle. Ultimately, technology should bring those capabilities together onto a single, unified platform for a comprehensive and superior experience.

Agility wins

In summary, business agility is key for any industry, but it’s never been proven to be as true as during the recent crises we’re emerging from. Lenders have turned out to be an irrepressible bunch — more resilient and versatile than many imagined. They have leveraged technology to keep pace with changing customer expectations, competition and loan programs while building a competitive edge that will endure into the future.

Vlad Kovacevic is the founder and CTO of Inovatec Systems. Inovatec provides LOS, LMS and direct systems that seek to eliminate friction in the lending process and automate much of the manual work of originating and managing loans.

The 23rd annual Big Wheels Auto Finance Data 2022 report is now available, providing exclusive statistics on the auto lending and leasing industry and a ranking of the top 200 auto financiers in the nation. Order your report.