Graham Donald explores some of the challenges facing the industry and explains how intelligent automation technology could be the key to meeting them head on
The motor industry is on a high after a record 2014, the best year in a decade in terms of sales. Statistics from the Finance & Leasing Association (FLA) confirm that figures were up 17% on the previous year, with 75.9% of all new cars sold being financed in some way. Forecasts for the year ahead look positive too, as the market climbs back to pre-recession levels. The prospects look exciting indeed.
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Yet, such celebration should not draw attention away from the fresh challenges of 2015.
The FCA challenge
The grace period afforded to the sector by the Financial Conduct Authority (FCA), which took over from the Office of Fair Trading in April last year, is well and truly over. Its first year in charge saw the FCA distribute a massive £1.47bn worth of fines, coming down hard on short-term creditors and banks. Consumer credit will continue as the body’s main focus for 2015, with a foreboding promise to rid the market of firms that do not meet its standards.
For dealers offering motor finance, it’s important, now more than ever, that they uphold and actively demonstrate responsible lending practices, and are clear in exactly what they are offering to consumers. Ensuring that customers are granted finance that’s affordable for the duration of the contract is now a fundamental requirement. With the market recovering strongly, those who can observe the rules and regulations set out by the FCA will help to protect themselves from penalties and enjoy the benefits of the rising tide.
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By GlobalDataThe business challenge
It’s not just the FCA that’s dictating the future of the market. A recent study from PwC found that, when buying a car, a third of all customers look for a one-stop service from their dealer, with complete support from consultation to the financing and purchase of the vehicle. The high level of demand from consumers for finance, evidenced by 2014’s record figures, along with the expectation of a seamless, end-to-end dedicated service, will no doubt be putting increased pressure on dealers to deliver in what is a competitive arena. At the same time, they will be focusing on internal cost cutting in order to take full advantage of the improvement in the economy.
If dealers are still reliant on manual application and underwriting processes, this will add further fuel to the fire by outstripping the time available to process applications, impacting customer service as a result. What’s clear is that the three-hour, manual application processes of old have little place in today’s fast-moving, technology reliant world.
How can these challenges be dealt with?
A software system capable of enhancing the business of credit sourcing and finance administration has the potential to transform the operations of motor financiers, enabling them to match applicants to appropriate finance products in a better way. By utilising this technology, lenders can keep pace with evolving requirements and streamline existing processes to ensure they are effective, FCA compliant and putting the customer at the heart of their processes.
When managed digitally, the turnaround time between finance application and approval is greatly reduced and, in many cases, can be completed in real-time, at the point of sale. Imagine if a dealer could process a credit application in the same time it takes a customer to return from the test drive? By replacing their manual loan application and collections systems with an automated equivalent, motor financiers can do just that, dramatically simplifying the application process and generating a finance decision in a matter of minutes. What’s more, the resulting credit agreement can be signed electronically, removing the final paper-based hurdle in the credit applications process and eliminating the cumbersome administration associated with paper applications for dealers. All of this results in the delivery of a greatly enhanced buying experience to their customers.
This is not to say that the underwriting process, though much quicker, is any less stringent. This type of technology is purposely designed to minimise manual underwriting by connecting to multiple sources of information, including credit and fraud agencies, as well as specialised motor industry information like Glass’s data, to underwrite cases quickly and accurately. The guarantee is that the computer only says ‘yes’ when all eligibility criteria, as defined specifically by the each lender, have been met, meaning lenders can showcase their responsible practices to the FCA.
For the dealer, it also offers a clever way to incorporate the other aspects of the process such as handling commission from finance companies, checking vehicle history and part exchange data.
By integrating these intelligent decisioning technologies, motor finance providers can observe the rules and regulations set out by the FCA and at the same time keep their operations efficient, cut costs and free up internal resources, all while ensuring the customer service levels never falter.
Motor finance providers, MotoNovo Finance and Startline Motor Finance have been utilising intelligent decision making technology from Pancredit. MotoNovo has transformed manual underwriting processes for its dealerships, enhancing its facilities to meet its individual needs and those of its customers. As a result, MotoNovo can now provide loan application decisions almost instantaneously. It is also able to scale and reconfigure the system quickly and easily in order to update its settings in line with new legislation or changes in financial modelling.
Startline Motor Finance has also taken advantage of the automated process of finance application and administration from its beginnings, putting the customer at the heart of its business from day one. With these technologies in place, Startline dealerships can ensure that they are service-led and can guide the consumer through the entire application process on-site with all finance decisions delivered electronically.
