Global Trends in Digital Auto Finance: How Four Automotive Lenders are Transforming Auto Loans

September 21, 2020

Digital transformation in auto finance is accelerating. Around the world, automotive lenders are digitizing the customer experience through technologies such as identity document verification, biometrics, and e-signature.

The process of applying for a car loan or lease – whether in the dealership or remotely – is becoming increasingly faster and more secure as digitization replaces paper forms and manual ID-checks. According to PwC: “91% of dealers believe a strong digital presence is important to their overall sales strategy, but 83% do not have a dedicated digital strategy.” Automating the auto finance loan process is one way that auto finance lenders can embrace digital transformation. Automated loan processes can help increase loan volume, reduce operational costs, and ensure compliance with controlled workflow rules.

Non-digital Auto Finance Processes Cost Dealers Millions

Around the world, 77 million cars and light trucks were sold in 2019. Of those, U.S. sales of new vehicles topped 17 million and over 15 million new passenger vehicles were registered in the European Union (EU) and EFTA countries. A large percentage of these are financed; for example, 85% of new car buyers in the U.S. and 91% in the UK paid through financing in 2019. This equates to millions of finance contracts a year – and millions of hours manually processing paperwork and then conducting compliance audits to find and take corrective action on errors. The following calculations provide an estimate for the time a manual auto finance agreement process can take in the dealership:

• Manual data entry: 30 min
• Printing multiple copies: 10 min
• Manual identity verification (verifying a driver’s license or ID card): 20 min
• Know Your Customer (KYC) verification: 20 min
• Explaining key terms of the agreement: 20 min
• Signing/consent: 10 min
• Filing/post-signing administration: 15 min
• Total: 2 hours

With dealers and sales reps spending an average of 1.5 to 2.5 hours to complete each finance agreement, less time is available to spend on delivering valuable customer services. Manual processes also do not provide visibility into whether agreements are executed in a way that is consistent, secure, and enforceable. In contrast, digital auto finance platforms that deliver an easy, step-by-step financing process (whether in-dealership or at home) can significantly improve the customer experience, cut costs, and improve dealers’ cash flow with same-day funding from finance companies.

In the UK, Santander Digitizes the Auto Finance Experience

One lender leading the way is UK-based Santander Consumer Finance. Santander works with major auto manufacturers such as Hyundai, Kia, Volvo, and Mazda to deliver financing through a network of dealers. In 2018, Santander Consumer Finance looked to digitize in-dealership auto finance loan applications using e-signatures and digital identity verification. The new online auto financing process (known as ‘i-click’) is completely browser-based. Using the service, customers can apply for finance quickly and easily, and dealers can increase the speed and volume of sales. This dealer demonstration video shows i-click in action:

EU Auto Finance Providers Turn to Digital Identity Verification

In Europe, auto finance providers are reinventing the auto finance process by introducing digital identity verification. This includes automated capabilities such as:
Digital verification of identity documents such as a passport, driver’s license, or national ID card (using smartphones to capture an image of an identity document, which is then analyzed to determine its authenticity.) This can take place in a dealership with the applicant, or online with a remote applicant.

Facial recognition (comparing a selfie with the image on a passport or ID card) for remote scenarios where the customer is applying for financing from their home, office, or anywhere.

As an example, a captive auto finance provider in Spain recently introduced a new digital identity verification and agreement signing process across its network of dealerships. The auto finance arm of a major auto manufacturer in France is doing the same, while also planning to extend the auto finance process to remote applicants as well. Digital identity verification methods such as facial comparison are used to enable remote loan applications. The technology is used to confirm that the remote customer is in fact the individual they claim to be – not a fraudster trying to pass themselves off as the owner of the identity document.

In the U.S., BMW Financial Services Automates with ESignatures

In the U.S., over 70% of BMW dealerships use e-signatures and iPads to make it easier for customers to sign documents such as credit applications, the Motor Vehicle Retail Installment Contract, and end of lease agreements. An early adopter of e-signature, BMW Financial Services has automated credit applications and finance contracts by presenting documents and consumer disclosures to the customer on a signature capture pad for review, acceptance, and e-signing. Similarly, for end-of-lease processes, the customer and representative jointly perform a final inspection on the lease vehicle, using the iPad to document any vehicle damage, and immediately generate the proper paperwork for e-signature. Their e-signature integration with the company’s iPad app required just two weeks.With the digital process, BMW has seen a 30% reduction in time to complete the contracting cycle. The digital process has also enabled them to provide same-day funding to dealers.

In Australia, Auto Finance Provider Reduces Time to Finalize a Car Loan

In Australia, an auto manufacturer digitalized its auto finance loan process – rolling out e-signatures to 1,500 dealers to enable customers to e-sign auto finance loan documents and privacy statements.Because their captive auto finance organization needed to eliminate the risk of fraud and false contracts, their initiative required a comprehensive digital audit trail. Digital signature technology provides additional security by tamper sealing each signature, as well as the final document and visual audit trail.The new process has reduced time to finalize a loan from approximately one week to 2 days. To achieve this, the auto finance company integrated e signatures with their loan origination platform to support a digitally automated process. The e-signature workflow is fully white-labelled to keep the auto manufacturer’s brand front and center.

The Time for Digital is Now During COVID-19

In these unprecedented times, financial services have become crucial for millions sheltering at home. New cloud-based technologies combined with shorter implementation times mean that auto finance providers can bring innovation to market now – whether in the dealership or making digital financing accessible from a customer’s home. These technologies improve the auto loan process for the customer while delivering security, compliance, and efficiency benefits for dealers and lenders.