The 2018 Banking News Impacting the Lending Industry Through 2019

Lender adoption of digital technology is accompanied by the increasing risk of data breaches that threaten all participants in the lending cycle. Breaches are expensive—financially and reputationally. The Ponemon Cost of Data Breach Study states the global average cost for a data breach is $3.62 million. The average cost for a stolen record containing confidential information is $141. Corporate acknowledgement of recent data breaches have been embarrassingly slow. To force corporations to more proactively protect personal data and acknowledge breaches, government are enacting legislation. Arizona’s HB 2154, now law expands the definition of personal data and adds notification requirements. In particular the new law:

• Expands the definition of personal information to include online account credentials, taxpayer and passport identification numbers, and even some biometric data.
• Requires that notice to individuals affected by a data breach be provided within 45 days after confirmation of a data breach.
• Requires notification to the three largest consumer reporting agencies for any breach affecting more than 1,000 individuals.
• Increases the maximum fine for violation from $10,000 per breach to $500,000 per breach.

What should you be doing to decrease the probability of a data breach and its financial impact? The newest loan originations systems take advantage of technology that provides a significantly increased level of cybersecurity throughout the loan lifecycle. Fintech companies whose offerings are cloud-based take advantage of these capabilities and standards to defend against data breaches:

• SSL/TLS Secure Sockets Layer/Transport Layer Security provide secure, encrypted communications between web browser and lending system.
• Leading cloud platforms such as AWS, Google, and Azure provide a wealth of authentication and encryption services for applications and data hosted in their data centers.
• Cloud providers that have ISO 27018 certification, based on the ISO information security standard 27002, provide an added level of security for personally identifiable information (PII) stored in the cloud.

The many benefits technology has afforded the lending industry are unfortunately accompanied by increasing regulations regarding proper acquisition and use of customer data. How important are these? The Auto Finance Performance & Compliance Summit devotes two days to topics of evolving regulatory landscape, state and local regulations, impending regulatory changes, and heightened security demands. With all of these changes, how can lenders successfully deal with pending compliance regulations, particularly at the front end of the lending cycle? Having closely watched the development of these regulations and the challenges they present lenders in implementing them, we believe these capabilities and practices will help lenders successfully comply.

• A formal change management process/team in place to review, interpret, and implement regulations.
• Loan origination system that are configurable to allow business users to make the policy, process, and procedure changes required by regulations.
• Automation and decision rules to transform regulatory requirements into consistently executed processes.
• An LOS tracks changes so you can confidently report when audited.

Partner focus: Carleton is a leading provider of compliant lending and leasing calculation software and document preparation software serving the financial and auto industry.

It seems we’ve been talking about this for decades—paperless or digital documents, yet have made only incremental progress. The proliferation of technologies and devices that eliminate the need for paper or transform paper into digital images have yet to fully transform loan origination and other paper-intensive activities like compliance letters. The 2018 Consumer Survey of Automotive Finance Perceptions USA confirms this, stating, “Only 5% of US consumers applied for their loans online while 29% plan to do so for their next auto loan.” There are well-understood economic and time savings benefits of digital documents that include:

• Eliminated expense of overnight document shipping – $22.98 to $101.57 depending upon weight and destination. What would be your annual savings?
• Guaranteed that all appropriate documents have been submitted using automation.
• Accelerated the application and decisioning process.
• Avoid lost or misplaced paperwork by using digital documents.
• Eliminate long-term paper document storage costs.
• Securely retain digital documents as legal records.

Partner focus: Cedar Document Technologies provides an integrated customer communications and digital servicing platform delivered as a hosted managed service.

According to the AFSA, Fintech innovation is changing auto lending, by increasing the direct lending option for car buyers. In comparison to long-established lending solution vendors, Fintech companies have no legacy systems they need to maintain. They approach the lending process with fresh perspective. And by taking advantage of technologies such as web, cloud, and mobile they offer a decidedly better customer experience. Fintech lending solutions give applicants a greater sense of control, guiding them and allowing them to progress through the loan application process at their pace. Lenders still employing legacy lending solutions, but wanting to remain profitable in a very competitive market, should consider the advantages of adopting fintech lending solutions:

• Functionality that meets the needs of today’s lending market.
• Available virtually anywhere and via any device.
• Easily configurable by business users.
• Pre-integrated with leading data sources and services.
• Supports paperless lending (digital document).
• Lower implementation and operational costs (courtesy of cloud deployment).

Partner focus: CoreLane CreditLane provides enforceable rules to help ensure that the applications you receive match your portfolio requirements.

Business Insider reports that mobile banking is more important than ever. Banks continue to invest to provide better customer experience and increase loyalty. Mobile simplifies common transactions like account management and check deposits, but more complex processes like loan applications remain cumbersome. From the lender side, mobile already helps manage loan origination. From the applicant side, while we don’t expect loan origination to go completely mobile anytime soon, lenders should be incorporating mobile capabilities into the process to:

• Allow well-qualified applicants to initiate applications.
• Let applicants track loan application process.
• Quickly notify applicants in the event additional information is required.
• Eliminate paper by accepting images of required documentation.

Partner focus: RouteOne provides a comprehensive suite of F&I solutions across multiple channels: in-store, online, mobile, and third-party solutions. Products include credit applications, eContracting, compliance and online, and mobile retail services.