The Business Process Outsourcing Trend That Auto Lenders Need to Know for 2021

Many auto lenders—including banks, credit unions, and fincos—were forced to rethink their ability to respond to unexpected economic disruptions in 2020. 

Yes, 2020 experienced a once-in-a-century disruption, but it was made painfully clear to many lenders that in-house resources, software, processes, and skills were inadequate to effectively respond to the spike in loan and lease servicing demands. Savvy lenders want to be prepared for any future economic upheaval, even if it’s on a lesser scale. 

These auto lenders face the decision of upgrading their legacy software and processes or looking for alternatives means of loan and lease servicing. Auto lenders that have previously lived through a new software implementation project may be wary. For many lenders, that alternative is business process outsourcing (BPO), a trend appealing to smaller lending institutions looking for greater efficiencies and cost savings. 

Here are key reasons why the business process outsourcing trend is gaining traction.  

You’ll Be Better Prepared to Respond to Future Disruption

One of the biggest challenges that auto lenders, regardless of size, have is managing staffing levels to match market dynamics. When borrowers and lessees overwhelmed call centers with requests for guidance, loan extensions, and forbearance, few lenders could scale quickly to effectively manage the demand. The challenge of hiring skilled agents, legacy servicing software, and established processes (many of them paper-based) all prevented rapid implementation of needed changes. When loan and lease volumes decline, smaller lenders are faced with layoffs, unused software licenses, and office space. 

An established, experienced business process outsourcing provider is well-prepared to quickly respond to market changes. They have experienced staff, the latest in servicing software and systems, and best practices in managing quotidian loan and lease activities. Their ability to quickly scale up or down, depending on market conditions, relieves smaller lenders of the most challenging aspects of managing auto loan and lease servicing in-house. 

Borrowers Increasingly Expect a Digital Experience 

Moving to a business process outsourcing model for loan and lease servicing can also be one of the fastest ways to address borrowers’ expectations of a digital experience. An increasing number of auto loan and lease originations are entirely digital. The best auto lenders employ loan origination software that can respond with an offer in seconds and seal the deal with an e-contract and e-signature. Borrowers expect the same level of digital experience in the servicing phase. 

The best business process outsourcing providers offer a digital lending experience, allowing borrowers to set up automatic payments, make one-time payments, access account statements, determine current payoff amounts, and make changes to contact information online. Borrowers can also inquire about account status or get advice via email, text, or web chat. 

A digital lending experience benefits borrowers and lenders. Accurate account information is available ‘round the clock; printing and mailing costs are greatly reduced; and there are fewer phone calls to the support center. A digital lending experience reflects positively on auto lenders who are meeting the expectations of today’s borrowers.

You Can Achieve a Greater Level of Efficiency 

Auto lenders should always be looking for greater levels of efficiency that bring growth, lower operating costs, and higher profits. For auto lenders with legacy servicing systems, moving to a business process outsourcing provider may be the quickest way to achieve that goal.

Leading business process outsourcing providers employ the latest technology to bring greater efficiency to all aspects of loan and lease servicing. Whenever possible, electronic communications and documents replace paper. Workflows and decision rules consistently accomplish activities or tasks in a fraction of the time, compared to manual processes. Not only is the process significantly more efficient, but workflow and rules also help ensure that decisions are made in accordance with current lending regulations. During these processes, data are generated to monitor the overall process efficiency, identify potential bottlenecks, and continually find new ways to improve performance. 

Digital communications and documents combined with workflows bring greater efficiency to: 

• Call center customer service resolution
• Payment processing
• Accounts receivable
• Cash management
• Delinquency and default management
• Title management
• Repossessions
• Remarketing

Without a significant upgrade to servicing software and advanced training of their servicing agents, it would be nearly impossible for many lenders to achieve these levels of efficiency in these common activities associated with their loan and lease servicing departments.

Business Process Outsourcing Trend: Choose the Services You Need

Experienced business process outsourcing providers recognize the need for flexibility when transitioning from in-house to outsourcing services. To address that trend, the best providers offer a range of services and the ability to gradually transition to the level of services you need. Services cover everything from handling the full spectrum of customer support requests to the details of settling outstanding tolls or fines incurred during the course of a lease. 

When researching these services, auto lenders will often find that the quality and breadth of service significantly exceeds anything they could provide in-house. For example: 

• Fluent foreign language call center agents to support an increasingly diverse borrower population.
• Extended call center servicing hours, including weekends and holidays, with the option of 24/7 support, if needed.
• Return mail processing to locate hard-to-find recipients, validate returned mail addresses, and update billing information.
• Title management to validate the vehicle, lienholder, and registered owner; follow-up with dealer or seller when titles are delayed; manage title sign-off processing.
• Cash management, including lockbox, reconciliation and cash disbursements, payment research for rejected items, payment processing, and account payoffs
• Proactive campaigns to reduce defaults by contacting delinquent borrowers and working with them to secure promises to pay and coaching to help borrowers stay current.

Collections can be one of the most time-consuming aspects of loan and lease servicing. The complexity of the process correlates with the number of states you operate in. Established loan and lease servicing providers maintain collection licenses for all 50 states and have collection processes in place to comply with each state’s regulations and meet Consumer Financial Protection Bureau (CFPB) guidelines.

And when an account defaults, an experienced loan and lease servicing provider has all the tools and processes to handle these issues more effectively. Data models advise on the most effective strategies and communication channels to resolve these problems. In the late collections stage, the servicing provider works with a nationwide network of forwarders to streamline repossessions and provide regular updates from repossession agents to inform you of asset status.

Making the transition from in-house auto loan and lease servicing to an outsourcing provider doesn’t have to be an all-or-nothing decision. Experienced outsourcing providers work with lenders to choose the type and level of services that meet their current needs, develop a detailed plan to make the transition, and implement the transition to provide services that reflect your brand identity regarding loan or lease servicing.

Business Process Outsourcing Trends Focus on Efficiency and Cost Savings

It’s safe to say that 2020 was a wake-up call for nearly every industry as businesses attempted to efficiently deliver a level of services despite increasing constraints and changing federal, state, and local directives. 

Lenders already managing loan and lease servicing via a business process outsourcing provider were spared these headaches. Their providers efficiently handled the surge in servicing inquiries and requests for assistance in coping with borrower financial uncertainty. 

In 2021—as the disruptions of 2020 gradually settle—many lenders want to be better prepared to handle future upsets. They are considering the benefits of delegating loan and lease servicing to outsourcing providers. Greater efficiencies across all areas of loan and lease servicing, the ability to provide a higher level of customer service, and lower operating costs are three quantifiable benefits motivating lenders to take advantage of business process outsourcing trends.