Understand the BPO Transition Framework and How Auto Lenders Can Make It Easier

As is the case with other industries, lending companies are moving towards using third parties to perform certain functions or execute specific tasks to streamline their operations, in a strategy known as business process outsourcing (BPO). Transition frameworks for moving towards BPO in the financial sector have typically contracted out accounting, customer service, data processing, human resources, and other roles previously done in-house. In today’s consumer-centric environment, this is done not only to improve efficiency but also to improve customer experience.

These days, BPO transition frameworks often involve software-as-a-service (SaaS) companies, who provide customized software platforms for companies’ needs. This is no less true in the auto lending industry, where financial technology (fintech) is key to many cutting-edge solutions. Investments in fintech reached $213.9 billion in 2019, and though investment dipped in 2020 due to the pandemic, it recovered in 2021 to $210.1 billion, with the Americas accounting for 80 percent of this investment. Along with others in the finance sector, auto lenders are increasingly outsourcing, choosing vendors that utilize fintech to drive down costs, increase efficiency and provide better customer experiences.

Transitioning all or some of your processes from in-house personnel to outsourced vendors requires a formal strategy. With any BPO transition, frameworks help an organization adjust to the movement of processes to another organization. Yet this is also a delicate time, during which the precise scope of the transitions may appear fuzzy.

When creating a BPO transition framework, lenders should consider:

• Better pricing resulting from increased competition, though this should be balanced against services offered by each.
• Communication is critical in any business relationship, so vendors should respond quickly to queries, clearing up any issues as soon as they arise.
• Cost savings that come from outsourcing specific areas of a loan’s life cycle, often service providers who offer multiple or even end-to-end loan services can provide greater savings.
• The vendor’s technology and whether it can support a lender’s outsourcing needs. Those vendors with the most cutting-edge fintech will help create a seamless and better customer experience.
• Outsourcing those functions that are the most problematic, including those that cost creditors both time and money.
• The reputation of a vendor through recommendation and research in order to verify their honesty and reliability.
• Service level agreements (SLAs) to ensure they contain no ambiguity in the type or quality of services received from the vendor.
• Whether vendors can produce quality work with little oversight allows creditors to concentrate on core functions.

For auto lenders, choosing an end-to-end provider with a solid reputation within a BPO transition framework helps avoid having to deal with multiple vendors. Additionally, when selecting an outsourcing partner, the technology they bring to the table should be able to make the entire lifecycle of the loan more efficient for both the borrower and lender.

When strategizing on how to transition to a BPO vendor, auto lenders should first understand what they want to achieve from this outsourcing relationship. To realize good results, lenders should minimize the chance of service interruptions caused by a BPO transition. Frameworks should also consider what aspects of a lender’s business can most benefit from a BPO vendor. Any new service agreements should be presented in clear terms, concisely describing what is expected from both lender and outsourcer.

While disruptions may occur during a BPO transition, frameworks for converting to new ways of providing services should focus on delivery to the borrower. Additionally, all levels of a lender’s workforce should be trained in how these will work while ensuring that these changes don’t negatively affect customers. To keep their customers happy, lenders should make ongoing efforts to improve service delivery and educate customers on any changes that could affect them.

Meanwhile, vendors should agree to certain criteria, making any adjustments when necessary. Lenders should ensure that vendors are flexible in their application of any fintech and open to making changes when necessary. BPO transitioning takes teamwork, so there must be give and take on both sides, though a customer-centric approach should take precedence. Cooperation between lenders and outsourcers should always keep the borrower’s needs in mind.

Outsourcing occurs in businesses of all sizes, from small startups to large multinational corporations that have been around for decades. Regardless of the size of the business, BPO transition frameworks should consider both the advantages and disadvantages involved in making these changes. By doing this, customers (and a lender’s staff) will understand how they’ll benefit from these changes while mitigating any adverse issues that may arise.

When considering a BPO transition, frameworks should also consider where the work will be outsourced. Offshore vendors are located outside the country in which the company is based and can even be on the other side of the world. For example, it could include a call center based in India. Nearshore vendors are those in neighboring countries, which would mean countries like Canada or Mexico, in the case of the United States. Onshore vendors are from the same country but may be located in another city or state.

BPO transition frameworks must also look at the types of services rendered. The tasks on which a BPO vendor concentrates may be categorized according to whether it deals with customers directly on behalf of the lender or handles the lender’s internal processes. Both can affect the service a creditor’s customers receive. Still, customers are mainly aware only of customer-facing tasks, such as sales and marketing, as well as customer service and technical support. Internal functions handled by a vendor could include payment processing or marketing.

Services a vendor offers may include:

• Customer service: With support via a call center or help desk, lenders can provide applicants and borrowers with a consistent customer experience.
• Online marketing: This can include supporting a lender’s outreach for more customers with Google ads or even advertising an auction of previously leased vehicles on social media sites.
• Processing payments: BOP vendors can handle the processing of payments for loans or leases.

A BPO vendor for an auto lender can handle additional services as well, like managing vehicle titles, collections, repossessions, processing sales of leased vehicles, remarketing of vehicles, refinancing, and more.

When considering a BPO transition, frameworks should recognize that lending businesses of all sizes benefit and that all or some processes can be outsourced permanently or temporarily. Regardless of the size of the organization, it can be more effective to outsource due to reduced costs of both infrastructure and personnel.

Some of the advantages to lenders include:  

• Acquiring access to expertise not available within a lender’s workforce.
• Allowing lenders to focus on their core functions to preserve resources.
• Creating savings as it requires less investment internally in employee development, infrastructure, and technology.
• Improving capabilities to scale up services and resolve issues when needed allows the lender to expand its offerings or customer base more rapidly.
• Improving overall efficiency by handing off basic functions to a BPO vendor.
• Increasing productivity within the organization by freeing up staff to concentrate on other tasks.
• Proactively implementing solutions to guarantee operations run smoothly.
• Providing job opportunities without the burden involved in direct hiring.
• Reducing costs of administrative tasks.

While there may be some drawbacks to any BPO transition, frameworks should be used to address and moderate these issues. Often these concerns come from how they affect a lender’s employees rather than resulting from any matters dealing with cost or productivity.

Lenders should consider the following when considering a BPO transition: 

• Agreements with a BPO vendor need to be structured to ensure business costs increases are understood.
• Any transition, including outsourcing, may cause temporary workload increases  for some employees.
• BPO transition frameworks require time and effort to ensure return on investment (ROI), so sufficient resources should go towards planning and implementation.
• By outsourcing such things as internal processing and IT support, lenders may eliminate the need for certain in-house staff.
• Employees will need to adjust, especially if outsourcing involves downsizing the lender’s workforce.
• Hiring a BPO vendor inevitably takes some control away from the lender.
• If they’re given access to sensitive information, a BPO vendor needs to have a stellar reputation and first-rate security.
• Not having certain staff on-premises may require a certain amount of adjustment by employees.
• Sometimes hidden costs are involved when hiring a BPO vendor, so any contractual agreement should be carefully considered.

Decisions involving a third party for any business process should be carefully considered. It’s especially important to perform due diligence before choosing an outsourcing partner. If done correctly, a lender and its customers will only benefit from the relationship, with none of the negatives.

With the complexities lenders face when engaging with potential BPO vendors and integrating them into their processes, it’s often better to utilize a single, end-to-end loan service provider. Using defi SOLUTIONS for the complete loan or lease lifecycle simplifies borrowers’ experiences while also allowing lenders to increase revenue by expanding their portfolios and speeding up processing transactions.

Basic services offered by defi SOLUTIONS for loans and leases include: 

• Customer service
• Indirect management of vehicle titles
• Managing documents
• Operational support
• Payment management

Our loan and lease services include:

• Collections
• Managing bankruptcies
• Recoveries
• Repossessions

Advantages of using defi SOLUTIONS as a BPO loan and lease vendor include:

• Allows rapid scaling of services for lenders of all sizes.
• Automation reduces operational costs and streamlines processing.
• Multilingual staff with significant experience dealing with borrowers.
• Provides larger lenders with overflow support when needed, along with flexibility for non-core functions.

When leases mature, defi SOLUTIONS can help handle off-lease vehicles, reducing the need for in-house personnel to manage this task. This allows easy transitioning to end-of-term processes, single-lease outsourcing, or other across-the-board solutions.

Lease Maturity Management  services offered by defi SOLUTIONS include: 

• Processing sales of leased vehicles.
• Providing customer care for end-of-term leases.
• Receiving and reconciling payments.

• Grounding vehicles
• Managing inspections
• Refinancing
• Verifying contracts

Advantages defi SOLUTIONS provides for lease maturity management include:

• Automated solutions that streamline processing.
• Capabilities for tailoring strategies to meet specific types of borrowers.
• Expert leasing staff capable of meeting fluctuating lease volumes.

When it comes to remarketing vehicles, defi SOLUTIONS can maximize resale values at auction. With our experience selling over 1.5 million vehicles from various types of portfolios, we get clients higher returns for off-lease or repossessed vehicles.

Remarketing services offered by defi SOLUTIONS include: 

• Arrangements for vehicle transport
• Managing auctions
• Processing damage claims
• Scheduling vehicle sales
• Online sales

Advantages defi SOLUTIONS provides for remarketing vehicles includes:

• Achieving fair market value for clients by utilizing access to privately-owned data on vehicles.
• Dedicated online sales channels and onsite representation offers clients competitive advantages when selling vehicles.
• Reasonable rates for repairs, sales fees, and storage for vehicles going to auction.

When there’s a possibility a servicer may become insolvent, or it doesn’t perform adequately, defi SOLUTIONS can provide comprehensive backup servicing. With our ability to respond quickly to unforeseen events, we have the capabilities to scale according to the size of our client’s portfolios.

Backup servicing by defi SOLUTIONS includes: 

• Analogous systems with the primary servicer that are either partial or full.
• Data mapping from system to system.
• Preparation for minimum initial transitioning.

Advantages defi SOLUTIONS provides regarding backup servicing includes:

• Over 31 years of experience within the auto finance industry.
• Scalable solutions that are thorough, considered, and well-timed due to the continuous recruitment of skilled professionals.
• Standard processes that can be duplicated, allowing multiple options for engagement to which the company can respond quickly.