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SELECTING AN AUTO LOAN ORIGINATION SYSTEM: WHAT BANKS SHOULD LOOK FOR

The defi Team 3rd party integrations, auto loan origination software, Automation, Community Banking, Compliance, defi ANALYTICS, defi CONNECT, defi INSIGHT, defi LOS, defi Partners, Digital Loan Documents, Digitalization, Fraud, Instant Integrations, Loan Origination Software, Reporting & Analytics, Simplifying Processes, Technology

auto financing online

Modern auto loan origination software is making it easier than ever for banks to respond to loan applications rapidly and boost their chances of capturing loans. In many cases, approval decisions can be reached in seconds with an offer sent via email or SMS shortly after. Banks looking to improve their ability to handle a larger number of auto loans and leases and do so more cost-effectively should look for LOS software that offers three key capabilities: auto structuring, fraud detection, and integrated analytics. 

With these capabilities incorporated into a loan origination system, banks gain the ability to quickly make well-informed lending decisions, improve process efficiency, and adjust lending strategies in response to market dynamics.

Auto Structuring Boosts Closure Rate 

All frequently an application fails your credit policies, only to be placed in a queue for eventual underwriter review. Often, it only takes a simple modification to a lending term for loan approval.

Any delay increases the risk of losing the loan. Auto structuring addresses this problem and allows banks to improve the accuracy and consistency of loan decisions while simultaneously accelerating decision times. 

As part of the loan origination process the bank establishes a set of business rules that will initiate the auto structuring process. It only takes one rule to trigger the process. Once triggered the auto structuring process initiates a waterfall looping process to systematically alter lending terms to arrive at an acceptable deal structure and send back a conditional approval. If the auto structuring process fails to arrive at an acceptable deal structure it returns an adverse action, including the specific reason. 

Auto structuring is an automation technique that enables banks to create business rules in order to alter and return a deal structure that would have typically required manual review. By reducing the number of applications that are reviewed by underwriters, it allows underwriters to focus on reviewing applications that truly need their expertise in determining an applicant’s creditworthiness and structuring the deal. In the best cases, auto structuring can return a decision in seconds, thereby increasing the closure rate. 

Fraud Detection to Reduce Risk

Today, an essential function of a loan origination system in a bank is fraud detection. Just as advancements in IT and communications have enhanced the ability for financial institutions to deliver a wider range of services more efficiently, the same advancements also work to the benefit of hackers and fraudsters. According to ID Analytics, identity verification is the biggest challenge for financial organizations. Synthetic identity theft (co-opting Personally Identifiable Information from unsuspecting individuals) is the fastest-growing type of ID fraud, currently accounting for 80%-85% of all identity fraud. 

To counter this trend, loan origination systems for banks must incorporate fraud detection capabilities. These techniques apply sophisticated algorithms to detect misrepresented information or verify information via access to cloud-based identity, employment, income, and vehicle valuation. 

Fraud Detection and Mitigation Resources

Where Fraud Is Headed in a Post Pandemic World
Employment Misrepresentation in Auto Loan Applications
Income Misrepresentation and Auto Loan Application Fraud
Used Vehicle Valuation Tire-Kicking Rule # 1: Don’t Guess

Integrated Analytics for Immediate Access to LOS Metrics 

Auto structuring and fraud detection capabilities enable a faster, more confident loan origination process for banks. These are benefits that can be quantified, measured, and monitored using the data generated during the loan origination process. Access to these data and the insights they provide shouldn’t be hampered by the need to integrate third-party analytic tools. Look for a loan origination system that includes analytics as part of the solution. Integrated analytics allow banking professionals to easily access and explore data to gain an understanding of LOS metrics and efficiency. 

Visualization transforms data into easily-understood graphs that allow risk managers, credit officers, financial analysts, and others responsible for lending strategies to determine how credit policies and operational decisions are impacting their lending business.   

A modern loan origination system for banks provides out-of-the-box reports and configurable dashboards, including: 

  • Application volumes over any time period
  • Origins by source, FICO bucket, and geography
  • Approval, capture, and book-to-look ratios
  • Percentage of auto approvals vs. auto declines

These reports and dashboards can easily be customized by users to provide insight into the specific metrics and trends relevant to their roles and responsibilities. Reports can also be automated to deliver regularly-updated information to users’ desktops. 

Auto Loan Origination System for Banks

Auto structuring, fraud detection, and integrated analytics aren’t the only capabilities that help boost efficiency and reduce risk in an auto loan origination system for banks. See the loan origination workflow checklist for additional capabilities that support an optimized loan origination process. Nonetheless, loan origination systems that incorporate these capabilities are on the leading edge of proactively addressing bank lending challenges. 

Getting Started

defi SOLUTIONS provides configurable lease or loan origination systems, integration with innovative information sources and services, analytics and reporting, loan management and servicing, and a wide range of technology-enabled BPO services. Banks struggling with the limitations of their current auto loan origination systems should take the first step in realizing the benefits of modern technology. Contact our team today or register for a demo.

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