COVID-19 was extremely disruptive to anyone involved in auto lending and leasing.
The economic uncertainty caused by job losses, the overwhelming number of borrowers requesting loan or lease modifications, and varying federal and state lending regulations presented lenders with more challenges than they’ve seen since 2008. But some lenders fared much better than others—but how?
Lenders that were already outsourcing their auto loan and lease servicing needs to a well-established provider benefited from the outsourcing provider’s experience, expertise, and flexibility in anticipating and adapting to rapidly changing market demands.
For lenders still struggling to manage COVID disruptions or lenders questioning the efficiency of their current in-house servicing operations, today may indeed be an opportune time to seriously consider loan and lease outsourcing.
It’s not an all-or-nothing transition from in-house to outsourcing loan and lease servicing. The best outsourcing providers offer a range of services that give lenders flexibility in choosing the services that best meet their individual needs. Below we highlight four of the key ways that outsourcing during COVID has benefitted lenders.
Experience and Expertise to Resolve Inquiries
Today’s borrowers expect to interact with their lenders via multiple channels. That includes the traditional call center and paper mail, as well as e-mail and web chats. A service provider’s experienced representatives have handled thousands of customer service requests. They can provide advice to cover the full spectrum of loan and lease requests, from simple “how-to” inquiries to the most complex default or bankruptcy proceedings. With this level of experience and expertise, they are well-positioned to triage inquiries and determine the best means to efficiently and effectively resolve a myriad of issues.
In light of the increasing language diversity in the United States, some of the better outsourcing service providers employ lending professionals who are native speakers of Spanish, Portuguese, Korean, and other languages. Native speakers facilitate faster call resolution for non-English speakers and differentiate the lender through the extra level of service quality.
Handling Back-Office Processing With Efficiency
In addition to handling front-line customer support, many lenders have also decided to outsource a variety of back-office processes. These are often labor-intensive processes, particularly when payments and communications are paper-based. A well-established outsourcing provider employs the latest technology and best practices to handle these processes with optimum efficiency. Typical back-office processes that are done far more efficiently than in-house processes include:
- High volume payment processing
- Cash management
- Lockbox to speed processing time
- Automated Clearing House (ACH) transactions
- In-house payments
- Convenience checks
- Balance transfers
Lenders who have chosen to outsource have benefitted from these services by eliminating the need for office space, IT infrastructure, and staffing to handle these high-volume processes. And as process volumes changed during the past year, the technology and systems employed enable outsourcing providers to easily accommodate these changes. In comparison to the time and effort required to manage these back-office processes in-house, outsourcing provides a significantly more cost-effective and efficient means to meet those needs.
Dealing With the Difficult COVID-Associated Issues
The experience, expertise, and scalability offered by loan and lease outsourcing providers helped lenders better manage the unexpected financial challenges faced by borrowers. As the potential ramifications of COVID became clear, outsourcing providers were able to proactively initiate outbound campaigns to provide guidance for borrowers, specifically in the areas of loan restructuring, forbearance strategies, and ways of taking advantage of federal, state, and local programs to ease the financial strain.
However, dealing with difficult issues is par for the course for these experienced outsourcing providers. During normal times, they efficiently handle the challenges of delinquencies, promises to pay, bankruptcies, and even repossessions.
Regulations that govern these activities can be complex and vary from state to state. Therefore, compliance can be challenging if you’re not up-to-date on the regulations. Delegating these responsibilities to an outsourcing provider relieves lenders of this compliance-related headache.
Analysis Demonstrating the Benefit of Outsourcing During COVID
Detailed process metrics tracked by loan and outsourcing providers demonstrated the quantitative benefits of outsourcing loan and lease servicing. By applying analytics to the operational data generated by their servicing systems (IT infrastructure, software, best practices, employees, etc.), providers are able to analyze call volumes, hold times, types of inquiries, resolution times, and a number of other metrics to assess servicing efficiency.
On a scheduled basis, the best outsourcing providers make this information available to clients as summaries and/or detailed reports, allowing them to track trends and compare against lending industry benchmarks.
This level of analysis far exceeds the capability that most lenders have in-house, provides detailed insight into developing servicing trends, and confirms the provider’s ability to meet or exceed the agreed-upon service level.
What Lenders Learned From Outsourcing During COVID
Lenders who established outsourcing loan and lease agreements with industry-leading providers prior to COVID weathered the disruption far more effectively than those who relied on in-house servicing organizations.
There was no need to scramble to upgrade software and systems in an attempt to adapt to the new normal of remote work; hire and train call-center staff to handle increased volumes; and read-up and apply the latest regulations to ensure compliance. Many lenders learned from outsourcing during COVID that flexibility and efficiency were two of the most important business capabilities to withstand disruption.
A trusted outsourcing partner can provide lenders with a range of expert services, from front-line customer support to the most complex processes involving loans and leases that default. The best outsourcing providers will work with you to ensure the services they are providing are a white-labeled extension of your lending practice.
defi SOLUTIONS is a leading provider of loan and lease outsourcing services to hundreds of lending institutions throughout the United States. Our focus on continual process improvement and quality of service is guided by advanced analytics to measure performance. If you’ve been challenged by the disruption of the past year and want to provide a loan and lease servicing more efficiently, contact our team today or register for a demo to experience how others benefited from outsourcing during COVID.