A growing number of lenders, specifically those solely focused on auto lending, are considering business process outsourcing as a means to improve operational efficiency and simultaneously reduce costs. In the past year, they’ve experienced an increased number of calls regarding loan deferments and a growing number of delinquencies and defaults. A maze of federal and state regulations that govern some of the more complex aspects of collections present added challenges. These circumstances have made it difficult for smaller lenders to find experienced staff and improve process efficiency to handle the demands.
If you find yourself facing similar challenges, you may be considering business process outsourcing for some or all of your lease and loan servicing requirements. Based on more than thirty years of providing these services for hundreds of lenders across the country, we’re confident you can avoid business process outsourcing failure by following these four planning tips.
#1: Have Concrete, Quantifiable Reasons for Outsourcing
Your instinct may be telling you that outsourcing is the direction to take, but you’ll be much better prepared to make the move if you can identify your reasons for outsourcing or the specific goals you want to achieve. Are you looking for cost savings? If so, what is your target percentage of savings? Are you looking to improve efficiency? Do you have current metrics to compare against and measure improvement? Are you hoping to provide a higher quality service? If so, how would you quantifiably characterize that higher quality of service? Asking questions like these will help avoid business process outsourcing failures that stem from unrealistic expectations.
#2: Know What Areas You Want to Outsource
Business process outsourcing for lease and loan servicing covers a continuum of capabilities—call center, payment management, collections, delinquencies, defaults, title management, repossession, and remarketing are some of the key areas. If you’re intending to outsource all of your lease and loan servicing, that can simplify the move, but there are usually a few areas that are high-priority for most lenders in our experience.
It’s well worth the time to identify which of your servicing areas you want to focus on. Create a prioritized list and use that as a starting point for discussion with potential providers. It will allow prospective business process outsourcing providers to explain how they handle those specific areas. And as you discuss your requirements, ask detailed questions regarding how each of those services is provided.
- What is the experience level of the staff who provide a specific service?
- What systems are in place to manage the service?
- To what degree is process automation used?
- Do you maintain metrics regarding the services provided?
- How are federal and state compliance requirements incorporated into the process?
- How do you manage fluctuations resulting from seasonal or economic cycles?
You’ll also want to ask the business process outsourcing provider if any of their services are truly unique or innovative in the way they are delivered. For example, do they have multilingual call center staff? What risk mitigation strategies do they have in place? In how many states do they maintain collection licenses? Do they employ any advanced analytics to help optimize operations? Capabilities and innovations like these can not only deliver services more efficiently and provide a better quality of service, they can simultaneously help enhance your reputation as a lender.
#3: Stay Onshore
You’ve undoubtedly heard about the reputation of business process outsourcing services located offshore. Of course, the biggest benefit of offshore outsourcing is significantly lower operating costs. You may have been the recipient of services provided by an offshore provider, and you’re likely to have experienced a less than satisfactory level of service.
Considering the complexity of auto lease and loan servicing, you’ll want to work with a provider whose staff and resources are US-based. They’ll understand the details and nuances of lending practices, be well-versed in the compliance requirements, and be much better prepared and positioned to deliver a level of service that positively reflects on your reputation.
#4: Look for a Provider With Proven Industry Success
Business process outsourcing covers a vast area of services. You can find outsourcing services for every core aspect of a business—accounting, human resources, legal, customer support, IT, procurement, and finance. While some business process outsourcing providers may be able to handle some aspects of your servicing, it’s highly unlikely they can handle all aspects.
To significantly increase the success of outsourcing, look for a provider that specializes in auto lease and loan servicing. Rather than covering a wide range of business activities, they’ll be focused exclusively on the services you need, have the ability to continually invest in systems and technology to improve services, and implement industry best practices.
Ask prospective providers for a reference list of clients that they serve and follow up with a call to one or more of the references to learn about their experience in making the transition to outsourcing. Solid references are one of the best indications that you’ll be avoiding business process outsourcing failure when you work with a provider with proven industry success.
Good Planning Avoids Business Process Outsourcing Failure
Of course, there are many other plans and activities that need to be well executed to avoid business process outsourcing failure. Here, we’ve focused on some of the key planning steps to help ensure success. Time invested identifying your reasons for outsourcing and prioritizing the areas of lease and loan servicing having the greatest need will facilitate a focused discussion with prospective providers and help accelerate the implementation process.
Of course, once you embark on your outsourcing strategy, there are many steps along the way that require proper preparation and timely execution. We’ll address some of the critical execution items in a future blog.
defi SOLUTIONS provides software solutions for lease and loan origination, servicing, reporting, and analytics, as well as a wide range of innovative, technology-enabled BPO services. We tailor our solutions and services to the needs of finance companies, captive lenders, regional banks, credit unions, and lending start-ups. Contact our team today. We have years of experience in successful implementation, helping lenders avoid business process outsourcing failure.