End to end lending process


The defi Team Automation, defi INSIGHT

Modern society depends on automation. Automated assembly lines have largely replaced humans throughout the manufacturing process. Amazon warehouses benefit from picking and packing robots to optimize their operations. Some households even have programmable coffee makers that help consumers start their day.

The auto lending and leasing industry is no different. Automation has positively impacted both lenders and borrowers alike, and with auto sales declining, there are now fewer lending opportunities. Due to current trends in auto loans, automated loan processing systems have become essential, allowing lenders to remain competitive and keep their businesses profitable.   

Automated Loan Processing System

Advanced automated loan processing systems have distinct advantages over legacy lending systems. Using the latest cloud-based technologies, these systems are quickly implemented and configurable, providing superior customer experience while improving the accuracy of decision-making. They even save on operational costs, as their use largely eliminates the need for paper documentation. Automated systems make all stages of the loan cycle more efficient.

Though lenders may receive hundreds, or even thousands, of applications weekly, only a portion of these may align with a lender’s established lending strategy. Automated loan processing offers banks, captive lenders, or credit unions the ability to quickly evaluate and identify applications that meet their lending criteria. This allows lenders to expediently contact applicants and, once approved, confidently underwrite and fund a loan.

By automating decision rules and transforming paper applications into a digital format, lenders can more easily gather performance data. This allows lenders to:

  • Provide a better user experience by improving the speed and accuracy of loan applications.
  • Process a larger number of loan applications with existing resources.
  • Largely eliminate human error while making faster, better-quality evaluation decisions.  
  • Establish predictable, repeatable, and auditable processes that support compliance.
  • Reduce delays and costs associated with paper processes.
  • Analyze process and loan performance to continually improve efficiency and profitability.

To be successful in a very competitive auto lending and leasing market, lenders must adopt innovative loan processing solutions. By incorporating cutting-edge automation technologies, lenders will gain a significant advantage in today’s consumer lending market.

To be successful in a very competitive auto lending and leasing market, lenders must adopt modern loan processing solutions.

Improved Customer Experience

The Internet has made many daily transactions frictionless. Consumers can now purchase just about anything online. Traders can buy and sell stocks. Bank customers can conduct banking activities online. Homeowners these days can even adjust their home’s heating and cooling from their desktops or mobile devices.

Today’s consumers have come to expect the simplicity and efficiency that automation provides. However, the auto lending and leasing industry lags behind in adopting this technology. Because of this, many potential car buyers view the process of obtaining an auto loan as overly complex.

For example, a 2019 FICO survey found that 91 percent of US consumers would either accept or consider a loan offer if it meant not having to do extra paperwork or deal with a bank. But even as consumers complained about paperwork, the digital transformation of the US auto lending sector seems to be making inroads and improving efficiency. This same study also found that over two-thirds of US consumers found the process easy, with 42 percent waiting less than a half hour to finalize their auto financing.

An automated lending system can dramatically simplify and accelerate the entire process. Applicants can be anywhere there’s an internet connection. With configurable menus, applicants are simply led through the process, prompted for information, and provided with guidance when necessary to ensure they enter the correct information.

Paper documents, if required, are digitized and securely sent to the lender to eliminate delays associated with shipping hard copies of documents to a lender. When the application process is automated, information can be collected quickly and accurately. It’s then transmitted to the lender for a quick decision process. In today’s auto lending and leasing market, faster credit decisions give lenders a competitive advantage.

Accurate and Repeatable Decision-Making

Automation improves the ability to evaluate applicants accurately and make swift decisions. It eliminates repetitive manual steps that are better done digitally. This allows lenders’ employees to use their expertise rather than act as data entry machines. Examples of how automation can help lenders include:

  • Decision rules evaluate applicant attributes and provide immediate loan approval for well-qualified applicants or declination for applicants who are underage, have no credit history, or have over-extended credit.
  • Integration with credit data sources and services such as Digital Matrix Systems lets lenders automatically and quickly verify applicant information.
  • Decision rule flexibility can guide processing for exception applications, automatically performing certain steps of the evaluation process and delegating more complex decisions to experienced underwriters.
  • No lost or misplaced documents. Paper documents converted to digital images are immediately and securely accessible by the underwriter so that they can review applicant materials more quickly.
  • Combining decision rules and integration with credit data sources and services lets lenders calculate optimum loan structures and terms automatically.
  • Decision rules provide predictable, repeatable processes that remove the variations associated with human decisions and demonstrate compliance with lending regulations.

Multichannel for Digital Notification

Automation decreases the manual work associated with notifying applicants whether they’ve been approved or declined. Every application requires a response, and digitizing this process gives lenders greater flexibility on how to respond. An automated loan processing system helps lenders create a variety of notification templates that are then populated with applicant and loan-specific information before sending out a notification. Multichannel communication allows lenders to send notifications via email, text message, or regular mail.

Multichannel communications allow lenders to reduce their printing and mailing costs. Additionally, it digitally retains a copy of the notification. This helps lenders maintain strict regulatory compliance, including in the case of adverse action letters. Meanwhile, it also relieves lenders of the cost and risks of storing paper documents.

Analytics for Continuous Process Improvement

In addition to these previously mentioned advantages, automation helps lenders analyze their lending practices. Automated processes gather a wealth of data regarding applications, underwriting, and funding of loans. Analytical tools designed explicitly for lending allow lenders to determine where improvements can be made. These tools also show in which areas a lender performs best while, more importantly, identifying areas that can be improved upon. With analytics tools, you can:

  • Identify which geographic areas send the best loan opportunities while then determining how to replicate this success in other geographical regions.
  • Determine which borrower traits influence loan performance and use this insight to accept more applicants with these attributes.
  • Discover which loan structures and terms reduce the risk of default for subprime borrowers.
  • Identify borrower characteristics that lead to unexpected delinquencies and implement more stringent qualification steps to reduce risk.
  • Identify unnecessary, time-consuming manual steps in loan origination that can be improved through decision rules.

Analytics should be thought of as an essential tool for lenders, with the above only a small selection of the benefits they can glean. An automated loan processing system improves the efficiency of the entire lending process. Analytics monitors performance and provides insights that allow lenders to continually improve process efficiency. In a competitive lending market, continuous process improvement is essential to sustain profitability.

Success Requires Automation     

Automation positively impacts our daily lives. It increases productivity, reduces costs, and improves the quality and consistency of consumer products and services. Without automation, we wouldn’t have all the amenities of a modern world, and the consumer lending industry is no different.

An automated loan processing system provides lenders’ customers with a better experience, making applications simpler and quicker. The use of decision rules enables a faster, more accurate underwriting process. Multichannel communications facilitate faster notifications. The digitization of records supports compliance requirements. Analytic tools give lenders the power to continually improve efficiency and performance. To effectively compete in today’s auto lending market, lenders need to recognize the advantages of automation and how it provides benefits throughout the lending process.

defi SOLUTIONS offers a total automated loan processing system for a lender’s complete loan or lease lifecycle. Partnering with captives, banks, credit unions, and finance companies, defi’s market-leading solution helps lenders exceed borrower expectations. From digital engagement through the complete lending process, defi sets new standards for flexibility, configurability, and scalability in originations and servicing (by your experts or ours). defi SOLUTIONS has the backing of Warburg Pincus, Bain Capital Ventures, and Fiserv. For more information, please visit www.defisolutions.com.

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