Auto financing is increasingly becoming commoditized. As a result, relationships and ease of doing business are the two key factors impacting applicant’s selection of a loan provider and loan application abandonment rates. These issues are true of both captive and non-captive lenders.
With price no longer the key distinguishing factor, customer service has become the most important lending differentiator. Indeed, customers are willing to pay a price premium of up to 18% for certain services just to receive a great customer experience.
Abandoned Applications are a Lender’s Lost Opportunity
To compete, auto lenders today must transform the way they interact with today’s consumers. Digital processes have become more pervasive across customer segments worldwide. For lenders, this is an opportunity to consider more fluid and virtual ways to secure customer loyalty and optimize costs. Yet this is an opportunity that is largely being unrealized.
CX Driven Business Model
It’s not enough for a lender to offer the best rates around. Today, factors like accessibility, information-sharing, professionalism, intuitiveness and attitude are driving growth. A recent report found that 60% of consumers have taken their business elsewhere due to poor customer service and nearly 70% of younger consumers have moved on due to inadequate support.
Skyrocketing Auto Loan Application Abandonment Rates
More than ever, an arduous, time consuming customer journey can well be the difference between a completed and abandoned loan application. Abandonment rates for online loan applications are at an all-time high of 97.5%. This is because customers today have the power to switch from one lender to the next in an instant. As a result, customer loyalty has all but disappeared: a mere 23% of people say they have a relationship with a brand.
Why Are Auto Loans Being Abandoned?
For an industry that relies on the completion of forms to onboard leads and assesses their suitability, loan application abandonment rates are a major problem.
There are several recurring reasons that applicants are dropping out of the application process:
- Download PDF: Applicants are sent application forms to complete in PDF format. These need to be downloaded onto one device. Doing so makes it difficult to return to the application from another device. Also, some formats are only digitally fillable if the customer possesses a specific app.
- Print and Sign: Customers are required to print and sign application documents, but most of them don’t have a printer handy when applying for a loan online, certainly not when they’re on the go.
- Submit Docs: Applicants are either asked to scan original docs, such as proof of identity or proof of income, or to make copies and send them by mail. Thing is, many applicants do not have access to a scanner or copier. They also do not have time to stand in line at the post office.
- Fill in forms: Applicants are instructed to complete a long application form, a daunting and sometimes overwhelming task. Faced with many fields to fill in and documents to provide, borrowers often bail on the process before they even start.
- Re-work: When vital documents are missing or an applicant has entered information incorrectly, they are expected to redo the form or re-submit the docs. Then, they must wait to be contacted, yet again, by a lender to confirm that the new info is accurate.
The High Cost of Outdated Application Processes:
A recent Kelley Blue Book survey found that 40% of car buyers are most frustrated with tasks like filling out paperwork (27%) and applying for financing (13%). These process inefficiencies produce the greatest customer pain point: anger over the amount of time invested after customers have agreed to purchase. Not knowing what the next step is and frustration over idle time are driving prospective customers away.
One recent survey found that application abandonment rates have shot up by 35% over the past two years. As a result of process inefficiencies, companies are losing between 20% and 30% in revenue every year.
The Auto Lender’s Challenge
Financing and lending technology has been stagnant since about 2004. That’s when the internet began to offer consumers the option of financing a vehicle online. By and large, auto lenders haven’t adjusted to the heightened expectations of today’s consumers.
Most lenders continue to manage process flows and operations across diverse platforms inefficiently – relying on the completion of manual, error-prone tasks to complete workflow. One survey found that a significant percentage of auto lenders don’t have the technology required to streamline their processes, everything from origination to servicing through collections.
With a dated approach, it’s virtually impossible to maintain a competitive advantage in today’s increasingly customer-centric market.
A Proven Way to Boost Auto Loan Originations
Digital innovations can enable loan originators to simplify operations and create a seamless customer experience and reduce loan application abandonment. Today, loan originators have proven technologies they can implement to accelerate their application processes. By adopting consumer-friendly technology, lenders can leverage their LOS, improve their yield, cut their application cycle time and quickly bridge the CX gap in auto lending.