Automated Digital Workflows for Auto Loan Originations
By Leor Melamedov
Customer demand for new cars may ebb and flow. That’s not something auto lenders can control. However, auto lenders can influence how many potential borrowers ultimately convert, and how long the auto loan application process takes.
Recent surveys show that 87% of car buyers expect to be able to complete their auto loan process entirely online. Yet most borrowers who attempt to take out a car loan online are bounced between channels, forced to repeat information across forms, asked for irrelevant information, or require follow-ups for additional stips.
As a result, auto loan officers waste precious time and resources chasing customers. And many customers who begin a loan application won’t even finish it due to the excess friction involved.
But there is another way. Auto lenders can adopt automated digital workflows to streamline and expedite the end-to-end loan origination process. In this article, we’ll show why choppy manual workflows are so detrimental for auto loan originations, the benefits of automating workflows, and the use cases in originations.
The Pitfalls of Manual Originations Workflows
A typical originations cycle involves complicated interactions between lenders, dealers, and customers. Customers typically have to show up at a dealership, fill out their auto loan application, and then receive offers from suitable lenders. Depending on the stips the customers send, there may be requests for additional information.
Direct lending is increasing in popularity and promises to simplify many of these steps, but even that does not eliminate the chasing that is inherent to manual processes. For example, a customer who shows their credit score to be under a certain threshold may be asked to provide additional documentation, such as utility bills or proof of income. But this process is typically far from automated, and currently relies on individual agents to flag customers and then chase them for missing information.
Robotic Process Automation (RPA) is another solution that some auto lenders have turned to in hopes of simplifying the cumbersome loan originations process. The idea is to automate individual tasks in the originations process such as the application, document submission and verification, underwriting, terms and conditions for ancillary products, title transfer, and more. It tends to do a good job with simplifying discrete steps, but is less successful in linking these steps together into a unified and logical customer-facing workflow. As a result, the full originations journey remains fundamentally fragmented.
This siloed and choppy approach negatively impacts several KPIs that auto lenders value, including:
Auto loan conversions: Friction in the loan application means that fewer customers will complete the process. Borrowers who are able to may choose to go with a different lender that offers a simpler process.
Turnaround time: Representatives spend an excessive amount of time chasing applicants for supporting documents and signatures due to disjointed processes.
NPS: Net Promoter Score, a measurement of customer satisfaction, suffers due to the stressful and choppy application process. In some cases, the poor experience may even lead to a failure to convert.
eNPS: Employee Net Promoter Score matters too. Agents often bear the brunt of customer frustration due to endless chasing of customers for documents, misunderstandings surrounding stip requirements, and incorrectly filled out forms. This can lead to burnout and loss of morale.
Compliance: Agents that fail to ask high-risk customers for additional supporting documentation expose the auto lender to compliance issues, fraud risks, and hefty penalties.
Automated Digital Workflows: Benefits for Auto Loan Originations
Originations departments have to coordinate among dealers, borrowers, and underwriters. This makes their job highly complex with many moving parts. Automating entire workflows ensures that loan applications are completed correctly and quickly the first time.
Managers no longer have to rely on their agents to remember to ask certain categories of borrowers for specific supporting documentation. They can simply set up business rules that trigger requests for new information, both within forms and between steps in the process.
While traditional business process management solutions required heavy IT involvement and coding, today’s no-code automated workflow solutions allow managers to independently adjust workflows depending on the business and regulatory environment.
By switching to such a solution, originations professionals can expect to see some of the following benefits:
More intuitive processes: A single system controls the entire end-to-end process with a simple drag-and-drop interface.
Digital tools in one digital suite: At various stages of the workflow, rules trigger the sending of requests for eSignatures, eForms, stip collection, digital payments, and ID verification.
More streamlined processes: Easy and intuitive conditional rules can be set to ensure business logic between steps, within steps, and within form fields.
More visibility: Digital workflows come with dashboards that allow business leaders to gain visibility into the KPIs that matter most, such as increasing ACH signup, increasing time to funding, boosting completion rates, and reducing time to collect stips.
Zero IT involvement: Managers can adjust their business rules according to their needs without requiring IT support or coding.
Common Originations Use Cases Leveraging Digital Workflows
As we’ve seen, automated digital workflows ensure auto loan originations reflect the latest compliance and business requirements.
The biggest use cases for digital workflows can be found in expediting auto loan applications and signing borrowers up for ACH.
Auto Loan Applications
Before: The agent chases the customer for additional unforeseen documentation, with mounting frustration and time loss affecting both sides.
After: As soon as the customer submits their digital loan application and stips, the system triggers requests for any additional documentation or signatures depending on the customer’s risk profile and/or state of residency.
Digital workflows are designed to maximize compliance while minimizing inefficiencies. A typical loan application process using automated digital workflows can look like this:
The customer submits the loan application form, supporting documents, and ID for verification — 100% digitally.
Depending on the information submitted, the agent’s system triggers requests for additional information, documents, or signatures.
The form information is instantly compared with the information revealed on documents and ID to ensure accuracy.
The loan is approved.
Here are some examples of conditional logic triggers auto lenders may want to employ during the originations process:
[From California y/n, add waiver x to signature]
If: Credit score is below x
If: State or residency is y
Then: Request z documents (e.g., proof of income, utility bill)
Then: Request signature
Signing Borrowers Up For ACH
Before: Borrowers who encounter financial difficulties fall behind on their auto loan payments, leading auto lenders to chase customers for payments.
After: New borrowers are encouraged to sign up for ACH, increasing the likelihood of regular payments even during times of financial difficulty.
Digital workflows can be set up to trigger ACH signup offers immediately after the loan is approved. The advantage of signing new borrowers up for ACH right away is that it proactively prevents late payments down the line.
A typical ACH signup process using automated workflows can look like this:
The customer’s loan application is approved.
The representative offers an ACH payment plan, in some cases in exchange for improved loan terms.
The ACH payment plan is implemented.
Here are some examples of conditional logic triggers auto lenders may want to employ for ACH:
If: Loan is approved
If: Customer is interested in ACH
Then: ACH is offered
Then: A digital ACH authorization form is sent for the customer to fill out and return on the spot
Then: Signed documentation is sent to storage and compliance
Then: Better terms contingent on ACH signup are set in underlying system
Then: Notifications and tracking are set in underlying systems
Digital Workflows for Efficient and Compliant Auto Loan Originations
Perhaps the greatest advantage of automated digital workflows is that originations departments can adapt them to their exact needs. This flexibility means that customer interactions with the auto lender are instantly tailored to each borrower’s’ unique circumstances. Customers are asked to provide only the information that is needed from them, no more and no less. Automated workflows ensure the ball is kept rolling between critical steps, both at the auto lender and when dealing with the dealership and underwriter. This allows auto lenders to sell more loans with greater efficiency.
Lightico offers such a workflow automation solution that uses conditional logic to streamline end-to-end customer interactions in auto finance. The platform includes eSignatures, smart eForms, digital stip collection, and instant ID verification.
On average, Lightico’s customers experience 30% faster time to funding, 25% increased completion rate, and 40% reduced time to collect stips. Learn more at Lightico.com.
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