How digital is redefining the game of auto finance for banks?

Published: December 25, 2018

The world of auto finance, as we know it, is changing 'faster than any of us can fathom. And there is only one thing that can drive banks through this tsunami of changes' potential to adapt and innovate.

Interestingly, modern trends, like car sharing services and car rental services, are making in-roads into the auto finance landscape. Buyers have more options available to finance car purchases, such as peer-to-peer lending sites, that often offer more lucrative rates for lesser loan amounts.

While some of the major banks have already started their auto finance transformation journey, most of the banks are still far from true digitization and not so ready.

What follows next are eight areas wherein technology can be the enabler to help banks rethink their business models and customer interactions, if not outright transform, in the disrupting world of auto finance.

Car Selection

Buyers look for convenience and agility that traditional channels, such as dealership visits, do not offer.

With the integration of car aggregator websites, banks can gain a competitive edge and provide a hassle-free experience to customers. Also, banks can harness the potential of virtual reality to offer them real-time experiences by creating simulations of car models.

Loan Origination

Customer personas form the foundation of the loan origination process. And, in today's digital times, it's important for banks to keep up with the changing personas and realign the processes.

Digital marketing techniques such as retargeting can help banks to target the right set of customers at the right time in the right place. Once banks have their customers attention, they can engage with the customers with the right set of offerings devised as per the insights gained from collected data, such as customer profiles, preferences, and demographics.

Decision Making

While customers demand swiftness in the auto loan application process, banks are often unable to speed up the process due to the lack of enough data required to assess applications.

Banks can reduce the turnaround time (TAT) and make faster decisions by leveraging alternate data sources, powered by artificial intelligence (AI) techniques, to gather more information about the applicants.

Digitization of Dealer/Agent Processes

While banks are deploying faster data capturing and application processing systems, most of the dealers and agents still use paper-based forms to process customers applications, which delay the overall process.

With Optical Character Recognition (OCR) techniques, which allow mechanical or electronic conversion of images of typed, handwritten or printed text into machine-encoded text, banks can read application data automatically and feed into a system. Thereby, enabling faster processing of applications while saving resources, time, and money.

Reconciliations Automation

Involvement of several parties in the auto finance value chain results in reconciliations that lengthens the process of loan sanction and delays decision-making.

Implementation of Robotic Process Automation (RPA) programs can help banks to automate the reconciliations and reduce the overall duration of the process significantly.

Customer Service Automation

Manual and repetitive customer service processes can be automated by deploying chatbots powered by natural language processing (NLP) and AI techniques.

Consequently, banks can extract information from customer inputs, analyze, and validate them to accurately identify problems or provide suggestions.

Process Digitization

Banks are investing in mobile apps to offer auto financing deals, customer onboarding, document capturing and processing, credit decisioning, loan servicing and more.

Paperless processing, in collaboration with partners such as signature processors, remote document handling service providers, can help banks to make the overall process frictionless.


Integrating offerings with third party service providers including auto accessories dealers, insurance service providers (ISP), car servicing agents for mobile and web channels, can help banks to differentiate themselves among the lenders in the marketplace.

The bottom line: Rapid technological advancements are opening window of opportunities in the auto lending space including mobility, digitization, analytics, collaboration, and customer centricity. Banks must rethink new level of engagements and make a shift from traditional offerings to non-traditional offerings. As per a report published in the New York Times, major banks have already started ramping up auto lending after experiencing a post-crisis slowdown in other types of loans like mortgages. The auto finance landscape, ushered in by technologies and trends, will ultimately produce both winners and losers depending on banks speed and agility to evolve as a one-stop shop to meet customers demands.

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