How not to alienate auto customers with verifications

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Above and beyond any other process, verifying a borrower’s identity is a universal practice to avoid business risk. Auto lending is no exception – and it is becoming more and more reliant on fast, easy digital processes to remove barriers to accessing finance.

What’s driving these changes?

When COVID-19 hit and the physical branches of financial institutions closed, customers were forced to go online. Now, according to a 2020 survey of mid-sized financial institutions conducted by Cornerstone Advisors, the number of new retail deposit accounts opened in-branch decreased by nearly 60% the same year. And according to Accenture, almost 50% of consumers would now prefer to open a new account digitally over face-to-face.

In the broader market, the boom of branchless neobanks with online verification features is driving the revolution of app-based banking without the need for in-branch or long-winded verification processes – think the likes of Revolut, Volt, Monzo, Wise, and MoneyLion. These challenger banks are setting a new precedent for easy onboarding, leveraging the demand accelerated by the pandemic.

In terms of auto finance, you should be setting similar goals. To make doing business with you faster and easier for customers, there are several verification steps to consider, starting with what information you need and the different ways you can get it.

1) Who’s the buyer?

The fastest way to manage ID verification is digitally. This means minimal effort for the customer and no work burden on the dealer to complete the verification process. An example of this approach would be the borrower simply taking a photo of their ID with a phone and uploading it to the dealer’s system.

Even so, something to keep in mind is that according to the PIF Fintech and e-money customer onboarding benchmarking report, 1 in 4 customers drop out during the FinTech onboarding process. This is despite the fairly widespread use of integrated e-ID document capture. To have better onboarding success and make the best use of integrated e-ID services, you should consider the UX and UI aspects of this process, such as making sure you’re taking feedback on each stage of the process to continually optimize the customer experience.

With the right technology, infrastructure, and analytics for an effective feedback loop, you can expedite the onboarding process and don’t need to worry about building all of the infrastructure yourself.

2) Where’s the buyer based?

Once you’ve verified your borrower’s ID, your risk models may recommend residential address verification as well. Generally speaking, this type of verification is most common for sub-prime and lower credit-quality borrowers.

For reference, in 2019, 11:FS found that 22% of customers using a digital financial service or app thought that providing this kind of personal information was the most painful part of the experience. And we can’t blame them – experiencing an address issue can mean they fail the application process automatically, have to resubmit all of their information, and eventually get frustrated and give up. A use case of Prove Pre-fill™ technology found that the ability to auto-fill identity and address data resulted in a 15% average increase in successful sign-ups and an 80% reduction in keystrokes during the onboarding process.

As with ID verification, there are third parties that can help with this process and three ways to put this type of verification into operation. This is also the stage where automated form fills can be effective at preventing abandonment.

Such technologies continue to evolve and can drastically improve the customer experience for necessary (but often time-consuming) verification steps.

3) What’s the buyer’s income status?

Lending to consumer borrowers in the digital age requires objective financial information. Compared to other verification processes, this type of verification holds the highest risk of abandonment, especially if it involves the customer having to dig out various bank statements, payslips, and other financial documents.

If the customer does resubmit the information after failing verification, there’s still a chance their bank will flag the transaction due. Consumers are often still wary of handing over personal information and social security information, which is another frustration at hand in going through the process all over again.

To keep lenders happy and avoid borrower frustration, it’s critical to make this process as easy as possible. We recommend three areas of improvement:

  • Leverage third-party data sources, integrations, and services to collect, process, and check credit information accuracy
  • Focus on an automated digital strategy for a long-term, measurable way of speeding up verification processes
  • Having the technological ability to make adaptations and improvements with minimal outsourcing requirements

The final word on verifications

The real issue for many lenders and their customers is the ineffective translation of manual processes into digital ones, rather than thinking about how technologies can improve and advance a manual process.

And while we don’t advocate a complete replacement of manual or branch-based processes with digital ones altogether, there are different moving parts to both. It’s worth investing in the technology to be able to offer a great customer experience, whether your customer decides to visit a dealership or make contact through the web or an app, and to be able to pause or resume an application process at any time.

Of course, your situation may be different.

Get in touch with Solifi today to request a free assessment of your verification processes and a chat about how our technology could help you create a painless auto finance onboarding process.

Solifi Open Finance Platform

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