Leveraging AI Technology to Maximize Efficiency in Auto Lending

Leveraging AI Technology to Maximize Efficiency in Auto Lending Informed

More and more, financial institutions are turning to fintechs to access their advanced technologies, including AI. Makes sense, since Lenders need advanced verification methods to enhance customer experience, prevent fraud, and become more competitive. Fluctuating interest rates, high refinancing activity, and evolving regulations, mean lenders must adapt to the demands of the digital age. And fintechs are the enabler.

Maximizing efficiency is a common goal, and there are a few strategies to achieve that goal. To overcome their current challenges Lender’s can pull technology-enabled “levers.”

Reducing Operational Costs

“Do more with less” by reducing operational costs. Achieve this by automating document-related processes with artificial intelligence and machine learning. Streamline daily tasks and minimize manual labor for repetitive activities like data entry, validation, transformation, reconciliation, and compliance to reduce the need for human resources and a 50+% reduction in document processing expenses. By letting the software handle the boring, repetitive low-level work the extra “human time” can be reallocated for higher value and/or customer facing work.

Establishing Consistent and Scalable Processes

Consistent and scalable processes can be  established through automation combined with policies, procedures, and standards. Implementing a set of policies, procedures, and standards that define how the organization will streamline and reduce operational expenses is crucial for long-term cost savings and scalability.

Mitigating Risks

Proactively conducting a comprehensive risk assessment of the lender’s potential risk exposure is essential for effective risk mitigation. Following the assessment  you can develop a risk management strategy that aligns with your business objectives and risk management approach.  Continuous monitoring and adjusting to changing threats, technologies, and regulatory requirements is key to success. Auto lenders recognize the benefits of AI and automation, but often have concerns about accuracy and scalability, critical to growing their portfolios.

Automation companies (fintechs) should be asked to  provide performance metrics demonstrating the accuracy and scalability of their systems. This includes metrics such as error rates, processing times, and throughput. Also, case studies highlighting real-world successes of automation improving efficiency, reducing errors, and scaling.

Providing Accurate Data for Insights

Manual document processing –  prone to human error – can have disastrous consequences such as non-compliance and penalties if data is inaccurate. Decisions must be based on accurate data. Automating document processing helps lenders increase accuracy.

Intelligent document processing platforms provide additional benefits such as document intelligence, which helps businesses interpret, capture, validate, transform, and reconcile data from documents. This leads to informed business decisions and simplified analytics, even from unstructured documents. Lenders can use these quantitative and qualitative insights and data to see and assess more deals, win competitive deals, and nurture their portfolio for follow-on investment or M&A.

Providing Accurate Data for Insights

Manual document processing –  prone to human error – can have disastrous consequences such as non-compliance and penalties if data is inaccurate. Decisions must be based on accurate data. Automating document processing helps lenders increase accuracy.

Intelligent document processing platforms provide additional benefits such as document intelligence, which helps businesses interpret, capture, validate, transform, and reconcile data from documents. This leads to informed business decisions and simplified analytics, even from unstructured documents. Lenders can use these quantitative and qualitative insights and data to see and assess more deals, win competitive deals, and nurture their portfolio for follow-on investment or M&A.

Measuring Success

To ensure success,  establish key performance indicators (KPIs) to measure the effectiveness of the program and identify areas for improvement. Providing ongoing support to customers ensuring that their systems remain accurate and scalable over time is important to long term ROI. This includes regular updates and maintenance to address issues and ensure that the system continues to perform optimally. Best practices include an account management team with quarterly customer success meetings and quarterly business reviews. 

By providing KPIs and best in class practices showcasing the accuracy and scalability of their systems, fintechs build trust with their customers.The end state accomplishments will vary depending on the lender’s specific needs and goals, but often include achieving compliance with industry standards and regulations, reducing the organization’s overall risk profile, doing more with less and improving your security posture.

An earlier version of this article appeared on Auto Finance News.

author avatar
Jessica Gonzalez Director of Lending Strategies
With more than 15 years’ experience in the financial services industry, including tenures at Santander Consumer USA and Visa, Jessica Gonzalez is now the Director of Lending Strategies at Informed.IQ.

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