Despite a dip in consumer confidence and the introduction of new FCA regulations, the motor finance industry has continued to show strong growth, outperforming other sectors. Graham Donald, managing director, EquinitiPancredit, explores how lenders in other industries might learn from the sector’s delivery of a seamless customer experience.
In April, the Bank of England reported that growth in unsecured borrowing, including personal loans, had returned to rates not seen since the financial crisis[i]. With market confidence renewed, lenders are now looking for best practices that can help them make the most of the rising market. Enhancing the customer experience is a good starting point; removing ‘points of friction’ can significantly reduce application drop outs. It’s also something that the motor finance industry is really starting to nail.
Despite economic doubts and stricter compliance requirements, the sector has continued to demonstrate enviable growth. In October 2015, car sales had been rising consecutively for 43 months[ii] and, after a brief pause (for new plates to be issued), sales picked up again, and at a faster rate than before. In March 2016, the new car market surged by 5.3%, making it the highest grossing month since 1999[iii]. Given that roughly 80% of all new vehicles are bought with finance it’s little wonder that the Finance & Leasing Association (FLA) reported an 11% increase in motor finance lending in Q1 2016[iv].
Sure, new cars are an attractive consumer purchase which makes the market naturally buoyant in times of confidence. But the sector’s growth has also been assisted by the automated systems that specialist lenders have harnessed in order to enable a fast and convenient finance application process for dealerships and customers.
By digitising and automating paper applications, replacing them with intelligent digital systems and electronic signatures, motor finance companies are eliminating the manual underwriting process entirely. This means turnaround time on car finance decisions can be cut from several days to a matter of minutes. Every dealer will tell you that if an enthusiastic customer walks away without sealing the deal, the chance of closing the sale plummets. With new digital systems, however, the points of friction in the paper process are consigned to history, replaced by a fast and smooth digital experience that enables sales teams to close on both the deal and the finance in the same customer visit.
Other lenders should aspire to deliver the same level of service, not only because it’s good practice, but because it’s also increasingly what customers expect. For years, and across so many industries, digital services have replaced archaic paper-based systems for precisely these reasons. It’s time the lending industry caught up.
Regulators agree. Not only do digital loan applications services deliver a better experience for the end customer, they also promote transparency, raise operational efficiency and drive consistency in the underwriting process; all factors that the Financial Conduct Authority is focused on. In motor finance, dealers can now automatically match applicants to finance products that are appropriate to their fiscal circumstances and guide them through the entire application process on-site, enabling a finance decision to be delivered instantly and electronically. These are big wins for the end customer, saving them the time and frustration of declined applications, and ensuring that everyone receives the same fast and efficient treatment.
The motor finance industry has been enjoying the benefits of the return in consumer confidence. By harnessing the right technologies, there’s no reason why the rest of the lending market can’t do the same.