How lenders can stay competitive in a digital shopping world

Black Friday and the holidays are now behind us, and lenders face 2022, hopefully less crowded with the restrictions of the past two years. However, the trend towards online shopping that accelerated during the pandemic has definitely changed the landscape. Consider online shopping in general to hit $ 8.9 billion on Black Friday, well above pre-pandemic levels.

Auto sales are no exception to this dynamic. Digital vehicle sales have become an important source of income, especially as millennials emerge as a larger group of car buyers than their baby boomer predecessors, and they are twice as likely to skip the market altogether. showroom and buy vehicles online, new or used.

So what does this mean for lenders, and how can they strengthen their e-commerce offering in order to stay competitive in a highly digital shopping environment? The drive to gain a competitive advantage is compounded by the fact that inventory is still tight for dealers and interest rates remain low, a double whammy that will likely last until 2022. This has led consumers to signing contracts for vehicles weeks before they’re even due to arrive.

This unique environment opens a window where lenders have more opportunities to compete on the basis of their own services rather than being just a conduit for the dealer. This means that lenders have more to gain by committing to a robust Loan Origination System (LOS) and advanced automation solutions that deliver streamlined integration, rapid decision-making, and frictionless customer experiences through a online platform.

In addition, fully digital resellers such as Autotrader, Carvana, Vroom and other alternative sources of business have come into the limelight with the move to online services. Sophisticated LOS systems can connect lenders to these platforms to gain buyer’s share as these sites continue to capitalize on this momentum. Many of these destinations offer price comparison tools that direct consumers to online finance companies. Lenders need powerful tools that allow them to differentiate their customer experience and emerge as the winning provider in these environments.

Everyone wants opportunism

The difference between making a deal and losing it is the ability to deliver speed and precision to the engagement experience – all attributes that can be enhanced with the right technology.

The main reason consumers buy vehicles online is because it’s convenient, according to Kelley Blue Book. Where shoppers once researched their purchases online and then went to a dealership, many shoppers have switched to staying online throughout the transaction. Millennials in particular reject the showroom experience, which typically involves hours of negotiations, consultations with different managers, considerable paperwork, and long waits for approvals.

Sophisticated LOS solutions feature artificial intelligence-based processes that speed up income verification and reduce risk to the lender while reducing work on the part of the lender. The result is near instant approvals, compared to the time investment of a dealership visit.

The best financing tools win

The Blue Book survey identified one of the main benefits that consumers find in buying cars online: Buying online allows them to choose the best financing tools instead of being limited to the tools of a individual dealer. This underlines how essential it is to be that lender with the “best tools”.

For banks, credit unions and other lenders, this means turning to online refinancing solutions to increase profits despite the unprecedented lack of inventory. Yet vehicle owners are bombarded with refinancing offers because it represents a source of income that does not even involve a physical sale. Lenders are forced to compete on their ability to provide faster and more efficient online loan arrangements. There are technologies that allow customers to refinance their auto loans literally with a few clicks of the mouse.

For captive lenders and dealer groups, loan applications always offer greater speed as they can be completed in the showroom through the lender’s website. Many dealerships have adopted automated technology to offer online document signing and contactless application processes for security reasons. Yet after having been forced to move much of their financing processes online, dealerships are still benefiting from the adoption of this automation.

Likewise, for indirect lenders, connecting to digital markets offers greater accuracy, reduced risk, less human interaction, a faster customer experience, and greater customer satisfaction. All of this lends itself to higher sales volumes.

Lenders can take advantage of a single window to dominate online sales today with robust LOS technology. And when the economy rebounds and stocks start to come back, lenders who have invested in technology that creates efficiencies will be even better positioned to compete in an ever-changing market, meeting pent-up demand.

Vlad kovacevic is the founder and CTO of Inovatec systems. Inovatec provides modern and innovative LOS, LMS and Direct systems that eliminate friction in the loan process and automate much of the manual work of loan creation and management.

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