Using the cloud for income and employment verification

In a recent Equifax survey, nearly 40% of dealerships said they were still not investing in more digital resources for their retail and lending processes. Among this group, about 31% said they didn’t have the resources to invest more, 40% said they didn’t feel comfortable with the technology, and 29% said they were comfortable with the digital activity they are currently getting.

These dealers and lenders may want to reconsider their position, especially in today’s highly competitive environment.

Today’s consumers are more savvy than ever and have high expectations when they embark on a car purchase. They no longer necessarily compare different lenders or dealers; they compare experiences. With much of today’s shopping done digitally, lenders and dealerships need to consider ways to provide the level of service consumers expect at every stage of the journey, from finding the right car to financing it.

Digital transformation goes beyond speed and compliance

It is no longer enough for dealerships and lenders to simply adopt digital transformation strategies based on efficiency and compliance concerns. The right tools and resources can have a significant impact on the bottom line.

In a separate Equifax study of U.S. auto lenders that process more than 150,000 automated credit report requests for auto loan applications, data showed a 245% increase in loan conversion rates for lenders who Automated income and employment verification. Additionally, conversion rates were significantly higher for borrowers with lower credit scores. This demonstrates that using income and employment can significantly help borrowers who typically have the most difficulty getting a loan.

Lenders who leveraged income and employment verification data were, in some cases, able to offer lower interest rates or better loan terms to borrowers in all credit brackets by compared to lenders who have not used these resources.

The study showed that lenders saw an estimated 19.6% increase in profits from growing their loan portfolios, with only a slight increase in interest rates in consumer segments.

Why Cloud Technology Makes a Significant Difference

Frankly, few banking institutions or lenders have the internal resources to integrate automation tools to extract valuable and relevant insights from their data once compiled. However, reliable resources can provide financial institutions of all sizes with access to flexible data integration and access capabilities. Offering multiple delivery options can help lenders quickly adopt a standardized enterprise-wide loan decision framework based on integrated income and employment data from a single verification source.

Many financial institutions have mountains of data in their arsenal. When deciphering data points for advanced risk models, lenders often ask many questions: How can I bring together internal data with up-to-date information from third-party data providers to create a complete view of the applicant ready ? And once that data is compiled, how can I best use that data to uncover insights into loan affordability? How can I take action to make sound decisions and reduce risk? How can I use this data to convert more loans?

Cloud technology can enable the shopping experience consumers expect by providing lenders with a quick yet comprehensive view of borrower affordability. This is done by breaking down data silos or technical barriers between data sets and eliminating the cumbersome process of lenders pulling data from multiple sources to get a complete picture of a borrower.

By integrating these data sources into a cloud-based environment, data can become a transparent, globally distributed data structure, allowing lenders to combine data in new ways, unlock new insights, and ultimately , to foster a better experience for borrowers.

Identify and unlock new customers

By incorporating automated income and employment data, auto lenders have the ability to unlock new consumer markets that would otherwise be overlooked. According to Equifax, nearly 20% of all consumers today with a subprime credit score are considered financially sustainable; in fact, among consumers with a modest 580 credit score, 10% estimated total household income to be over $178,000, indicating an untapped market of potentially attractive customers. Yet, according to automotive trend data collected in November 2021, only 16.6% of auto loan and lease accounts were issued to subprime consumers, the lowest share of subprime since the beginning of the year since 2010.

Digital transformation strategies, combined with “today’s leading cloud-based data analytics, help dealers and lenders go beyond efficiency and compliance; ‘they open up new opportunities for business growth. While traditional credit scores remain a strong indicator of creditworthiness, “consumers today can be more complex. Leveraging alternative data sources in the decision-making process, such as income and employment information accessible through cloud platforms, can expand the pool of potential consumers for lenders, driving more conversations and potential conversions.

Will Holleman (photo, top left) is the Sales Manager – Auto Check Services within the automotive team at Equifax Workforce Solutions. (www.equifax.com)

About Jermaine Chase

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