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© 2020 Fair Isaac Corporation. All rights reserved.
Customer DevelopmentCustomer Engagement Q
&A
Your consumers expect a seamless digital financing experience — can you deliver it?
Andrew Williams
EMEA Auto Practice Lead
Mica DuBois
Portfolio Marketing for Origination
Self-disruption:bringing the “fintech experience” to auto consumers
”Increasing digital disruption from fintechs, customer empowerment, and regulation are creating a business environment where if it takes you several cycles to deliver an optimal origination strategy, you’re probably already losing out.”
Andrew Williams,
EMEA Auto Practice Lead
© 2020 Fair Isaac Corporation. All rights reserved. 2
Customer EngagementCustomer DevelopmentSelf-disruption: bringing the “fintech experience”
to auto consumers
The way most auto lenders seek performance gains in origination is like walking around a dark room with a dim flashlight. The sightline is a few steps ahead in one direction. Select and test a new strategy. If it’s successful, roll it out. Start from there in the next round, and then take a few more steps.
There’s no time for that anymore. Today’s auto finance leaders are using centralised decisioning, data, and optimised strategies as a flood lamp to illuminate a landscape of opportunities across the customer credit lifecycle — from marketing to origination and through customer management. They’re leaping ahead and discovering winning strategies that would otherwise have not been evaluated or would take many cycles to approach. Andrew Williams, EMEA Auto Practice Lead at FICO, answered questions about seamless digital experiences in auto finance from Mica DuBois, Portfolio Marketing for Origination.
Q: So, what are today’s customers expecting when they finance a car? Have finance expectations really changed that much?
Q: You just mentioned the “F” word — fintechs. How can auto lenders self-disrupt and become more “fintechy” in their approach to providing convenient and delightful financing experiences?
A: According to FICO’s latest Global Consumer Auto Finance Survey, 77% of European consumers followed traditional methods of funding, which required physical interactions in the dealership or bank. However, there was a 6% increase in the number of online applications in 2018. More staggering — and an indication of how quickly the market can shift — is that 90% of consumers said they would accept an instant loan offer for vehicle financing if it meant avoiding going to a bank. That speaks powerfully to today’s consumer and their demand for convenient experiences. Increasing digital disruption from fintechs, customer empowerment, and regulation are creating a business environment where if it takes you several cycles to deliver an optimal origination strategy, you’re probably already losing out.
A: Delightful may be a stretch, but convenient and seamless are certainly attainable. The car-buying process remains mired in traditional, slow procedures. Contrast that with today’s consumers who expect on-demand, nearly instant personalised service. (Thank you, Amazon.)
No doubt, some consumers will continue to visit their bank. However, many will expect to secure vehicle financing in the time it takes to have a cup of coffee or tea. An ever-increasing number of consumers will break from tradition and expect a fully digital financing experience.
© 2020 Fair Isaac Corporation. All rights reserved. 3
Customer EngagementCustomer DevelopmentSelf-disruption: bringing the “fintech experience”
to auto consumers
Seamless, delightful customer experiences don’t just miraculously happen. Ask yourself these questions to know if you’re actually doing it:
1. How prepared are you to become a fully digital lender?
2. How future-proof and easy-to-adapt is your credit risk strategy?
3. Are you delivering a memorable customer experience while making the digital transition?
4. Are you protecting your customers and your business from the increased risk of application fraud?
A: Now I’m going to use the “A” word — AI. Lenders can use AI-driven risk technologies to deliver a seamless, instant customer experience, while still meeting all of the necessary compliance and security requirements. The goal is to build up the origination portfolio with the right customers, taking great care to guard against fraudsters or customers who bring too much risk.
A: In an evolving digital world, where big data, data lakes, and alternative data sources are the norm, auto lenders need an independent data orchestrator to collect, normalise, and aggregate data. Imagine a sports coach selecting and bringing together the right players to have the best chance to win in every game.
The orchestrator must quickly and seamlessly connect to new data sources, while maintaining existing links without affecting cost or service. These rich new data sources enable better decisions and more accurately measure risk.
Q: That sounds like a lot of complicated data wrangling. How can lenders manage all of that data — usually from multiple sources — to make sure they’re quickly and effectively assessing credit risk?
Q: Sounds great in theory, but typical auto finance IT departments don’t have time to orchestrate data and quickly update credit risk policies, do they?
A: You’re absolutely right. And that’s why business users need to have that power at their fingertips. Every consumer, digital or otherwise, is an individual who expects to be treated accordingly — not like a number.
This critical need for personalisation coupled with many macroeconomic factors means that auto lenders must have a flexible, automated decision management system that allows new business rules and lending criteria to be updated quickly. Lenders should not be forced to rely on constrained IT resources or incur unnecessary cost and time delays because of slow-to-market vendor configurations or dependence on unpredictable external resources.
Q: Okay, so how do auto lenders deliver on that high expectation? It sounds challenging, time-consuming, and expensive.
© 2020 Fair Isaac Corporation. All rights reserved. 4
Customer EngagementCustomer DevelopmentSelf-disruption: bringing the “fintech experience”
to auto consumers
A: Fast and easy-to-use digital-only channels are an absolute necessity now. However, auto lenders have to balance that “need for speed” and convenience with the very real risk of increased fraud at the point of application — it can’t be so fast that it gets sloppy on fraud management.
Powerful, sophisticated AI-driven technologies can bring a seamless and desirable customer experience, while also reducing acquisition costs, streamlining compliance, and stopping identity theft. When these intelligent technologies are operationalised, lenders get a fully automated, flexible onboarding solution that brings that fast, personalised, convenient experience while speeding their time-to-market. The goal is to provide a delightful, risk-aware onboarding experience to the right (legitimate) customers, at the right time, with the right offer.
A: They say you can’t have it all, but in this case, you can. It is possible to provide a seamless digital onboarding experience with identity verification without compromising the customer experience. And, it’s all in the selfie.
Q: I figured you’d bring up the other “F” word at some point — fraud. How can lenders prevent identity fraud at the point of origination while keeping a positive customer experience? Aren’t those objectives at odds with each other?
Q: What does a selfie have to do with all of this?
A: FICO’s Identity Proofing solution checks the validity of documents provided to make sure they have not been tampered with. A smartphone is used to photograph the government-issued identity documents, and then takes a “selfie.” Machine learning algorithms compare photographs of the identity documents (such as driving licenses and passports) with the person making the application to ensure they match.
FICO® Identity Proofing not only establishes identity but, crucially for online applications, liveness technology makes sure the applicant is real and present. FICO Identity Proofing even takes the work out of form-filling with optical character recognition that reads the identity documents, and then uses that information to populate loan forms.
Q: Fair enough. So, how does all of this culminate into data insights and business-user-friendly technology that actually delivers a seamless “fintechy” onboarding experience for new customers?
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A: Not true. FICO® Identity Proofing supports seamless transition, even when an application is started in one channel and completed in another. For example, if a customer first applies for auto finance online, but then progresses the application in the showroom — or indeed the other way around.
Data and methods of future authentication can be established at initial contact; for example, by capturing a password, voiceprint, or other biometric. When you next encounter the customer, you can trust they are who they say they are using information already obtained — without asking them to present documentation yet again.
Customers loathe being asked to present information that you already have from them. When they turn up to collect their lovely new car, you’ll know you’re handing the keys to the right customer.
A: As Mobility as a Service becomes a reality, and consumers look toward more flexible and cost-effective options to get from A to B, traditional auto lenders will need to consider providing increased flexibility to its customers. To effectively compete in the changing landscape, auto lenders need to be technologically prepared to handle new entrants in vehicle subscription, car sharing, and “pay as you drive” solutions. This will require an element of price and logistics optimisation, which can be adeptly handled and accessed with an intelligent, centralised decision management system.
Fintechs and evolving ownership models aren’t going away. Leading auto lenders will seize the opportunity to “self-disrupt” and use decision management technology to drive innovation, experience, and profitability in the coming years.
Q: So, what comes next? What does the future of credit risk hold for auto lenders with the new emerging models of multi-ownership?
To find out how the FICO® Decision Management Suite and FICO® Identify Proofing can help your organisation become more competitive, contact us at: [email protected]
Q: That’s incredible ... and a little bit spooky. But that only works for applicants who are committed to completing the whole process in the digital channel, right?
