It’s Time to March Toward Digital Finance

When you give the automotive industry lemons, it makes lemonade, says Jenn Reid, Head of Sales, Digital Lending – Motor Vehicle & Equipment for Wolters Kluwer, a global provider of information, software solutions and services. 

She explains when the pandemic restricted operations, dealers quickly pivoted and entered the digital space. “The pandemic accelerated the industry’s adoption of digital,” she says. 

But, she adds, consumers wanted digital processes for a while. They started looking for information online over a decade ago. Today, consumers expect information to be available when and where they want it.

“They looked for alternative sources for information and that began the digital transformation,” she says. “That’s when we started to see things like e-contracting and remote deliveries pop up. But until COVID hit, only a small percentage of dealers were digital.”

The pandemic stripped dealers of their reservations to embrace digital and, as a result, digitization across the industry accelerated. 

The retail side of the house transformed the most. But Reid suggests it is time for dealers to embrace digital financing too.

She explains, “Digital finance is not equal to online shopping. Digital finance is when a consumer signs all contract and financial documentation (either at home or in the showroom) via digital signature as opposed to physical signatures on a stack of paper.” 

Though most of the industry needs to digitize its back-office processes, Wolters Kluwer sees some positive signs of progression. Its data shows:

• A 78.86% growth in digital financing transactions between 2021 and 2020, and a 38% growth from 2019 to 2020.
• And a 98% increase in digital financing transactions between Q4 2020 and Q4 2021. 

Define Digitization

Most dealers digitize at some level. But Reid suggests there are different layers of digitization, and the industry must define each. These layers include:

• Putting vehicle listings online. Most dealers now make their inventory accessible digitally. 
• Ability to research F&I information online. More dealers are embracing this capability.
• Ability to complete an entire transaction online and digitally. The real growth is in adding end-to-end digital transactions. 

Reid notes most dealers meet consumer demands for digital inventory, online representation of the dealership and their brands, and the desire to engage through different channels, be it in-person, online, via text, email or social. 

“Where you start to see fall off is transacting or doing financing digitally,” she says. “There are a small percentage of dealers who can truly complete the entire process online.”

The next big transformation is in the move to digital financing where all documents are digital. “That’s where the next wave will come,” she says. “The back-end processes need to catch up.” 

Why the Delay?

The delay in digitizing back-end processes is not technology. There is plenty of that, Reid says.

Most dealerships rely on dealer management systems (DMS), customer relationship management (CRM) systems, inventory management software and more to perform their day-to-day duties. But all too often the platforms cannot communicate, leading to siloed information. Then there’s the technology consumers engage with online.

“There’s a need for better information transfers between where consumers engage online and the back-end processes at the dealership, and with lending communities,” she says. “Currently, these are all separate and fragmented. Dealerships need workflows that connect the dots to offer a true end-to-end experience.” 

Though there are many integrations in the automotive space, fragmentation still proliferates. But “the industry needed innovation on the consumer experience side before it could align processes on the backend,” she says. “Now integrations and workflows must evolve to integrate the entire process.” 

Where to Start

Start at the very beginning. Dealerships should examine where they are at digitally before developing new priorities, according to Reid.

“Make sure that you can transact and show your inventory and engage consumers online,” she says. “Then examine how you can create a similar experience on the back end to streamline things and improve the speed of the transaction. Look at protection, compliance and other important parameters and reassess the partnerships and vendors in place.”

This review can influence where the dealership needs integrations and direct tool upgrades to elevate customer experiences. 

Reid recommends focusing on the contract and financing piece, adding the ability to deliver vehicles and do paperwork remotely. She also advises getting digital signatures and digital paperwork to move from a paper-based system. 

“Ask yourself, ‘How can I eliminate the paper-based system I have and convert it to tools that let you digitally sign paperwork, manage and store paperwork, and transfer paperwork to lending to get the purchase funded,’” she says. 

Compliance Concerns

Digitizing financial also has a compliance piece. Dealers must do their due diligence to keep their data secure. Failing to do so can cost thousands in fines. For instance, a driver’s license left out on a desk can lead to a $11,000 per day penalty.

“You have to be able to validate paperwork and forms so that you know they are correct, and you don’t have to bring customers back in for re-contracting,” she says. “You also need to keep their data secure.”

Digital helps with that. There’s no driver’s license sitting on a desk or concerns with dealer jackets in plain view. All data lives in an authenticated electronic system. “The digital system also provides an audit trail that lets dealerships track everything and know who had access to the information,” she says. 

Digitization also helps dealers adhere to GLB regulations, Reid says.

Auto dealerships collect a range of personal information about customers, including address, phone number, credit card numbers, Social Security numbers and more. The GLB Privacy Rule regulates how dealerships can share this information. 

Under GLB, dealers must inform consumers of the information they need, how they will share this information, and allow consumers to “opt out” of sharing it.

“It becomes easier to comply with GLB with digital,” she says. “You can show consumers how you protect their information and get signatures that show you informed them of the information you needed, how you planned to share it, and gave them a chance to opt out.”

Digitizing the back end offers some protection, especially with an audit trail behind it, she adds. 

“It’s really tough to document what happens through a transaction without a digital audit trail,” she says. “There’s a lot of risk around these transactions. You need these processes to keep up. Without them, you cannot offer a truly complete digital experience.” 

Ronnie Wendt is an editor at Auto Dealer Today.