Online Identification: Do Your Consumers Need a VIN?

Online LendingFew would dispute the auto-buying decision journey is switching into high gear digitally, with research from IHS suggesting consumers spend roughly 60% of their time researching makes and models online, versus 35% at the dealership. Using the VIN to uniquely identify a car, consumers use various online tools to check car values, if the car has been in an accident, who is on the title, and other information about the vehicle.

As digital-savvy consumers increasingly demand to complete a majority of the financing process online in the same way they have taken charge of their vehicle selection, a pleasing  user experience in a mobile or online environment is critical. A 2016 Fiserv quarterly consumer trends survey — Expectations & Experiences: Borrowing and Wealth Management, conducted online by Harris Poll among 3,090 banking consumers in the U.S — validated this consumer demand, with 48% of respondents willing to apply online for auto financing.

The challenge to lenders is how to keep the customer engaged through each step from application through final execution of the financing documents — while protecting themselves from application fraud in a cost-effective manner. In the same way a consumer wants to validate their potential new vehicle, including being willing to pay a small fee to verify some information about the car before moving ahead with the purchase, lenders must make the same decisions as to how they will verify the customer’s identity, and how much cost to incur at each step of the process to validate the customer is who they say they are.

In-person identity validation, such as at the dealer location or within the branch office of the financial institution — is a traditional method that is still valuable. However, lenders still have some level of risk with this method, due to potential fraud by the person validating the consumer’s identity, or if the applicant is using fraudulent identity documents. With online applications, this step may not occur until later in the process after the lender has already had to invest in generating a credit decision for the customer.

The proliferation of identity theft has rendered many of the other methods for “know your customer” less effective. Requesting personal identifiable information from the consumer is not enough, nor is a cursory validation of what the customer initially submits.  Lenders must validate what the consumer gives them, against multiple third party sources and gather other information about the user’s actions. They must do all of this while providing that information to cross reference all sources of identifying characteristics and weigh overall risk.

While identity theft is a distressing phenomenon, consumer awareness of it means that consumers also value steps financial institutions take to protect and prevent false identity use. In the Fiserv survey, 70% of consumers said they were “willing” or “very willing” to use security questions to help lenders confirm their identity, especially if it helped speed up the loan process.

As consumer self-service vehicle financing expands from applying online to eventually finishing the transaction online by reviewing the final documents and potentially eSigning them, lenders must build in steps in the online experience that protect the lender and demonstrate to the consumer that the lender values their information security and privacy.

Embedding progressive layers of identity validation and authentication into a layered acquisition or origination process supports a positive user experience while meeting the challenges of customer verification and fraud prevention.  With thoughtful design, lenders can explain why they are asking for the information required to establish and validate identity, make it easy to understand and use, and turn identity validation into a competitive advantage with prospective customers. Cars can be uniquely identified by VINs, but identifying people requires more than just a number.

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