The administrative aspects of servicing the life cycle of a loan from origination until pay off has become an industry in and of itself.
Banks, captives, and primary loan servicers, all must pay special attention to how they are collecting principal and interest on the loan well after the borrower leaves the dealership. It is also crucial to modify practices to new innovations, regulatory ambiguity, and advanced technologies that pop up in the industry.
To help readers navigate the trends and challenges in the loan servicing space, Auto Finance Excellence spoke with seasoned executives from Ally Financial, Hyundai Capital America, and First Associates to discover the best practices for thriving in the space.
Keep an Eye to Customers and Clients
This one seems obvious, but customer satisfaction is the No. 1 step to growth since it’s the foundation that inspires better business practices — all three executives concurred.
It is simple: “Strong customer service leads to strong portfolio performance,” David Johnson, chief executive of First Associates, told AFE. “Our work in this area has shown, again and again, the link between happy customers and portfolio performance.”
Ensuring a tight relationship with clients is just as valuable. A strong link between servicers and their clients enables rapid responses to opportunities or issues. “Client strategies in branding, product delivery, pricing, and technology are increasingly dynamic,” Johnson added.
For captives, the goal is the same — “bring value to our OEM by creating customer loyalty,” Kimia Willison, senior director of servicing for Hyundai Capital America, told AFE. “With that financial goal in mind, we make sure that customer loyalty is our top priority.”
Enhance The Digital Footprint
One of the critical ways to serve today’s digital-savvy customer is gauging their preferred channel, whether it’s online, mobile app, chat, voice, etc., Willison said. So businesses need to adjust technologies to customers’ changing communication methods. “We don’t need to recreate the wheel we just need to reevaluate the tools,” she said.
“Customer expectations are changing right along with, if not faster than, technology,” Wendy Dempsey, executive director of Customer Care at Ally Financial, told AFE. Customers require the ability to access their account through all channels and receive the necessary assistance.
Artificial Intelligence (AI) is one area that can help — and servicers should expect to integrate AI into practices in the near future.
“There are numerous dimensions of AI that can be tapped to streamline the path the customer takes, regardless of the channel the customer has selected,” Dempsey said.
AI speech analytics is a “game changer” for call center environments, Johnson said. Utilizing AI speech analytics and 100% call monitoring provides a “significant uptick in performance across compliance, effectiveness, agent training, and other areas,” Johnson said. “AI also delivers insights from the voice data stream that positively impacts service and business growth that were simply impossible to achieve before.”
In a regulated industry, where the number of “consumer touches” are more and more limited by law, optimizing each communication touch point for maximum effectiveness is “critical,” Johnson said. This is where data science comes in. Data science goes hand in hand with speech analytics. By optimizing data innovations, servicers understand the best consumer communication strategies by encompassing data from demographics, known behaviors, and other inputs.
Outsourcing Is Valuable
The common goal for servicing organizations is to offer a “high-quality, low-effort customer experience,” Dempsey said. One of the most resourceful ways to do that is through vendor partnerships.
With the increase in regulations and rapid evolution of technology, there’s increasing specialization required to achieve competitive advantage, Johnson said. In the servicing arena, in particular, originators turn to outsourcing because of how process intensive, highly regulated, and scale-driven the industry can be.
Outsourcing is a way for servicers to “offset operational expenses,” Willison said. Reevaluating what your vendor partners bring to the table is vital. “One major area we look at is the minimal integration efforts with our core system,” Willison said.
Navigating the Regulatory Landscape
The financial crisis brought an increased scrutiny to loan servicing practices. As loan volumes increase for servicers the complexity of regulatory requirements becomes more challenging.
“The impact on the auto finance market is profound,” Johnson said. However, maintaining “an extremely robust compliance program” is key to delivering service.
“Regulators are not only promulgating new regulations at a rapid rate, but those regulations are also becoming more complex and require more significant investment to achieve compliance than ever before,” he added.