Recent figures suggest that consumers are back to buying vehicles at a pre-recession pace – sales this year have already surpassed 15 million, with May producing the highest sale figures in six years.
Not only are consumers buying vehicles, but their shopping habits are changing, with the Web now the most influential source. A recent study by AutoTrader.com has shown that car shoppers are becoming more and more likely to use the Internet to find out about a particular car, while a survey of buyers in the used car market found that 76% of used-car buyers say they use the Internet in the car-shopping process, up from 71% in 2011.
And the consumer is now demanding different finance options on their purchases: the average length of a loan is now 72 months for new vehicles and 58 months for used; people are opting to pay bi-monthly; and Gen Y are buying fewer, smaller and older cars. All are looking for more flexible payment channels such as mobile and online.
A digital strategy is now a necessary component for the auto finance industry and not just for the purchase, loan or lease origination. Auto finance servicers need to be aware that these same Web-savvy consumers expect to use online technology to pay their loan or lease, as well as to access information and buy additional services or products for their car.
The industry must shift to electronic payment channels to offer more varied, convenient and compliant options while still accepting paper checks and cash.
Mobile-Optimized Auto Finance Add to this the growth in mobile, and it's clear that the auto finance industry must sit up and take note of these payment channels. Customers are using their mobile phones to pay their bills. The Pew Research Center cites that at least 50% of the U.S. population now uses mobile smart phones, and an October 2012 Litle & Co. study showed that 25% of consumers with a smartphone or tablet computer made payments using their devices.
This number is a clear indication that the auto finance industry needs to add mobile solutions in order to give customers the option to pay however they wish.
Convenient, Flexible Payment Solutions These proven payment technologies are already there and available, and can enable auto finance companies to offer consumers the sort of payment options which are available in other markets – from paying phone bills to making bank transfers. And the use of these payment technologies has an added bonus in terms of customer service – they help build loyalty programs, deliver payment alerts, and enable people to manage their debts.
So auto finance companies need a digital strategy that wraps into it a payment processing solution that manages ACH accounts, credit and debit card transactions in addition to ways to automate acceptance of paper checks, money orders and cash payments – the sort of service we offer our customers.
But on top of this, there are new, consumer-friendly payment options available for auto finance companies to offer their customers. I have listed some here:
- Web Payment Portal – Used for single, future-dated and recurring loan and lease payments, consumers are happy and comfortable with payments via a Web payment portal. They should provide clients with their own secure Web payment portal, branded with the relevant company’s name and logo to engender the trust of customers. These accept and process electronic check, debit or credit card payments and encourage customers to settle payments effectively – and provide consistent enforcement and consolidated information for an auto finance company.
- Mobile: Payment, Mobile Wallet, Text Solution – Supporting mobile payments provides a convenient option to support today’s on-the-go consumer. The market is already seeing the growth in mobile wallets for the maintenance of payment account information and loyalty programs. The industry can leverage this technology to reduce costs associated with traditional consumer billing – printing and postage time and costs – sending time-sensitive notices and outstanding balance statements and payment reminders. Through a mobile-optimized payment portal, customers can perform a number of electronic transactions including making payments and additional purchases. The text functionality enables a finance company to send automated payment reminders, balance due notices or post-dated check notifications and make payments by return text.
- IVR – A solution that allows callers to interact with an automated telephone-payment system to make ACH, debit and credit card payments 24/7. IVR is seen as key growth area and we recently conducted research that showed that IVR is set to almost double from 33% to 60% in 2013.
- Full Electronic Bill Presentment and Payment (EBPP) – For print, mail or email communications for statements and billing reminders.
But What About Compliance? Recent changes in the CFPB’s legal positioning has given the bureau a range of new investigative powers, including the ability to review sale contracts, telephone recordings, account transfers, training programs and scripts for employees, to name but a few.
Managing the constant flow of information, rules and regulations can be challenging. Technology can assist in this area, as the regulations and procedures for disclosure and payment receipt are transparent, and can be easily and consistently provided. All of these payment solutions enable companies to build compliance into their payment collection procedures.
Customer Value The challenges the auto finance industry is facing are part of a consumer-driven revolution; the increase in the use of Web and mobile for payments in other industries is significantly impacting the automotive industry, and taking a proactive approach to offer multiple, varied payment options will be key in order to encourage customers to pay on time.