(New York, NY): Auto lenders on the road to digital transformation may want to turn to an unlikely source for inspiration: credit card companies.
US credit card players have nudged customers toward digital servicing in recent years with feature-rich platforms where they can chat with virtual assistants, make payments, and manage their finances. Now, in an effort to keep pace with FinTechs and customer preferences, credit card companies are embracing a new ideology: go “digital by default,” or prioritize digital channels over traditional ones.
The thought process is simple: In an age of Amazon and WhatsApp, the industry’s tendency toward paper statements and digital opt-ins is outdated. In fact, a growing number of credit card firms are nixing digital opt-ins altogether, choosing to auto-enroll new customers in e-statements and push notifications. In tandem with this strategy, credit card companies are digitizing important documents like account opening agreements and making new features available exclusively online.
The early results show that onboarding customers digitally is more efficient and effective than converting them later in the lifecycle.
“It’s important for lenders to set expectations early to instill sustained behavior,” said Matt Bethell, Manager in Auriemma’s Industry Roundtable practice. “The credit card industry is poised to reap massive efficiency gains by migrating new customers to digital-default servicing.”
The credit card industry’s efforts are a blueprint for auto lenders planning to digitize. As auto manufacturers pivot to electric vehicles and self-driving cars, their finance subsidiaries have been slower to modernize. Auto lenders still send paper billing statements to most of their customers, for instance, and have yet to harness the full potential of mobile apps and other technologies. In fact, 82 percent of auto lenders send loan welcome packages – a key early communication with information about how and when to make payments – exclusively by postal mail. Just 43 percent of borrowers are enrolled in e-statements, according to Auriemma industry data.
To follow fully in credit card companies’ footsteps, there are some challenges. Auto lenders often rely on dealers to collect customer information, with inconsistent capture rates. But the potential cost savings are substantial. By auto-enrolling new customers in e-statements and digitizing welcome packages, lenders can save more than $5 per account per year, which can add up to millions in savings.
Mobile-first servicing has perhaps the most potential to unlock efficiencies. Push notifications are more reliable and cost effective than other contact methods, and lenders are harnessing device biometrics like Apple’s TouchID to pre-authenticate customers who place calls from the app, reducing fraud, friction, and call handle time. And as it becomes easier to integrate new technology with legacy systems, mobile servicing is facilitating a previously unattainable “whole-customer” view, in which customers can see all their financial products through a single login.
Thanks to the proliferation of digitized customer activity, card organizations have more opportunities to customize service, increasing customer loyalty and engagement. Some issuers are using customer activity in digital channels, such as web pages visited or applications started, to intelligently route calls to the right agent, optimizing call routing and staff allocation. In the auto space, predictive servicing could allow lenders to route customers approaching lease-end to specialized Loyalty teams to retain customers.
“A mobile-centric servicing model would allow auto lenders to set a regular customer communication cadence throughout the product lifecycle,” Bethell said. “Lenders that embrace mobile stand to increase retention and engage a digitally-savvy generation of customers.”
About Auriemma Group
For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, call Matt Bethell at (212) 323-7000.