In recent years, the sales of automobiles have seen huge growth throughout the world. A majority of these cars and bikes were financed and purchased with loans. Since then the annual car loan market has been growing tremendously.
It’s time the Financing industry took up the mantle of the ecosystem. It will be a win-win situation for the lenders and those looking for loans. Unfortunately, the process is easier said than done. With the increasing demand scalability of loaning is constrained while the fight with fraudsters is too high. Thus there is a huge need for verifying and onboarding customers without running into loan fraud.
Challenges in Auto-Finance Industry
With the increasing demand for automobiles, the industry has so many challenges to overcome. Financial institutions have trouble sorting through thousands of applications, and it is cumbersome and time-consuming to process the documents. With so many documents, it is easy for fraudsters to slip in their documents. The time taken for the whole process is a major roadblock for customer onboarding. The fact that manual customer verification leads to human error.
As most financial institutions are using the verification process, traditional modes of financing and onboarding the customers aren’t pragmatic. Traditional customer onboarding methods don’t have the same level of fraud protection as digital customer onboarding solutions.
Additionally, fraudsters, scammers, and other bad actors keep building new ways to avail of loans that they otherwise wouldn’t. The latest technology is helping businesses to uncover fraud. The major way to stop fraud is by leveraging technologies. In India, many financial institutions are yet to create an environment that relies completely on technologies.
Some of the biggest challenges in financial industry are:
- Huge time required for customer onboarding
- The inefficiency of in-person verification
- Error-prone human verification process
- Challenges in scaling
- Advanced level financial fraud
How To Tackle Fraud With Technology?
The pandemic brought forth the boost in technology advancement because of the widespread need. Before the pandemic, banks and financial institutions were on their way to adopting technologies to improve customer experience and prevent financial fraud. Technologies such as online document verification or online KYC verification solutions also help in KYC compliance and improve customer onboarding.
The solution is simple, digitizing the financial landscape for smooth customer onboarding, approval, and fraud prevention. When it comes to vehicle financing, technologies can help us get rid of human errors all the while reducing the TAT for processing. With the widespread use of technologies, long onboarding time, huge TAT for loan approval, and cumbersome document handling can be eliminated.
The car loan market in Asian regions, especially India is expected to grow by 8% by the fiscal year 2026. And it’s only possible with all the major players digitizing the document verification process and improving customer experience. The digital revolution opens the doors to a lot of new avenues for all the competitors in a particular sector.
With proper digitization throughout the industry, it becomes easier for businesses to store, retain and retrieve customer data. And the costs behind the handling of manual documents drop down tremendously. With secure and seamless data sharing among businesses, the customer onboarding time can drop down to several minutes instead of hours. This also leads to safer transactions and makes it easier to detect fraud before any major harm is done.
The benefits of digitizing the vehicle financing process are:
- Reduced TAT
- Increased profitability
- Better scalability
- Fewer chances of human error
- Reduced cost of document handling
- Easier to detect fraudsters
Use of APIs to Improve Vehicle Financing
The use of APIs in the financial services industry has brought forth a lot of changes. After the implementation of PSD2 in the EU, banks are forced to use 6 APIs that help in day-to-day activities and help in data sharing.
With access to endless data about consumers, their financial history, and other financial habits, it’s easier for banks to onboard customers and detect suspicious activities. APIs allow authorized third parties to access customer data from banks. The process is secure and fast, which allows businesses to onboard new customers faster by leveraging shared data.
Any sudden changes in a customer’s financial habits or changes in transactions can be cross-checked with the data to uncover instances of fraud. The same rules can be applied to vehicle financing in Asian regions.
With the use of open banking APIs, such as online document verification API, online bank account verification API, businesses can improve their day-to-day workings. With sharing of data, onboarding customers can happen faster, smoother, and without the risk of fraud. Loan fraud is a major challenge for banks, so with access to a customer’s transaction history, banks can create a risk profile for the customers. High-risk customers are often denied loans due to their inability to pay off the loan.
Conclusion: How APIs can Help In Car Loan?
The automobile sector has been in a boom for a long time, but the level of customer satisfaction is at an all-time low. Long queues and huge waiting times can be a challenge for most customers. With the use of online customer onboarding technologies and data sharing with open banking APIs, it is possible for businesses to improve the vehicle financing process.