Alfa, the developer of Alfa Systems, recently released the third segment of its Innovation in Implementation whitepaper series.
The enterprise software platform for providers of automotive, wholesale and equipment finance published a new whitepaper on best practices in systems integration.
The report titled, “Leveraging the Power of an Open Platform,” discusses how best to approach the integration aspect of a systems transformation project, including the prioritization of features and portfolios, aligning the various teams, understanding the data, and designing integrations that are easy to build, change and maintain.
Previous papers in the series, which guides decision-makers and project leads on how to approach modern enterprise software implementations, have discussed phased implementations and complex data migrations.
Miro Torma, a project manager with Alfa and co-author of the paper, said: “Modernizing your core platform can disrupt point-to-point integrations, which may have been developed over many years. It follows that their reimplementation, with all functionality retained or improved upon, is a key project challenge.
“‘Leveraging the Power of an Open Platform’ can not only help other implementers through that challenge, but also ready them for longer-term success,” Torma continued.
In the Innovation in Implementation series, Alfa’s experts draw on their talent and experience to discuss ways in which agile can be used to deliver quickly and often. They present the main challenges to consider when operating within a complex systems landscape, with many interdependent factors that aren’t easy to separate into manageable chunks.
Ryan Fong, a solution architect and the other co-author, said: “We always place an emphasis on partnership and teamwork, with our strength and experience in both platform and delivery complementing the vision of the client. In this series we’re sharing our full experience for the benefit of those embarking on a systems implementation, and those who are focused on integration will recognize the challenges we address in this paper.”
Future papers will explore how best to iterate and keep delivering value through effective partnering approaches; accelerated implementations; and powerful hosting and managed service strategies.
You can find the whitepapers at alfasystems.com.
After opening its whitepaper series last fall about systems change called Innovation in Implementation, Alfa released the next installment last week.
The provider of systems and services to some of the world’s most complex auto and equipment finance companies highlighted that new paper in its series is focused on data migration.
Titled Agility in Data Migration – Onboarding Portfolios Efficiently and Effectively, the effort drills down into what Alfa acknowledged as what’s often thought of as the most challenging aspect of a systems implementation project.
The whitepaper explores how agile techniques can minimize risk when manipulating large volumes of sensitive data and discusses how cross-functional teams, empowered to drive pragmatic scoping decisions, can accelerate the delivery of business value and provide robust support for future onboarding.
Sam Fairhurst, a senior project manager at Alfa and author of the paper, said in a news release: “At Alfa we consider ourselves industry leaders in data migration, be that migrating portfolios from legacy applications as part of a system implementation, or onboarding newly acquired portfolios to an established system.
“In this paper I've looked to show how agile techniques should be at the core of data migration methodology — regardless of whether the launch will be multi-phased, or 'big-bang' — and that focusing on the right balance of pragmatism and functional richness will maximize business value, within project-friendly timeframes,” Fairhurst continued.
Onboarding is the second paper in the Innovation in Implementation series, in which various individuals from Alfa draw on their talent and experience to discuss how asset finance organizations can work in an agile fashion to deliver quick and often on their software implementations.
The series is designed to cover key concepts such as phased implementations and integration, accelerated implementations and the onboarding of new portfolios, as well as how to iterate and keep delivering value through effective hosting and partnering strategies.
The first whitepaper, Derisking Your Systems Replacement Project through Phased Implementation, discussed how lessons learned from the industry, alongside the rise of agile methodologies, have prompted alternative, phased implementation approaches which present an exciting opportunity for companies to move away from the traditional models that bring a high level of risk, complexity and cost.
To learn more about the whitepaper series, go to alfasystems.com/agile.
Evidently, it’s not easy to be a chief financial officer these days.
CFOs are wrestling with new challenges and growing responsibilities in shorter time frames as tenure decreases, according to findings from a new survey conducted by the office of the CFO solutions practice at FTI Consulting, in collaboration with Industry Dive.
In a survey of corporate finance executives, nearly half of the respondents expect the CFO at their company to have a tenure of less than five years. Experts said this trend points to increased job options for CFOs, but also potentially having less time to deliver high-impact value in their roles.
“This year’s survey results aligns to what we’re hearing from our CFO clients,” said Gina Gutzeit, leader of the office of the CFO solutions practice at FTI Consulting. “High-performing CFOs want to make an immediate impact, whether they are looking at their role in the long-term or short-term.”
The survey highlighted six other key insights about CFO priorities over the next year, including:
1. CFOs are optimizing workforce models and redefining office spaces. The survey respondents indicate that some remote workers will return to the office, with 59% anticipating a hybrid work model and 23% expecting to return to the office full time.
2. A finance talent shortage is causing CFOs to be more interested in outsourcing models for the back office, with the goal of better managing business volatility and having readily available talent at lower and more variable costs. Experience with working in a hybrid model for more than a year has made adoption for many, including mid-size organizations, less daunting.
3. Companies have significantly increased the adoption of cloud-based systems, with remote work triggering a reexamination of data security and cost mitigation. The survey showed that 67% of finance functions have implemented or are using cloud-based general ledgers, and enterprise resource planning (ERP) and enterprise performance management (EPM) systems are also shifting to the cloud.
4. Delivering real-time insights persists as a significant financial planning and analysis (FP&A) gap. Nearly all (95%) of the survey respondents strongly agreed their CFO and finance functions perform accurate, real-time planning, reporting and data analysis. Yet nearly 30% of CFOs said delivering real-time information to make business decisions is a critical priority, and 50% said developing predictive analytics capabilities is a high priority.
5. Cybersecurity has moved up the CFO priority list. More than 70% of the surveyed finance executives are involved in their organization’s incident response plan. In third-party supplier risk, one of the highest areas of cybersecurity focus for CFOs, respondents showed that they are proactively implementing cyber risk-mitigation processes, as 76% of respondents assess cybersecurity risks of third-party suppliers during procurement.
6. CFOs are increasingly considering environmental, social and governance (“ESG”) initiatives. More than half (57%) of respondents noted that establishing and making progress toward ESG objectives was of “high” importance, with 18.9% noting it as being of “critical” importance. Top challenges and concerns were measuring return on investment for ESG initiatives, as well as sourcing, warehousing, analyzing and visualizing underlying ESG data.
“As we’ve witnessed the CFO role pivot to be an enterprise value creator, expectations have heightened to also be a change leader that must achieve lofty financial performance goals,” said David White, a senior managing director in the office of the CFO solutions practice at FTI Consulting. “However, amidst all the ‘traditional’ areas that CFOs must lead, there’s a new list of responsibilities and the added pressure of fostering culture and engagement that is amplified with a remote and virtual workforce.”
The complete survey report titled, “It’s A New World for CFOs: FTI Consulting CFO Survey Report 2021-2022,” can be found via this website.
Alfa, provider of Alfa Systems, recently rolled out a new thought leadership series to discuss how asset finance organizations can work in an agile fashion to deliver quick and often on their software implementations.
The series, titled “Innovation in Implementation,” draws on the talent and experience possessed by various individuals at Alfa to cover key concepts such as phased implementations and integration, accelerated implementations, and the onboarding of new portfolios; as well as how to iterate and keep delivering value through effective hosting and partnering strategies.
The first segment — Derisking Your Systems Replacement Project through Phased Implementation — delves into how lessons learned from the industry, alongside the rise of agile methodologies, have prompted alternative, phased implementation approaches that present an exciting opportunity for companies to move away from the traditional models that bring a high level of risk, complexity and cost.
Michael Mousdale, a project manager at Alfa and author of the first series, said, “At Alfa we have a rich history of delivering successful software change. In the Innovation series we draw on that to share our expertise and best-practice experience that sees results every time.
“Projects are taking an ever closer look at leveraging phased approaches as a way of mitigating against the pressure, expectation and risk of a ‘Big Bang’ approach. These days things are more about eliminating the barriers to getting work done efficiently, with the greatest flexibility and fewest constraints,” Mousdale continued in a news release.
The second part of the Innovation in Implementation series is to set be released later this year, discussing how to onboard new portfolios efficiently and effectively.
The series can be found online at alfasystems.com/agile.
J.D. Power sees competition for paper among finance companies as intense as ever, especially with monthly retail sales of new vehicles down 30% from pre-pandemic levels.
According to the J.D. Power 2021 U.S. Dealer Financing Satisfaction Study, finance companies that find ways to form close relationships with dealers and deliver consistently high service levels are best positioned to capture additional opportunities.
“Auto dealers who maintain transactional relationships with lenders, spreading their business across multiple institutions without establishing go-to relationships have significantly lower levels of satisfaction with their lending partners,” said Patrick Roosenberg, director of automotive finance intelligence at J.D. Power.
“In this market, where rates are low and new-vehicle sales volumes remain significantly suppressed, captive and non-captive lenders who want to stay competitive need to set themselves apart by forging close relationships with dealers through their sales reps, retail credit staff and funding,” Roosenberg continued in a news release that highlighted the study rankings.
And beginning the rankings rundown in the captive mass market segment, J.D. Power indicated Volkswagen Credit ranked highest in overall dealer satisfaction with a score of 946 (on a 1,000-point scale), followed by Subaru Motors Finance (916) and Toyota Financial Services (907).
Turning next to the national banking segment, the study showed TD Auto Finance came in highest in overall dealer satisfaction with a score of 953. Ally Financial (940) ranks second.
Within the regional banking category, J.D. Power determined Citizens ranked highest in overall dealer satisfaction with a score of 928, followed by Huntington National Bank (918) and Fifth Third Bank (887).
And in the subprime, Ally Financial climbed highest in overall dealer satisfaction with a score of 932. Capital One Auto Finance (854) was second.
Finally for leasing, the study revealed Audi Financial Services ranked highest in overall dealer satisfaction with a score of 952, followed by Volkswagen Credit (949) and Lincoln Automotive Financial Services (934).
J.D. Power explained that the 2021 U.S. Dealer Financing Satisfaction Study is based on responses collected in May through July from 2,992 dealer financial professionals.
Much effort is put into the analysis of finance-company performance when handling business from the consumer side. J.D. Power decided to examine how finance companies are faring with another vital customer segment — dealerships.
The firm on Thursday revealed its first U.S. Automotive Commercial Lending Satisfaction Study that pointed out most dealers rely on commercial providers to keep their lots full. When those finance companies get the dealer satisfaction formula right, they stand to attract even more business from dealers, according to the J.D. Power.
The study showed the difference between good and great dealer-finance company relationships comes down to four key steps that can set the stage for expanded business relationships.
The inaugural study evaluated dealer satisfaction with floor planning and other commercial lending services and identified the key service attributes that drive increased customer satisfaction and loan portfolio growth.
“The most common reason auto dealers select their lending partners for loans — such as real estate and construction — and lines of credit is because of a strong relationship a dealer already has with a lender on floorplan,” said Jim Houston, managing director of consumer lending and auto finance intelligence at J.D. Power.
“The study shows the tried-and-true path to building that relationship is by consistently delivering on a core set of performance metrics rooted in making it easier for dealers to sell vehicles,” Houston continued in a news release
Some other key findings of the 2021 study included:
—Dealer satisfaction with commercial lenders builds from a strong foundation: Overall dealer satisfaction with inventory financing providers is very high (9.69 on a 10-point scale), but there are some clear steps finance companies can take to improve even further.
—Four-step path to a perfect relationship: J.D. Power indicated the keys drivers of superior dealer/finance company relationships are all rooted in the principle of making dealers’ lives easier. Key performance metrics associated with the biggest jumps in customer satisfaction are: always being reachable when needed; making it easy to submit required documents; providing seamless credit line increases; and providing a clear, achievable path to meeting reward program requirements.
When dealers experience all four of these best practices, overall satisfaction jumps to a near-perfect 9.96, according to the study.
—Room to improve: Currently, despite overall strong scores, just 8% of dealers told J.D. Power that they experience all four performance metrics.
—Good floor plan relationship drives expanded business for finance companies: Nearly three-fourths (70%) of dealers select a credit facilities partner based on an existing inventory finance lending relationship.
The U.S. Automotive Commercial Lending Satisfaction Study was based on 1,727 evaluations by dealer finance professionals across both the inventory finance and lending segments. It was fielded in October and November.
For more information about the U.S. Automotive Commercial Lending Satisfaction Study, visit this website.
As automotive shoppers move more of their buying process online, it is important to understand their identity throughout the entire car-buying journey to provide a more personalized shopping experience that provides more confidence to dealers and lenders about who their customer is online.
As customer interactions move online in record numbers, dealers and lenders are challenged with accurately ensuring they are working with the same digital shopper on multiple devices, verifying identity and preventing fraud, assessing an online shopper’s buying capacity, and customizing the right offer that fits their needs. In fact, a 2019 Neustar and Forrester report said only 10% of marketers say they are confident in building a 360-degree view of their consumers.
Impacting this process further is the customer buying journey, which leverages online more but reduces the time a shopper spends in-market. According to the 2020 Cox Automotive Car Buyer Journey study, consumers now spend 89 days in-market, compared with 118 in 2017. Furthermore, consumers are averaging nearly fifteen hours total in spending time researching online, up from 13:55 in 2019.
Because of the increased time spent online, dealers and lenders must target their promotions and messages earlier on, and in a more personalized way that uniquely speaks to each shopper individually. Advanced analytical data and insights are increasingly being leveraged to accomplish this stronger targeted marketing, as well as offering better digital identity and verification solutions and protections against fraud.
What’s needed today is a thorough and complete understanding of a shopper’s identity. As a result, comprehensive and validated meta data-driven identity graphs based on all of these personalized criteria provide the digital technology needed to help create a more complete consumer profile to engage persona-based marketing and omnichannel strategies. This process helps the automotive ecosystem establish transaction-able identifiers along with all necessary requirements for consent management.
Knowing the customer’s individual needs
New target-marketing data resources help dealers better identify consumers that are likely to be ready to take on new financing for an auto loan or lease. It can also better match those consumers to vehicle models that dealers have in supply based on how many of those consumers are likely to be able to afford. This is important because dealers and their marketing partners must re-evaluate their strategies in 2021 to better align with the changing consumer needs and financial capacities.
One of these strategies in 2021 is through the use of the more highly personalized identity graph. Dealers, lenders and marketing partners want to scale these unique shopper identity graphs to build better insights, resolution, personalization and targeting efforts that leverage metadata-rich shopper insights or a proprietary ID. Privacy remains a critical factor in the entire process and a key area that must be adhered to by all parties involved.
Driven largely by the impact from COVID-19 last year, financial durability remains an important way to segment the economic health of households within the same credit bands. It considers a consumer’s assets, income from dividends and interest, retirement income, and the relationships between income, debt and spending. Today’s sophisticated economic anonymized marketing data resources tap into this information to help dealers make better and more precise decisions when putting an incentive-driven offer in front of a specific customer.
This deeper level of identity graph-powered insight is helping dealers and agency partners shift their traditional media strategy to a programmatic audience one.
Changing target marketing strategies
Successful programmatic strategies are based on truly understanding their in-market shopping audience. However, just because a consumer is shopping for a car online doesn’t mean they can purchase it. For example, first-time buyers may have no idea if or what they can afford, and these waters have been muddied further by the pandemic economy. They may be shopping for a vehicle online without knowing if the payment fits into their budget or if they can get credit. Dealers and their marketing agency partners need to identify several intent signals, as well as financial capacity to target consumers who have income and assets; discretionary spending ability; credit capacity; and propensity to buy.
A stronger focus for online fraud protection
Even with this higher level of personalization power, dealers and lenders must be wary of fraud and synthetic fraud because of the increased presence online. According to Cox Automotive in a recent edition of Auto Remarketing, nearly 40% of buyers want to finalize their vehicle price online, up from just 25% in 2017.
Fraudsters create new, fictitious identities by using different components of real identities — such as a name from one person, an address from a different person or the SSN of a minor or deceased person. Fraudsters then attempt to gain credit with the fictitious identity to monetize it. These manufactured identities are used for short term gain and then abandoned. When this is the case, there is no one for the lender to contact to collect funds. This poses a problem for organizations as misclassified non-payment matters get sent to collections, further wasting resources.
Today’s fraud-prevention technologies leverage alerts delivered in batch or real time, using patent-pending machine-learning algorithms to detect synthetic ID behaviors and patterns at various entry points. The alerts can be used during account origination to sort applications that trigger an alert into a manual review process. For example, when used in waterfall with a credit report, auto dealers and lenders can leverage these real-time alerts to vet new customers opening or applying for an auto loan or when trying to get financed for a vehicle.
Auto lenders can also leverage these alerts during account/portfolio management. The alerts can be used as a “back book” or “clean up” append for an existing portfolio to pinpoint accounts that may have been opened using synthetic identities. Once identified, lenders can use existing strategies for further verification/authentication.
The expedited growth in digital retailing means customers will be spending more time online shopping for their perfect vehicle. With these advanced analytical insights along with uniquely personalized identity graph technology, dealers and lenders will have more power in reaching them on a personalized level while also protecting against the threat of fraud.
Lena Bourgeois is automotive general manager for Equifax, responsible for driving customer value and accelerating company growth in the automotive market. For more information, visit www.equifax.com.
Mentioned almost as much as the pandemic itself is how much digital retailing has become a focal point for success at dealerships and finance companies.
Including F&I products can be crucial to culminating deliveries and boosting customer satisfaction, as Tim Blochowiak of Protective Asset Protection discussed in this podcast.
To listen to this episode, click on the link available below, or visit the Auto Remarketing Podcast page.
Download and subscribe to the Auto Remarketing Podcast on iTunes or on Google Play.
Over the past few months, dealers and lenders have been focused on ensuring that their operations are running efficiently and with as little disruption as possible. This has lit a fire under the entire auto retail industry to go digital and go digital now.
But it isn’t as easy as saying, "One, two, three," when it comes to the heavily regulated auto-financing space where lenders must carefully balance consumer needs and expectations with federal and state rules and restrictions.
Dealers and consumers are moving to digital retailing at a never-before-seen pace. In fact, per a recent Cox Automotive study, two out of three shoppers are now more likely to buy their next vehicle 100% online. Likewise, according to Dealertrack sales and transaction data, between mid-April and mid-July 2020, dealer interest in eContracting grew 94% while the number of contracts signed remotely rose by 97%.
So, what exactly is the role that lenders play in this shift online and how can they maintain compliance at the same time? Verifying identities, protecting data and reinforcing best practices for electronic signing ceremonies and remote delivery are just a few of the many considerations. With the right digital retailing solutions and safeguards in place, lenders can enable a digital browsing experience that can turn a car shopper into a pre-approved, contract-ready buyer for their dealer partners. By embracing this digital workflow, lenders can ultimately create an expedited signing, submission, review and funding process that drives efficiency and value for all parties involved.
There has never been a more important time for lenders to position themselves as strong service partners to dealers. Here are some tips to help lenders find a successful path to going digital without compromising compliance.
One size does not fit all
Between their unique financing models and distinct business goals, a one-size-fits-all solution just isn’t going to cut it for lenders – today or in the future. Fortunately, the right technology partner will help lenders ensure their digital strategies never stray from their business goals and always align with their available resources, as well as an ever-evolving F&I compliance landscape. By developing an optimized digital strategy that supports solutions, lenders can remove friction and improve the car buyer’s experience in several ways, including enabling real-time decision capabilities, providing alternative deal structures that allow customers to shop multiple vehicles and communicating all the documents needed for closing by sending structured stipulations.
A digital workflow is good for everyone
Regardless of where you land in the car-buying ecosystem — dealer, lender or consumer — a digital workflow with the ability to have a customer truly buy a car online is a game changer for everyone. With built-in tools that have been fine-tuned to ensure no signature is skipped, calculation error made or required document missed, eContracting allows for faster funding, less back-and-forth, greater accuracy and reduced re-contracting. This streamlined workflow is also further bolstered by a growing use of remote signing. As permitted by state, lender and provider, remote signing offers customers an easy and seamless way to eSign all deal documents from anywhere.
In a climate that is changing what feels like daily, finding new ways to reach consumers and help free up dealers’ cashflow will be crucial to strengthening partnerships and moving forward on the path to going all in on digital. This path, however, isn’t always going to be a straight line for lenders. But, with the right strategy and procedures in hand to ensure IDs are verified, data is protected and signing ceremonies result in securitized contracts, lenders can partner with dealers to go digital, smartly.
Andy Mayers is a lender solutions strategist at Dealertrack.
Artificial intelligence (AI). In recent years, it has been touted as the future of nearly every industry. It is certainly the future of auto finance. In fact, it has already begun to transform several of the sector's key processes, such as credit decisioning. But there is some distance to go before AI can reliably underpin the vehicle credit process from end to end.
At this point, auto lenders should be using AI to supplement the existing underwriting process. Why? Because the technology can draw on data, such as customer spending habits, to supplement standard credit ratings and help underwriters to make determinations about whether to extend a loan. The goal is to integrate AI to support, not replace, the human in the loop.
Augmented intelligence
Today, auto lenders use AI most heavily in the pre- and post-underwriting stages of the credit process. For example, before the credit decision they use AI to segment customers into risk groups in order to prevent fraud. After the decision, they use it in end-of-lease inspections — to more speedily and consistently assess damages and excessive wear and tear – or to run analyses on lost deals, when the customer chooses to seek credit elsewhere. And this is its best use — for now.
In the middle portion of the underwriting process – the yes/no decision on whether to grant credit — auto lenders should use AI in addition to current, robust, and replicable regression models, which use statistics to determine a customer’s credit worthiness. AI can help to feed more data into those models, or to challenge their outputs. For this reason, we like to think of AI as augmented, rather than artificial, intelligence.
But why place a go-slow on the implementation of AI in credit, when the potential gains in underwriting are so great? Because the opportunity for getting it wrong is significant. And because any industry that deals with regulatory compliance will benefit hugely from co-creating deep structural changes with regulators.
For regulators, the outcome is what matters
Fortunately, regulators are very supportive of the use of AI in credit processes. But that doesn't mean they are blind to the downside. Machine learning models are known to discriminate if the training data set is not carefully curated. So, regulators are understandably cautious.
As a result, regulators require that the same validation processes that apply to traditional regression models also apply to AI. Specifically, auto lenders should be able to easily explain and interpret AI models. And AI models should yield consistent and reproducible results. It is not good enough to implement 'black box' models that consume scores of data points and deliver a decision that cannot be unpacked.
With current, traditional models, the provider can explain to the customer which parameters fed the model (such as payment history, for example), what happened during the decision process, and why they were given a particular answer. And this will remain the standard. Generally speaking, regulators will focus on outcomes. If these outcomes appear to be discriminatory, the regulatory risk, financial penalties, and reputational damage for lenders could be devastating.
So yes, engaging with regulators may mean moving a little slower. But it also means that the industry will ultimately adopt standards that are best-in-class. Regulators don't want uniformity in the way auto lenders use AI – as long as it is fair. Rather, they desire a vibrant industry that isn't brought low by bias.
AI in auto: Four key considerations for lenders
If AI is the future of our industry, what should auto lenders consider on their AI journey?
1. Make sure your use of AI is explainable. Be prepared to explain how AI is being used right through the credit process, end-to-end. Genpact’s recent AI360 research shows that the majority (67%) of consumers worry about AI discriminating them, and most also fear that AI will make decisions that affect them without their knowledge. To allay concerns, be transparent with your customers. And know that regulators' attention won't just be on the decisioning portion of the credit process.
2. Engage with regulators, soon and sincerely. Describe your goals for the use of AI to regulators and explain the likely challenges. Regulators will want to be helpful.
3. Don't be made to feel like a laggard by fintech providers. The best use of AI in auto finance, for now, is pre and post-credit decision and as a challenger model to powerful, stable regression models. Over-implementing could go very wrong, very quickly. And buying software that builds black box models that you can't explain won't go down well with customers or regulators.
4. Keep a human in the loop. AI is here to augment human decisions, not to replace decision-makers. Supporting your underwriters with enhanced information provided by AI and good governance processes will allow your firm to spend more time on strategic, relationship-based activities that provide the best experience and outcome for the customer who, after all, is the focus of these efforts.
Proceed, prudently
When it comes to using AI in credit decisioning, therefore, auto lenders should put the pedal to the metal on neither the gas nor the brakes. Don't hit the accelerator and haphazardly apply AI to all aspects of the credit decision process. On the other hand, don't slam on the anchors and neglect to reap the enormous speed and accuracy benefits of including AI in the process.
Instead, apply AI prudently. To automate rote tasks in the pre- and post-decision phases of the credit process. And to supplement traditional regression models and augment the decision making of human underwriters along the way. And don't forget to engage with regulators on your AI journey.
Do this, and your auto finance company is sure to have a smooth ride. All the way to the bank.
Enrico Dallavecchia is the head of risk practice for North America and Niraj Juneja is the analytics consulting leader for banking and capital markets at Genpact, a global professional services firm.
