Best Practices around Big Data in the Vehicle Financing Industry

James Brady, Chief Product Officer, Spireon, Inc.
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James Brady, Chief Product Officer, Spireon, Inc.

The rise of big data has changed just about every aspect of our world, and the subprime vehicle financing industry is a perfect example. Although it seemed to happen overnight, the rise of machine-to-machine (M2M) communications and location-based collateral management has taken several years to come to fruition. Today, M2M platforms drive the collection of all sorts of relevant data to improve the loan process for consumers, including automatically confirming their home address, their place of work, and most frequented destinations.

M2M technologies and location-based data has provided a wealth of new information for subprime dealers and lenders, making it more efficient for them

This data stream provides a wealth of needed information about buyers and their ability to make consistent payments on their vehicle, helping subprime dealers and lenders put more buyers behind the wheels of vehicles. The data gained from M2M-based platforms helps subprime dealers and lenders in a number of ways:

• Become more efficient in their processes via automation Manual process such as reference checks, including home address verification and employment verification, can be automated through M2M-based solutions and platforms. These solutions can help verify information provided in loan applications based on location instead of manual phone calls. The data can also identify changes to those references based on alterations in the asset’s location. New collateral management solutions can also help dealers improve communications with buyers through features such as automated payment reminders, so that buyers are reminded via email, text or other methods if they are starting to fall behind on their payments.

• Reduce human error—Because M2M solutions automate much of the background checks for buyers, the reduction in human error caused by manual entry of data is reduced.

• Keep personal data private and secure-Data collected by computers, not humans, help provide additional privacy for the consumer. For example, instead of calling employers to verify an applicant’s employment, dealers and lenders can use location data to verify this information. Furthermore, moving to electronic records mean paperwork is no longer lying around on the tops of desks, available to prying eyes. Instead, it is secured in computers and data centers, secured by encryption technologies.

• Understand the health of the vehicle overall as well as the location-based device

M2M technologies collect data about the vehicle’s battery strength, the cellular signal, and the GPS signal. This data can alert a lender if any of these issues potentially impact the ability of the driver to drive the vehicle as well as its ability to be properly tracked.

The concept of predictive analytics has also emerged, and can be used in a manner that benefits the end customer. Two examples of using predictive analytics and automation include:

• Inactivity—A dealer can identify when a vehicle has been inactive for some period of time. This could indicate a problem with vehicle or a precursor to inability to make payment, and the dealer can then reach out to the customer to inquire about the status of the vehicle and loan. This tool allows the dealer to proactively work with the customer to get the vehicle operational, or get them into a new vehicle.

• Tow alerts—Alerts can be set up to inform the dealer if the vehicle is turned off or moving. This would indicate if the vehicle is being towed. The dealer can notify the customer, and the customer can take action to resolve the issue. This can save the consumer significant amounts of money and hassle.

While such volumes of data about buyers and their vehicles provide valuable information to subprime dealers and lenders, there are several best practices they should follow when dealing with the data:

1. Ensure that every employee at their organization is aware of and compliant with state and federal regulations governing the subprime vehicle financing market. Dealers and lenders should consider their collateral management platform provider a valuable resource for guidance and best practices surrounding compliance information, especially any changes in regulations of which they should be aware. Make sure your platform provider is a member of recognized associations that govern this industry.

2. Ensure your platform provider subscribes to the highest levels of security and privacy controls. The FTC Safeguards Rule requires every dealer, regardless of the size of the dealership, to develop, implement and maintain a written information security plan that describes the dealership’s program to protect customer data. It’s more than OK to ask questions of your platform provider such as “Can you tell me about your server and data center set-up?” and “What security controls do you have in place to protect my customers’ data?” Look for providers who regularly update you about their own security measures, especially in light of high profile security breaches in every industry.

3. Be intelligent about your customers’ data, and make sure your partner is as well. Yes, M2M solutions can provide you with a wealth of information about your buyer and their vehicle. It’s what you do with that data to improve the end-to-end process for buyers and make your own processes more efficient and cost-effective that will set your business apart. According to IDC, the ROI on business intelligence solutions that incorporate predictive analytics is about 250 percent, significantly higher than 89 percent ROI of projects focused only on information access and internal productivity gains.

M2M technologies and location-based data has provided a wealth of new information for subprime dealers and lenders, making it more efficient for them to put more buyers behind the wheels of vehicles. Predictive analytics have also helped to streamline their operations and reduce costs. By following best practices when dealing with the data, dealers and lenders are poised for tremendous success in the subprime market.

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