Making motor finance customer validation faster and smarter in a challenging environment
As the motor finance sector continues to grow, driven by the increasing popularity of Personal Contract Purchase, the risk of financial crime becomes ever-greater too. That’s just one of the challenges facing the industry, with compliance and regulatory issues focused on consumer affordability also particularly pertinent in a highly competitive market where speed of providing finance solutions is paramount to success.
It is becoming evident that motor finance providers need to check and validate potential customers more closely than ever before, whilst at the same time delivering the swift and seamless service which the market demands. Is there a single and simple solution? The answer is yes, and it is a solution which is already delivering results.
With the developing market, and particularly the increase of Personal Contract Purchases, motor finance providers need to deliver smart solutions for customers to maintain their competitive edge. They have to be fast and flexible. This is made more challenging in the context of rapidly rising financial crime, where criminals exploit the easier access to both financial products and personal data which market trends have demanded and created.
There is a need for a solution which enables the salesperson to validate the customer’s identity and financial status in real-time, to ensure that they are who they say they are, that they are telling the truth about their circumstances, and that they are not a risk to the business.
"New business volumes in the point of sale (POS) consumer new car finance market grew by 9% in August, compared with the same month in 2017, while the value of new business was up by 14% over the same period."
Finance and Leasing Association (FLA) press release, 5th October 2018
Regulation and compliance
Easiness of obtaining credit is a major area of concern for the Government and the Financial Conduct Authority, too. They have responded to the changing financial and consumer landscape within the motor finance sector by conducting in-depth research to help them shape their regulatory response.
“We wanted to understand the use of motor finance products, and assess the sales processes employed by firms and whether the products could cause consumer harm.”
Financial Conduct Authority (FCA) Our Work on Motor Finance, March 2018.
One of the key questions the FCA are asking is: “Are firms taking the right steps to make sure that they lend responsibly, in particular by appropriately assessing whether customers can afford the product in question?”
In other words, are customers and their circumstances being sufficiently checked before they are offered a financial package?
Along with these specific challenges, there are other regulatory requirements which apply across the whole finance sector, including compliance with anti-money-laundering (AML) regulations around terrorist financing and screening for sanctions and politically exposed persons.