Why asset finance industry leaders need to drive digital transformation in auditing

Apr 18, 2024 - 5 min read
Shane Reinert, Executive Director of Sales & Partnerships North America at Sopra Banking Software
  • As technology advances, asset finance businesses are adapting their systems and processes to protect or grow their market positions.
  • The hybrid auditing model gives dealerships access to real-time data across all sites and could ease credit obstacles.
  • Digital auditing solutions can help dealerships achieve significant cost and time savings.

The pressure on automotive dealership performance is increasing. The 2024 Cox Automotive report shows that the US-based automotive dealer profitability index fell to its second-lowest score on record, coming in only behind the second quarter of 2020, when COVID-19 lockdowns were in place.

Additionally, a recent Kerrigan survey showed that 69% of respondents expected car dealership profits in the US to decrease in the next 12 months, a clear signal that the need for dealers to evolve is reaching a critical point.  

As technology advances, asset finance businesses are adapting their systems and processes to protect or grow their market positions. Over the past year, 48% of trendsetters in the North American automotive retail market have enhanced their digital retailing, according to the 2023 Trendsetter’s Guide to Automotive Retail by CDK Global.

Immediate return on investment

The transition to digital solutions brings an almost immediate return on investment in total cost of ownership by implementing cloud technology, increasing security, and providing transparency across organizations.

However, digital transformation can have a deeper impact than the headline benefits. For some, this could be removing the reliance on traditional processes and replacing them with a faster, more cost-effective alternative. A great example of a digital solution that significantly impacts business operations in the asset finance market is the ability to audit assets digitally.

Traditionally, a lender would hire a third-party auditor or employ a dedicated staff member to travel to various locations to complete an in-person audit. Physical audits are an excellent way to centrally validate the information about an asset and corroborate that the day-to-day activities of individual dealerships match an organization’s overall objectives. However, this comes with significant time and financial implications and doesn’t give an accurate view of different locations.

An alternative solution is to implement a hybrid auditing model, giving businesses the best of both worlds. Self-service auditing solutions would enable individual dealerships to complete audits as required by the company and complete physical audits once or twice a year for validation. A significant benefit to this model is gaining access to real-time data across all sites, providing a better view of their book of business.

Digital audit is a faster & cost-effective alternative, allowing to access real-time data across multiple sites. © Getty Images

Used-car market obstacles

A recent AFSA blog highlighted numerous obstacles the US used-car market faces, including repossessions, product refund regulation, and the impact of the upcoming US presidential election.

In addition to these points, used-car dealers in the US are struggling to get inventory and are extending lines of credit, often without the benefit of a full view of what inventory is on the lot.

The long-term impact is that banks will often bear the brunt of this risk and impose stricter requirements on organizations looking to extend their lines of credit, putting greater pressure on the used-car market. Without access to reliable, real-time data, lenders might find themselves unable to extend credit, and their business operations are impacted.  

Regulation needed for digital transformation

Likewise, digital transformation is frequently accelerated by changes to market regulation. In his 2024 State of the Union address, President Joe Biden made statements about intentions to set green initiatives in the United States, defining targets to match efforts being made in Europe as part of the 2015 Paris Agreement.

President Biden noted the aim to cut carbon emissions by half and conserve 30% of America’s lands and waters by 2030, as well as the intention to create tens of thousands of clean energy jobs and install 500,000 electric vehicle charging stations.

Should such legislation be passed, it will undoubtedly expedite the digitization efforts of the US asset finance market. However, this will depend on the outcome of the elections in November this year, illustrating just how much current regulation can impact day-to-day operations.

The benefits of digital auditing

By implementing digital auditing as a self-servicing solution, one of our clients, a vehicle finance lender based in the West Midlands of the UK, could perform 100% of audits digitally during COVID restrictions, and continue their audit schedules & governance without impacting risks.

This meant that lender staff and third-party companies no longer traveled to dealerships to complete audits, with dealership staff now able to do it themselves. In addition to reducing CO2 emissions, they could complete audits more frequently, have a better view of the assets on the forecourt, and experience cost and time savings compared to traditional physical auditing.

Beyond market challenges and changes, digital transformation is key to saving money and reducing manual touchpoints. Research with Sopra Financing Platform clients has found that businesses could achieve cost savings of around 50% and time savings of up to 40% by implementing a digital audit solution.

An essential part of implementation is the rapid adoption of new processes, in part through successful launch and rolling out across all sites. One of our customers, an online car auction house based in New York State, rapidly rolled out its digital auditing solution to more than 1,000 sites.

Another large US floorplan financing giant is in the final stages of implementing the solution across 20,000 sites. This illustrates the importance of utilizing a system that can be scaled to grow with the lender’s needs and rapidly reach your organization’s digitization goals.  

With a digital audit solution, businesses can achieve cost savings of 50% and time savings of up to 40%. © Getty Images

How Sopra Banking Software can help

When it comes to digital transformation, it is vital to partner with a provider that will help meet broader digital business goals. SFP Digital Audit is an excellent example of how a small change can significantly impact wider business operations.

The expert team that supports the Sopra Financing Platform has helped clients of all sizes worldwide meet their end-to-end floorplan needs and upgrade their processes with a rapid rollout solution.

It saves time and money for small lenders and global enterprise operations, reduces their carbon footprint, and gives them a better view of their overall business.

Click here to learn more about how our digital audit solution can support your transformation initiatives.

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