#Financing

The five benefits of digital asset auditing

Jan 20, 2023 - 5 min read
Stephen McLernon, Commercial Director of SFP Digital Audit at Sopra Banking Software

Inventory auditing is traditionally a manual task that’s costly, prone to inaccuracy and has a negative ecological footprint. Lenders can regain control with digital auditing, a secure process that uses a built-for-purpose app and real-time data.

This topic was discussed during a dedicated session at the 2022 Sopra Banking Summit, and in this article, we’re going to dive a little bit deeper.

What is digital auditing?

The increasingly popular technique involves using a smart device and an app to perform an inventory audit. Instead of relying solely on physical auditors, dealers and businesses in possession of floorplan-funded assets can self-audit on behalf of the lender.

Occurring in real time, audit data is synced to a digital risk management dashboard that leverages rulesets, intelligence, automation and data analytics to optimize the process.

Digital auditing is for anyone in the world of asset finance: banks, captives, original equipment manufacturers, independent funders and dealers. Moreover, the solution applies cross-sector to any asset type, with samples including vehicles, agricultural machinery, construction equipment and white goods.

Rise of digital auditing

Digitized solutions have gained traction for a number of reasons. From an auditor’s perspective, physical audits are time-consuming; there’s a limit to how many they can carry out in a day, especially factoring in aspects like travel time and traffic.

Furthermore, auditors are highly skilled individuals whose talents aren’t optimized by being out on the road counting assets. They’re also an expensive resource, taking salary, pension, travel, subsistence and car maintenance costs into account.

From a funder’s standpoint, physical auditing is an inefficient drain on core resources, while systems used to analyze data are often antiquated and pricey to maintain and scale. Additionally, the time lag between audits and results can lead to delays in identifying and dealing with high-risk situations.

There’s also the business undergoing the audit to consider. Pain points range from the inconvenience and inflexibility of on-site audits to the time they take to conduct, sometimes leading to friction between auditors and their customers.

Impact of digital auditing

Digitizing this function eradicates the physical limitations of on-site auditors. Dealers can self-audit simply and securely within minutes by downloading an app, and there are no restrictions around audit volume and frequency. Additionally, the technology behind audit applications offers enriched, real-time data for augmented risk management.

As lenders transition from manual to digital solutions, they can build robust rulesets and strengthen processes, protecting both themselves and the dealers being audited. There’s also the opportunity to introduce increased automation and efficiencies for risk teams managing audits and their results.

Five key benefits of digital auditing

Generally, digital auditing delivers lenders greater asset control, operational and cost efficiencies, scalability, and deeper risk insights. The sustainability and green credentials of digitization are also key motivators.

1. Increased asset control

It’s possible to perform audits as regularly as necessary, dependent on the risk profile of the dealer, with physical audits reserved to complement digital audits, the results of which ensure that a physical auditor can be deployed to maximum effect. Additionally, digital solutions can integrate with external data sources such as credit bureaus, open banking platforms and legacy systems to provide enhanced benefits.

2. Deeper risk insights

Digital audits are performed and analyzed in real-time, improving their accuracy. And by using AI, machine learning and analytics to evaluate results, funders can model risk based on historic behavior and begin using that data to confidently predict the future.

3. Resource efficiencies

Self-audits take less time to complete, and lower-level individuals at a dealership can conduct them. Meanwhile, physical auditors are still on hand to build and maintain relationships. Digital solutions also enable lenders to automate repetitive analysis tasks, leaving auditors to concentrate on higher-value projects. And from an operational perspective, digitization allows lenders to link risk profiles to the frequency of audits, meaning greater protection.

4. Cost reductions

Field-based auditors are expensive to maintain; by combining on-site and digital solutions using a hybrid model, lenders achieve global coverage, quick scalability and the potential for massive savings – in excess of 50% in some cases.

5. Reduced emissions

The EU cut greenhouse gas emissions by 32% between 1990 and 2020. However, the transport sector bucked that trend: emissions rose by 7% over the same period. Taking field auditors off the road plays a role in remedying that, leading to fewer cars and journeys and reduced carbon dioxide (CO2) emissions.

Allied Irish Bank and digital auditing

For Joanne Mckenna, Operations Manager for Wholesale Finance at Allied Irish Bank (AIB), the advantages of digitizing with SFP Digital Audit are clear. Our cloud-based solution offers real-time risk management using AI, machine learning and API integration.

The fast and scalable platform helps AIB eliminate manual and laborious tasks, brings efficiencies and cost-effectiveness to the process, and allows their auditors to refocus priorities.

In conjunction with that, AIB’s customers feel more in control. “We experienced surprisingly little resistance (from the dealer network),” says Joanne. “Self-audits are slick and less time-consuming, so they’ve embraced them.”

Future of digital asset auditing

There are a variety of ways to perform a digital asset audit, from near-field communication (NFC) tagging and video snapshots to live streaming and images. Alongside those interchangeable and complementary methods, it’s possible to integrate other technologies into the picture via APIs, including:

  • Aerial drones. Leveraging advanced imagery and three-dimensional modelling, drones quickly provide accurate and high-quality inventory data.
  • On-board diagnostics (OBD). The Internet of Things (IoT) is an increasingly rich source of information, with connectivity allowing an asset’s data to be automatically added to its records via an OBD-II device.
  • Radio frequency identification (RFID) tags. This customizable technique scans multiple items at a time and offers longer-range communication than NFC.
  • Blockchain. By using this technology, reporting becomes more standardized and transparent, enabling more efficient data extraction and analysis.

Balancing with a hybrid solution

Shifting to digital inventory auditing is a leap, albeit accelerated by the global pandemic. Institutions are aware of the limitations of physical auditing, but there’s a level of comfort associated with it.

A hybrid approach offers the best of both worlds, giving dealers the flexibility to self-audit and freeing up auditors’ time, while facilitating relationship building and edge case handling. Additional wide-ranging benefits include reduced emissions, cost savings, resource efficiencies and deeper risk insights.

The future lies with continued technological advances, further augmenting the digital auditing process, making it even easier and more effective.

To watch the full on-demand video from our 2022  Sopra Banking Summit, please click here.