The green impact of digital auditing in asset finance

Mar 09, 2022 - 4 min read
Also Available in : Français | Português
Stephen McLernon, Commercial Director of SFP Digital Audit at Sopra Banking Software

It should come as no surprise to anyone familiar with the wholesale financing industry that traditional auditing methods carry with them a negative impact on the environment. Asset managers might spend as many as four days in the working week on the road. Added up, that constitutes a heavy burden on the planet, especially when you consider that much of that travel is unnecessary. 

Thanks to advances in technology, large parts of the process can be digitized, meaning audits can take place remotely, eliminating the need for long trips by train, plane and automobile. 

This isn’t just a boon for the environment. By leveraging AI, machine learning and API integration tools, banks, captives and dealers are able to use digital auditing software to improve the efficiency and security, while lowering costs, of the whole auditing process.

But implementing a wide-ranging digital auditing process is easier said than done. In this article, we’ll consider how digital solutions can help improve the auditing process, how to overcome challenges in implementation and what the future of auditing might look like. 

The carbon footprint of physical audits

As we know, auditors play a vital role in the wholesale finance chain. By confirming the location of inventory, as well as its quality and condition, they ensure that the whole process runs as it’s supposed to, while keeping the risk of banks and captives to a minimum.  

But with dealers spread far and wide, these audits – when done physically – take plenty of traveling from one dealership to the next.

And transport’s a big problem when it comes to carbon footprint. In 2019, it produced 27 percent of the UK’s total emissions, with 91 percent stemming from road vehicles. Cars emit more greenhouse gasses per passenger mile than trains and coaches that hold more people. Sole vehicle occupancy – which physical auditing relies upon –  is therefore particularly damaging.

In 2019, transport produced 27% of the UK’s total emissions, with 91% stemming from road vehicles.

And then there’s air travel. A 2019 study by the International Council on Clean Transportation found that airline emissions rose up to 70 percent faster than predicted by the UN, growing by 32 percent from 2013 to 2018. It’s not just the number of flights people take, it’s also the class they choose – seats in business and first take up more space and weight than economy, emitting up to five times as many emissions.

Whichever mode of transport auditors use, the environment suffers. To reduce that, digital auditing must come into play.

Benefits and challenges of digitizing the audit process

UK transport data for 2020 showed Covid had a major effect on greenhouse gasses, with CO2 emissions falling by 10.7 percent. Though business travel will likely bounce back, the extremes of 2020 and 2021 forced companies to reassess.

Of course, none of this would have been possible before the digital age. Thanks to high-speed internet, video technology and smartphones in every pocket, many people were able to continue working from home during the pandemic. 

Fuelled by the need to go digital, the share of digital products accelerated by seven years during the first stages of the pandemic, per a McKinsey’s 2020 Global Survey

Unsurprisingly, this had a knock-on effect on the auditing process. With auditors unable to travel, lenders were forced to be solely reliant on the dealers and thus accelerating the digitization process

While dealer self-auditing brings many advantages for both the dealer and the lender, from cutting back on audit-related emissions to prioritizing wholesale risk mitigation with real-time data, digitizing the process doesn’t mean you can’t still have the human touch. Physical auditing can be used to supplement the audit process and add an additional layer of information and visibility.

As explained by Peter Houghton, Asset Finance and Leasing Manager at Close Brothers, sometimes the human touch is necessary. He says he values the “independent set of eyes and ears” his team offers.

“We take the opportunity to speak to our customers and find out how their business is operating, what challenges they may be facing and if they are planning to expand, potentially creating more opportunity for the sales teams,” adds Houghton.

A strong solution, and an experienced partner

To implement and maintain a successful digital auditing process, banks and captives need to work with experienced partners who have the know-how and solution required. 

With Sopra Banking’s cloud-based digital solution, field auditors are removed from the equation, with dealers given an app to conduct self-audits, meaning it’s easier to audit more regularly, at no extra cost to the environment. The application verifies inventory location and condition using several audit types, including near-field communication (NFC), live streaming video and intelligent image.

Furthermore, the platform facilitates fast, safe and secure audits, with stock data delivered instantaneously to the funder’s back office. What’s more, there are time savings of over 40 percent and cost reductions of up to 50 percent versus traditional methods.

Our solution results in time savings of over 40% and cost reductions of up to 50% versus traditional methods.

Audit-related interruptions become a thing of the past, and dealers can improve risk ratings with their financiers – the process is real-time, leveraging AI, machine learning and API integration to provide powerful analytics and better transparency for risk management.

Easy-to-implement and scalable, our dynamic and modular self-auditing tool features:

  • Best fit deployment of audit methods
  • All-in pricing models with a single amount per location and predictable costs
  • Established  Sopra Finance Platform, Salesforce and third-party integrations
  • Customer business rules to identify risks and trigger rectification in real-time
  • Global and simultaneous group and network auditing capabilities

Is the future of auditing digital?

Digitizing manual processes is one of the many ways that organizations across a host of different industries can help in the fight against climate change. In fact, research done by the United Nations Environment Programme (UNEP) confirms digital technologies can potentially reduce CO2 emissions by at least 20 percent. At the same time, they can lower the use of natural resources in products by 900 percent and decrease waste and detoxify supply chains by ten to 100 times.

Oftentimes, digitizing processes also improves them, too. And that’s certainly the case with digital auditing. As we’ve seen, a powerful digital auditing solution can maximize efficiency, reduce security issues and result in cost reductions. 

Does that mean that there’s no place for physical audits going forward? Despite all the benefits that come with digital auditing, there may still be a place for the human touch.  But it’s clear that integrating digitization will be key for banks and lenders who want to improve their existing processing.  

In order to do so successfully, it’s vital to have a strong partner with the right solution and experience. Click here to find out how Sopra Banking’s Digital Audit solution can help you.