Wolters Kluwer, a provider of professional information, software solutions and services, said second-quarter results and analysis of its Auto Finance Digital Transformation Index, which tracks the rate at which auto dealers, service providers and lenders are evolving from paper-based finance back-office processes to digital, show growth in adoption.
According to the Federal Reserve System’s June Beige Book edition, auto loan demand has slowed recently amid high interest rates, while sales have been steady, if not slightly up on the year. Consumers appear to be choosing lower-priced vehicles as affordability continues to place pressure on loan demand. Despite the sluggish demand for loans, the auto industry continues to show a growing interest in digitizing loans and contracts for better back office-efficiencies.
Digital Adoption Up Slightly
According to the most recent Auto Finance Digital Transformation Index based on second-quarter data, auto dealers, service providers and lenders showed a digital adoption growth rate of 7% quarter-over-quarter. The growth rate was up slightly in the first half of the year, mirroring the slight uptick in overall vehicle sales activity. However, historically after a first-quarter spike, data show a plateau of digital adoption, which appears to be the case again this year.
Comparing year-over-year data, the volume of digital adoption was up 2% year-over-year. The trailing 12-month rate increased 13%, a good sign of market stability and recovery despite the slight second-quarter uptick.
“We’re beginning to see budgetary pressures of continued sluggish auto sales impact the adoption rate of digitized back-office workflows for many lenders and dealers here in the mid-way point of 2023,” said Tim Yalich, head of auto strategy for Wolters Kluwer. “Our customer feedback is telling us that the industry continues to see great value and need to digitize all aspects of the loan and contract phases for both originations and securitization, especially since there are greater efficiencies realized when digitization is experienced along the entire journey, not just up front for the consumer.”
Adoption Mostly Flat in Securitization Markets
Wolters Kluwer’s second-quarter Auto Finance Digital Transformation Index also shows that the digitization adoption rate for securitization markets remained mostly flat, the number of transactions nearly at and on par year-over-year and in line with expectations. Overall, the number of transactions over the past three years is still trending slightly down and in line with market conditions.
To learn more, see the index's page here.
