The auto finance world has evolved significantly during the past two years, and the trends of that period continue to take hold into 2022. Since the beginning of the coronavirus pandemic, we have seen an explosion in digital fraud — a negative development. But on the flip side, we have seen decreased time to funding. Lending times will continue to shrink into 2022. Finally, Big Tech companies will continue to be more involved in auto production, sales, and finance.
The Growth of Digital Fraud
Digital fraud in auto lending has been exploding since the beginning of the pandemic. And it’s only going to grow as tech-savvy, sophisticated fraudsters flock to platforms such as Telegram to share information and tips. Already in the past year, identity fraud has cost the auto finance industry $1.2 billion, an increase over the year before that.
The fraud incidents of 2022 are bound to be more interconnected with digital access. For example, auto lenders can expect more synthetic identity theft, which is driven by bad actors gaining access to Ransomware as a Service (RaaS) tools and corporate networks. These bad actors use a combination of a person’s real name and date of birth, together with a false Social Security number, to get the financing they’d otherwise be unqualified for. In the end, they default.
In addition, false employment claims on auto loan applications will continue to be prevalent into 2022. The Payment Protection Program (PPP) taught would-be fraudsters how to fabricate a place of employment for unfair financial gain. Now, auto lenders can expect them to apply these “lessons” when applying for a car loan. The more sophisticated among them may even alter their online presence to make it seem as if they are really employed at a particular organization — when they may in fact not be employed at all.
Shorter Time to Funding
The pandemic forced lenders to interact with borrowers through digital means. As more employees worked from home, and more borrowers couldn’t leave the house, physical paperwork, printing, and scanning became increasingly impractical. Many lenders and dealers started allowing borrowers to apply for loans online out of necessity.
It’s likely that in 2022, any remaining holes in the digital system will be filled, enabling borrowers to experience a seamless digital loan application. This will also mean a shortened time to funding, as borrowers can easily upload digital stips and forms to an online lending system. This satisfies an important customer demand; according to one survey, 57 percent of lower-income borrowers expect to complete their auto loan application in a few hours or less.
This serves as an important lesson for subprime lenders: the borrowers they serve may be desperate to get a loan, but like all 21st century consumers, they have expectations for speed and efficiency. The same survey found that of consumers who abandon their auto loan application, 49 percent did so because the process “took too long.” So the trend towards a shorter time to funding means that fewer potential borrowers will abandon their application midway due to frustration.
Big Tech Converges With the Auto World
Big tech has seeped into every area of our lives, and in 2022, the auto world won’t be exempt. Amazon.com has announced a partnership with Stellantis NV, the innovative global automaker behind Jeep, Fiat, and Chrysler. Amazon will provide its cloud services and help with the development of digital solutions. The two companies plan to develop a digital cabin platform called STLA SmartCockpit starting in 2024. The technology will be added to electric vehicles.
Another tech giant, Intel, is going public with its self-driving company Mobileye. Intel continues to express excitement around Mobileye’s recent successes, noting that the company’s revenue in 2021 increased 40 percent over the previous year. With a bevy of other electric and autonomous vehicle companies having gone public recently, we can expect 2022 to continue the trend of tech giants partnering with the auto industry.
The Bottom Line
Big things are expected to happen to the auto industry in 2022. The industry will digitize like never before, which will keep opening up new opportunities for innovation, as well as threats to watch out for.