Today, Americans have nearly all but shifted their buying to online and have adapted to fully digital experiences. Lenders must be in tune with today’s consumer behavior, continuously improve and adapt the user experience they deliver to better compete.Competitiveness ensures that your business stays strong when lending demand slows and accelerates when demand goes up.
Lenders utilizing alternative credit data to make immediate, automated decisions, is one way to meet the needs of consumers today. Specifically, incorporating innovative data solutions during the underwriting process creates more efficiencies and improves decisioning. In turn, this helps drive conversion rates, specifically when used with autofunding strategies.
A. What is Autofunding
Autofunding uses an expedited, automated decisioning process for consumers that do not require additional verification by lenders. One of the most common verification steps is verifying that a consumer owns a bank account that is not risky. If you can bypass verifying the bank’s risk enables the lender to send the funds to the consumer faster, without ever having to interact with another human.
This idea sounds great in theory, but if done improperly runs the risk of fraud and high defaults. ValidiFI has created a path to success that not only verifies the risk of the bank accounts through automation, but also converts better leads and makes a faster, simpler process for customers. In a competitive market, having cutting-edge tools like this helps a lender stay ahead of the pack.
B. Problems of Manual Verifications for Funding
Many lenders still rely on manual verifications including but not limited to three-way calls with the employer and bank. A major problem with a three-way call verification process is that it increases drop-off. Most people today don’t answer calls from unknown numbers, nor do borrowers have the time to wait around. Another potential problem is fraud. In some cases, schemesters have set up fake employers for lenders to call and obtain fraudulent work history information. Regardless of these and other problems, consumers expect digital processes to be automatic and immediate, they don’t want complicated manual verifications to get funded. Instead, they will move on to the next lender that can provide them with that quicker, seamless digital experience.
C. Benefits of Autofunding
We know that consumers want an automated process. They are more likely to convert and become a returning borrower when provided with an expedient and positive experience. Adapting faster, automated decisioning gets customers funded sooner, increasing the number of conversions, as well as providing lenders with the following benefits:
- Reduces Underwriting Costs
- Provides a Competitive Edge
- Reduces Friction & Abandonment
- Improves Customer Acquisition
How does autofunding reduce underwriting costs? If you are able to send a borrower through an autofunding strategy and workflow, then presumably you are not spending as much on additional data sources. Data sources that help identify applicants as opportunities for an autofunded customer are likely to provide predictive benefits that would have been obtained through multiple data sources. Knowing more about the applicant at the very beginning of the application process, like whether their bank account is not risky, is a highly useful tool and can significantly reduce the number of data sources you spend money on throughout the overall process.
Using an autofunding strategy gives you a competitive advantage. There are still a lot of lenders using manual or credentialed processes in order to get funded. By offering this more streamlined approach you create a competitive advantage when compared to lenders that require manual intervention before getting the customer funded.
Eliminating manual intervention is probably the biggest benefit of adopting an autofunding strategy. Manual intervention may require a lender to get on the phone with the borrower. It may require a three-way call with a former employer or bank to verify the information. All these steps create friction. Where there are additional steps and friction a borrower is more likely to abandon the process. Using an autofunding strategy helps streamline the process and make the user experience more pleasant reducing the amount of friction and chance of abandonment.
With autofunding, you are creating a better overall experience. You are giving your customer what they want faster. You are reducing the cost of the application process by eliminating manual steps. All these and many more make autofunding a great choice for lenders who are seeking to acquire more consumers. Consumers have increasingly come to expect better and more streamlined experiences, which ultimately increases the number of new customers they can acquire.
ValidiFI has customized, real-time solutions to help you succeed in today’s competitive landscape, reducing friction and increasing conversions with simple, effective solutions empowering your autofunding strategies. ValidiFI’s tiered approach reduces credit risk as well as identifies the leads most likely to convert, without consumer interaction.
FI Risk Index – The FI Risk Index is a cost-effective, top-of-the-waterfall bank risk product, providing insight into the likelihood of default associated with an application. FI Risk Index not only allows you to identify the riskiest but also the least risky applicants, allowing you to send those applicants down an autofunded workflow, bypassing costly and high friction underwriting products.
PI Risk Score – Once initial risk screening has occurred with the FI Risk Index, take a closer look at the lead. This service provides insights based on the consumer’s transactions, behaviors, and characteristics. The PI Risk Score improves risk models that incorporate alternative and traditional credit bureau data, to enhance or generate new customer acquisition strategies. This solution provides unique insight, with no customer friction, making it a perfect fit for autofund strategies.
Ownership – For the medium to higher risk leads, ValidiFI’s ownership solution can confirm the likelihood that the account belongs to the consumer, reducing fraud and streamlining the onboarding process. ValidiFI’s Ownership solution does not rely on a consumer providing credentials to their online banking, making it more favorable for autofunded and frictionless strategies.
Lead Conversion Score – ValidiFI’s Lead Conversion score provides insight into the propensity for the applicant to convert to an originated borrower while mitigating fraud by verifying identifying and assessing various risk factors.
Although identity verification and fraud mitigation are undeniably critical to the decisioning process, it costs you a weaker user experience, encourages customer abandonment, stifles growth, and diminishes brand reputability implementing ValidiFI’s automated authentication strategies empowers a strengthened identity verification and risk filter to get valuable customers autofunded faster.
At ValidiFI, we provide real-time credit risk and validation solutions to enable autofunding, account openings, compliance objectives, credit decisions, fraud, and risk management. If you would like to know more about our services, get in touch with our team today, contact ValidiFI online, or call us at (754)-209-2511.