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Por Kay Winkler

 

Car loan processes, the third entry to the retail process type series that we are summarizing, preserves many similarities to automated personal loan processes – one will encounter features such as an initial quote generation, credit evaluation and approval sequences.

Particular only to the car loan processes, however, there will be process functions that automate the issuing of a car insurance policy or the option of handling the car through a trust deed.

Especially in emerging economies, it is of utmost importance considering external players to become the main process users, at least for the commercialization portion of it. In that sense, it is not uncommon that most of the process transactions will be originated from car dealerships, directly. For an efficient BPM implementation that not only bridges departmental gaps but also creates, enables and enhances inter-company relations, special security provisions will have to be considered in order to extend the process benefits to the dealers without compromising sensitive information from the banks’ side.

 

Common Process Components

As described in previous articles, the car loan processes also sport Time-to-Yes (TTY) and Time-to-Cash (TTC) process portions, consolidating all sales and, later on in the process, post-sales related activities (usually comprising of administrative activities).

The separation of these 2 process portions come in handy when trying to attribute different sets of measurements tailored to identifying the operational efficiency and effectiveness of the retail banking process. Whereas the TTY part of the process commonly entails high rates of resource rotation and lower incident and man/hour costs, the TTC portion tends to take exponentially more time to resolution at higher resource costs but at much lower resource rotation cycles.

Delving in deeper into the car loan origination process composition, common steps to the retail banking type of processes can easily be spotted:

You will have your quotation steps with the main purposes of capturing the interest of a prospect or existing customer, pre-screening and – if possible – retaining her/him for the subsequent activities of loan approval and customer on-boarding. The fundamental question you will have to answer during the design-time of this quotation step is whether or not you want to engage in cost-laden external integrations for pre-screening purposes, such as credit bureaus, black list providers, and many more. One school of thought stresses the importance of “weeding out” all non-applicable candidates as soon as possible, before the bank spends too much time and resources on those. On the opposite spectrum, you’ll find financial institutions that will reduce or even eliminate any pre-screenings during the first loan origination process step and rather take the requesters word for certain and focus on capturing the prospects’ attention, tailor-making a loan proposal that will fit the requester’s profile. The latter model seems to prevail of late, especially in emerging markets, because it is less exclusive and more adaptive towards different customer profiles from the very beginning of the origination process.

The similarities of retail banking processes are concentrated within their corresponding TTY portions which typically cover the quote steps, the proposal (a set of quote formalization activities), approval and notification steps.

Later on in the process (TTC), different to the credit card process we saw earlier, mortgage processes as well as car loan processes contain several activity steps dedicated to the disbursement of the loan amounts (partial or complete payments).

 

Unique Process Components

Unique features and steps to the car loan processes are, of course, concentrated around the loan object – the car.

So, depending on the product coverage, you will find that a bank incorporates specific rules and parameters for specific brands of cars, policy sets for new cars and used ones.

Some banks offer preferred or their own car insurances that have to be tailored into the process steps. In that sense, some banks incorporate insurance on-boarding sub processes as part of the loan origination process.

Extending the sales and origination (TTY) steps of the process to car dealerships is also something unique to car loan processes though they do have their equivalences for mortgage (relators) and personal loan (retailers) origination processes. As briefly mentioned above, the IT security aspects must be considered very carefully when extending BPM banking solutions to third parties. A well-structured architecture of secure channels, DMZ’s, advanced authentication schemes and firewalls will likely be required.

Following, the 2 typical Car Loan processes types one usually faces:

 

Process Types

1. Walk-In Car Loan processes: This is your typical scenario of an interested individual (existing customer/prospect) through the banks various channels. In case it's a prospect (not an existing customer), try to keep the customer onboarding, KYC and account opening processes integrated, but separate from the Car Loan process itself.

2. Pre-approved Car Loans: Usually, starting from the bank's core databases, creating filtered customer subsets that fit specific product promotions. One of the most notable differences to the walk-in variant would be that in a pre-approved process, most of the process instances (incidents) are processed as massive batch files and not 1×1. Once all established filters and policies have been applied to those batches, all resulting incidents typically get inserted into the Car Loan Walk-In core process, for now contacting each of the pre-approved customers individually. If the customer's response is positive, all approval steps will be skipped, invoking the TTC portion of the Car Loan core process automatically.

As the following paragraph implicates, Credit Card, Personal Loan and Car Loan processes are very alike when it comes to the request and approval steps (TTY) but start to diverge notably, once you reach their TTC portion.

 

Macro Activities (core process)

  • Car Loan Quote:
    • Identify requester as customer and/or prospect
    • Basic credit background check and validation
    • Emit an initial quote with minimal possible information (loan type, amount and conditions based on desired car)
    • Identify if customer/prospect is apt and/or interested (capture data even if not apt for future purposes)
  • Car Loan Request:
    • Refine and complete customer/prospect data
    • Refine and complete quote
    • If possible: negotiate and approve here
  • Car Loan Review:
    • Intended for special requests, considerations and exceptions (rest should be filtered and routed automatically)
  • Car Loan Approval:
    • If possible, automate through integrations with scoring systems
    • Manual approval for exceptions only
  • Logistics + Formalities:
    • Gather signatures
    • Validate documents and policies
    • Car Loan Insurance
    • Terms of payment and direct salary discounts
    • Disbursement (to car dealership)
  • Closure
    • Welcome kit
    • QA Step (activated for a definable % of cases at random)

 

Integrations (core process)

  • BPM <-> Core Banking System
    • Read CIF
    • Create/Update CIF
    • Create/Update product
  • BPM <-> Blacklists
    • Internal and external (like OFAC)
  • BPM <-> Other BPMS and/or processes (eg.: prospect exists not as a customer but as a requester in a mortgage process, about to be approved)
  • BPM <-> Other Legacy systems (Document processors, e-mail…), CRM and ERPs

Next up – “Mortgages