Logbook Loan Lending is Changing…
17.12.2020 by Jack H
The logbook loans landscape is swiftly changing. With the recent rise in technology, it's key that lenders are making the most of every opportunity to provide a safer, quicker and fairer loan process for borrowers.
Loanonyourcar.com is proud to have adopted some of the latest technology and software, which is a crucial part of creating our New Logbook Loans.
In the below article, we break down exactly what benefits these technologies bring to our customers and why you need to be wary of lenders who aren't embracing the new standards of practice.
'Paper-Based’ Logbook Loans Are Now Obsolete
The original paper-based ‘Bill of Sale’ logbook loan was a time-consuming and overly bureaucratic process for the borrower and lender for both making an application and the pay-out process. Typically, the potential borrower would contact the lender by either telephone or make an online application, both of which resulted in a Field Agent being dispatched to the borrower’s home or work address within 48 hours.
Whilst at the property, the Field Agent would spend well over an hour completing endless amounts of loan documentation [which required a witness] and undertaking a very public and physical car inspection in front of the customer’s property. The Field Agent would then scan all documentation back to the lender for their approval. Typically, pay-out could range from 24 – 36 hours in some cases. Not ideal for the borrower!
What's more, lenders had to ensure Field Agents were within easy reach of borrowers, consequently, large swathes of Wales, Scotland and Northern Ireland were without physical coverage. And in the worst case of all, the ‘Bill of Sale’ which was used to secure the loan again the logbook loan in Scotland is not legal, resulting in no Scottish logbook loan offering.
In 2015 the Law Commission and the Industry Regulator [FCA] commissioned a thorough review of the current logbook loan industry and the use of Bill of Sale. The report concluded that Bills of Sale are wholly unfit for 21 Century lending.
Embracing Hire Purchase and Digital Solutions
LoanOnYourCar.com is disrupting the traditional way the original logbook loan is being offered and completed. In recent years there has been significant growth in small, opportunist and often unethical logbook loan companies. Such companies still offer the original paper-based contracts using the archaic Bill of Sale documentation, face-to-face completion combined with high interest rates, and in some cases hidden high fees.
In this overcrowded, highly competitive marketplace, we saw a perfect opportunity to combine the Hire Purchase [Regulated by the Consumer Credit Act of 197] with the latest technological developments to deliver the optimum consumer experience. Our objective is to create a clear competitive position with the launch of the New Logbook Loan and deliver a proven, professional, and seamless technological lending solution directly to the borrower.
This has created a huge area of opportunity in terms of product accessibility, speed of completion, same day pay-out and online loan management. The potential to re-shape and evolve logbook loan lending for borrowers and lenders alike.
Logbook Loan Lending in the Smartphone Age
A recent 2020 survey found that over 84% of UK adults own a smartphone. On average, these users spend over two and a half hours online on their smartphones every day. In 2019, 72% of mobile connections are 4G, up from 66% in 2018. With the launch of 5G this trend is poised to move upwards, with connectivity becoming quicker and more stable.
In addition, in 2020, mobile devices (excluding tablets) generated approximately 50% website traffic, a fairly consistent percentage since 2017.
Internet searches for logbook loan products-completed via Google or Bing and direct website application completed via smartphones has hit new record levels.
Unprecedented numbers of borrowers are accessing LoanOnYourCar.com 24 hours a day via their phones, whilst on the go, commuting or from the comfort of their sofa making the smartphone the definitive method of application and interaction.
A Fast and Responsive Online Experience
With the enormous growth of mobile traffic to LoanOnYourCar.com, it is essential that our website is mobile-friendly, so our customers can easily browse and find information, regardless of what type of device they are using.
To ensure LoanOnYourCar.com provide an optimal experience for our borrowers on any device, we have continually built responsive web pages that make the most of the innovation in page design. Simply put, this means every customer can read and navigate our website with minimum resizing and scrolling, allowing you to access the information you need as easily and quickly as possible.
85% of consumerstrust customer reviews just as much as they trust personal recommendations. In fact, over 89% of us even check online reviews to compare them with recommendations from friends.
The recent growth in on-line review websites has been amazing. According to a report from online independent review expert Trustpilot; the top three reasons customers write reviews are to help others make a better buying decision, to share an experience, or to reward a company for good performance.
A recent study concluded that approximately 70% of consumers when asked will leave a review for a business. Reviews not only have the power to influence consumer decisions but can strengthen a company's credibility. Reviews have the power to gain customer trust and they encourage people to interact with the company.
At least 56% of consumers read at least four verified reviews before deciding how to proceed. These verified reviews allow consumers to get a trustworthy sense of how companies treat their customers.
At LoanOnYourCar.com, we believe every loan matters. We therefore ask every customer to leave a review on the independent online trusted review site Trustpilot about the service, product, and speed of completion. To date, we are rated ‘Excellent’ with a rating of 4.9/.5. Find out more on our dedicated Reviews page.
Internet Banking and Consumer Behaviour
New technology is rapidly and irreversibly transforming the way in which consumers interact with companies for their goods and services. Within two years, mobile banking is set to be more popular than visiting a high street bank branch.
The tipping point is expected to come in 2021, when the number of customers regularly using high street branches will be overtaken by those using apps.
Mobile and internet banking is already widespread in the UK. Over two-thirds of British adults used online banking and 48% used mobile banking in 2018 – up from 41% in the previous year, according to figures by UK Finance.
The digital area for smartphone users is now upon us, with up to 71% of customers expected to use mobile apps for banking by 2024. Over the same period, the number of customers who bank in branches is expected to decline to 55%.
The direct growth of the mobile and internet channels has had a significant and profoundly important impact on the LoanOnYourCar.com underwriting process due to the introduction of ‘Open Banking’.
Before ‘Open Banking’, we would require a customer to supply their last three months bank statements in a PDF format. This process presented significant challenges for borrowers and typically the quality of the submissions was variable. On receipt of the bank statements, the underwriting team would be required to review the statements in detail and produce an affordability assessment. This process can be very detailed and extremely lengthy, especially if the borrower had two or more accounts.
API - Leading the Charge in Technological Growth
If you've ever wondered how the modern digital experience got so interconnected and convenient, the answer is APIs. An API (Application Programming Interface) is an information gateway that allows software and services that you interact with every day from your mobile phone, desktop, or tablet to communicate with one another seamlessly and instantly.
APIs manage the entire operational and service aspects of every consumer business interaction, from ordering your shopping online, making reservations or booking a holiday. Everything is now done via API in a fraction of a second. These APIs are now super-intelligent and can make decisions on behalf of the user and service provider. They can also interact with the end-user, via some form of event or notification mechanism, giving rise to a new dimension of user/developer experience driven by APIs.
This incredible technological development over the last ten years and the continued consumer adoption of internet-based activities has paved the way for a revolution in the provision of online financial services.
The logbook loan industry is no different and has undergone a fundamental re-think of its operational structure in order to meet the increasing demands from the industry regulator, the increased consumer demand for greater protection and more fundamentally the explosion of the digitized and data-driven consumer. These borrowers are thriving in finding new technologies and platforms to access and demanding financial products, information, and banking.
This evolution and change in consumer behaviour and interaction with technology was growing long before the COVID-19 pandemic. However, the pandemic enhanced and crystallised the need and demand for a better digital experiences with consumers being forced to stay at home as a result of the lockdown and not able to attend local shops or branches.
How Are We Using Technology to Meet Customer Demands?
Auto Decision Platform - Shaping 21st Century Underwriting
In a rapidly-changing online consumer marketplace, it becomes even more important to deal with increased application volumes in real-time whilst applying a standardised and consistent underwriting process. And for the Lender to provide a security safety net against online fraudulent applications and delivering 24/7 real-time credit decisions.
Lenders are aware of the need to adapt quickly to these challenges as they emerge. It is, therefore, crucial to create a solution that will allow for seamless autonomous modifications to deal with emerging credit risk trends, new regulatory underwriting requirements or new data sources.
LoanOnYourCar.com have built and developed our own bespoke Auto Decision Platform (ADP) which allows our credit risk team to build, edit and deploy fast but highly complex lending decision strategies without IT support, via API. Our ADP is and it will remain openly connected to all our Credit Reference Agency [CRA], our 3rd party data providers, and access to our borrowers’ online accounts via open banking.
Technology and Open Banking Improving Underwriting Efficiency
What is open banking? Open banking is also known as "open bank data." Open banking is an FCA-regulated banking practice that provides third-party financial service providers open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through the use of APIs.
Open banking will allow borrowers to share their financial data such as spending habits, regular payments and companies used with authorised providers such as LoanOnYourCar.com, providing they give permission.
LoanOnYourCar.com employ third-party, Open Banking Specialists to collect this information online in real-time from potential borrowers. The information is returned instantly in real-time and is provided in a detailed bespoke report for our underwriting team to review and complete the relevant assessments of the loan application.
To complement the power of ADP, LoanOnYourCar.com have developed OpenBankVision (OBV). This allows us to build an incredibly clear picture of a customer’s affordability in real-time. The OBV provides fully categorised bank statement data, so our underwriters can make more informed decisions by seeing first-hand what the customer earns and spends. Our OBV is integrated via our API directly into our Auto Decision Platform.
Obtaining an Online Credit Report in Real-Time
A credit report or a credit file is a perfect overview of a potential borrower’s lending history and potential payment performance. It will contain information that helps lenders such as LoanOnYouCar.com confirm a borrower’s identity and crucially decide whether they are a reliable borrower and would be a good customer.
This includes details of credit accounts held (and whether or not they have kept up with repayments), current and previous addresses, and any financial connections.
Credit reports are compiled by commercial organisations called credit reference agencies such as Experian, Equifax and TransUnion (formerly Callcredit).
As an automated part of our Auto Decision Platform process, we will always complete an online credit report with one of our preferred partners. This report is completed online instantly using an API. This report is a critical tool for our underwriting team in reaching a decision on the potential borrower’s affordability based upon their current credit profile, total indebtedness and electrical roll register.
Online HPI Vehicle Check
Understanding the provenance and previous history of every proposed car being used as security for a logbook loan is critical.
By completing an online HPI check into each car, the Lender obtains a full HPI Check, which informs the Lender instantly whether a vehicle has outstanding finance, been stolen, written off as a total loss, has a mileage discrepancy (clocked), had a plate change, been cloned, or has an outstanding logbook loan.
As part of the LoanOnYourCar.com Auto Decision Model we have directly linked to HPI via our API to provide real-time seamless vehicle information on every application and pass all the car information though to the loan management software systems.
Once a loan is completed and paid-out the same day to the borrower, LoanOnYourCar.com will simultaneously place a ‘Finance’ and ‘Security’ marker on HPI against the vehicle registration to confirm that we hold a financial interest in the vehicle.
These markers remain on HPI for the duration of the agreement. HPI on behalf of all Lenders upload and share this information with the two online Car Finance Registers - Experian and CDL.
This online sharing and collaboration of information is all done in real-time and provides real protection for lenders to prevent them issuing a second loan without security and allows potential car buyers to complete consumer finance checks with the confidence of getting an accurate answer. This process has substantially prevented innocent third parties buying cars with finance.
Online Loan Contracts and E-signature
The introduction of Hire Purchase agreements to create our New Logbook Loan has allowed loan contracts to be completed online in real-time without the need for a witness which has created a significantly quicker and smoother customer experience
LoanOnYourCar.com has developed an effective contract management system to enable our borrowers to receive contracts online and have the ability to e-sign the contracts with a legally-binding, secure and encoded signature.
The use of e-signatures has significantly increased the speed of transaction for our borrowers and can be completed via any device, no matter where in the UK you’re located. Signatures are done electronically so there is no delay in updating or executing contracts.
WhatsApp Mobile Video Inspections
A final part of the loan completion process for all Lenders is the vehicle inspection. Typically, vehicle Inspection has been completed face-to-face. This is both costly and takes a significant amount of time to complete.
LoanOnYourCar.com has made the move to complete vehicle inspections online via the app, WhatsApp. WhatsApp is available for both iOS and Android, so we can easily video-call borrowers across all devices.
WhatsApp is end-to-end encrypted to ensure the vehicle inspection video and calls are secured from falling into the wrong hands.
Faster Payments was launched in 2008 and for over 12 years has revolutionised our day to day lives in the way in which we send and receive online payments. Faster Payments is a service that allows the transfer of funds between accounts in minutes or hours rather days.
A key part of the LoanOnYourCar.com unique selling point is the speed of service - “Receive Your Cash in 60 minutes”. Due to all the technological developments from documentation, application and underwriting, this is 100% deliverable every time. Combined with the ability to receive the loan advance by Faster Payment in minutes means we always exceed customers’ expectations.
Collecting Payments by Continuous Payment Authority
Traditionally, logbook loan lenders have been collecting borrowers’ weekly or monthly loan repayments by Standing Order. This method relied upon the borrower setting-up the payment directly with their bank for the set payment due date.
LoanOnYourCar.com has now migrated all borrowers to a Continuous Payment Authority [CPA]. CPA is a type of online recurring payment, similar to a direct debit, whereby the borrowers give permission for LoanOnYourCar.com to take loan repayments on the agreed date on a regular basis using their payment card details. CPA is favoured among many industries for collecting payments, especially in financial services.
LoanOnYourCar.com use Worldpay to collect our borrowers’ loan repayments via CPA. WorldPay is a UK-based merchant acquirer that provides payment technology services to merchants, businesses, and financial institutions around the world, with a focus on e-commerce. Continuous Payment AuthoritiAnother example of how technology has helped both borrowers and lenders improve account management efficiency and reduce loan defaults.es are considered safe and secure, especially via WorldPay, the premier bill payment service.
Revolution in the Logbook Loans Industry
The rapidly accelerating technological advances have enabled the creation of our New Logbook Loan and the way in which this industry will now operate.
Technology has created a massive increase in the availability of channels of accessibility, the use of data to help shape lending decisions and build better customer expectation. Plus, this data has provided the ability to use consumer data to price, target, and market our products and future services more efficiently than ever before.
The rapidly increasing demand for logbook loans is causing a shift towards more direct and online interactions with LoanOnYourCar.com. Technological changes increasingly allow multiple borrowers to apply seamlessly whilst we can manage the application process for ever borrowers consistently, seamlessly and in real-time. Now this is adding value to both LoanOnYourCar.com and the borrower.
The industry regulator the FCA is embracing the need and drive for innovation and technological advance in the financial sector and is encouraging the technology revolution.
The future for LoanOnYourCar.com and New Logbook Loans is extremely bright and we are best-placed to deliver outstanding customer experiences throughout 2021 and beyond.