Lending Enablement Solutions Drive ROA Attainment for Automotive Lenders, Open Lending Survey Finds
May 11 2023 - 8:15AM
Business Wire
New data validates the role of automated
decisioning and risk analytics in financial institutions’
performance, with 95% of Lending Enablement users meeting ROA
targets
Open Lending Corporation (NASDAQ: LPRO) (“Open Lending” or “the
Company”), an industry trailblazer in lending enablement and risk
analytics solutions for financial institutions, today released its
Lending Enablement Benchmark report. The goal of the research is to
uncover how financial institutions are using technology to adapt to
an ever-evolving auto lending environment.
The report reveals that Lending Enablement Solutions are playing
a clear and decisive role in improving decisioning speed,
increasing Return on Assets (ROA), and reducing risk exposure for
auto lenders. Additionally, the use of Lending Enablement Solutions
is allowing financial institutions to better reach near-prime
consumers — a segment that’s strategically critical to serve,
especially in an economic downturn.
Open Lending gathered responses from leaders of U.S.-based auto
lending institutions at or above the director level. Key data
insights include the following:
- Institutions that use Lending Enablement Solutions are
meeting or exceeding ROA targets and mitigating delinquency.
When comparing auto lending institutions that use a Lending
Enablement Solution to those that don’t, a much greater proportion
of Lending Enablement users report meeting their ROA targets last
year compared to non-users (95% vs. 73%). Lending Enablement users
are also far less likely to report a rise in delinquency rates
among those in near-prime categories (12% vs. 57%). The marked
contrast here suggests Lending Enablement Solutions have a positive
impact on curbing delinquency among non-prime borrowers.
- Financial institutions are prioritizing FICO scores and
income/employment history for auto loan decisioning — while
overlooking the value of alternative data sources. Many auto
lenders take a reductive approach to determine borrower potential,
using FICO scores (73%), income and employment history (60%), and
debt-to-income ratio (60%) to evaluate and price loans. Without
more nuanced alternative data sources — such as rental history,
mobile phone payments and account balances — lenders are likely to
exclude qualified borrowers in the near-prime credit segment.
Notably, Open Lending’s research identified near-prime borrowers as
a crucial component of a balanced, resilient portfolio: more
banking industry professionals observed delinquency in prime
borrowers (33%) than in near-prime borrowers (20%).
- Improving loan decisioning speed is a top priority for 2023
— but it shouldn’t introduce avoidable risk. Auto lending
leaders indicate that driving faster loan decisioning is tied for
priority No. 1 for 2023, with 44% listing it as a top priority. But
as they prioritize decisioning, they’re not overlooking default
risk, with 42% of leaders committing to reduced risk exposure this
year. Respondents also note greater transparency, enhanced
security, and increased use of AI as areas that could improve the
Lending Enablement Solution they use.
“As challenging market conditions put pressure on financial
institutions to build profitable, resilient auto loan portfolios,
Lending Enablement Solutions allow these organizations to do so
intelligently and quickly,” said Matt Roe, Chief Revenue Officer at
Open Lending. “The difference in results for auto lenders who use
these solutions and those that don't is clear. Lenders Protection™
offers a unique combination of fully automated auto loan
decisioning, AI-powered risk analysis and built-in default
insurance to enable lenders to strategically extend loans to
near-prime borrowers and remain competitive with the industry's
increasing reliance on personalization and AI.”
Learn more about Open Lending’s survey and read the full report
here.
With Open Lending’s Opportunity Calculator, financial
institutions can get customized results on their potential to
securely increase near- and non-prime loan originations with the
Lenders Protection risk management platform. Open Lending’s Lenders
Protection program currently serves approximately 440 financial
institutions and has facilitated more than $19.3 billion in auto
loans since its inception.
About Open Lending
Open Lending (NASDAQ: LPRO) provides loan analytics, risk-based
pricing, risk modeling and default insurance to auto lenders
throughout the United States. For 20 years we have been empowering
financial institutions to create profitable auto loan portfolios
with less risk and more reward. For more information, please visit
www.openlending.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20230511005276/en/
Alison Smith for Open Lending openlending@ink-co.com
Investor Relations Inquiries openlending@icrinc.com
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