VIEWPOINT: Composing business benefit from architectural excellence
Originations in automotive finance is a symphony of technology and connectivity. From the moment a credit application is submitted via dealer-facing connectors (such as RouteOne or DealerTrack), each potential lender executes a series of tasks across a number of platforms. Controlling the tempo and dynamics of each member of the orchestra, the LOS (loan origination system) platform represents the conductor of this symphony, ultimately pursuing the goal of providing the best offer to the customer in the shortest amount of time.
In previous Viewpoint articles, I have dug into the potential operational improvements that technology can offer, such as more and better-quality credit decisions, or automated funding. In this piece I will explore the importance of technology in its own right, as well as how robust architecture can not only reduce risk but drive transformational benefits too.
1. Greater than the sum of its parts
Like any orchestra, the achievement of the whole is greater than the sum of its parts. The originations process is a complex endeavor, where balancing acts of risk and volume are performed under pressure to be quicker than the competition. This often requires a diverse set of functions, working in unison and complementing each other. But no single platform can perform all functions at the level required for this market, and for this reason invoking a broad and diverse set of services is the foundation for successful integration into a complex ecosystem, and a crucial ingredient to success.
That ability to integrate effectively is a basic requirement of an LOS platform. Easy-to-understand, granular APIs, built on modern architecture, provide the ‘table stakes’ that enable customers to integrate freely across platforms without vendor assistance. Complementing this is the ability to house as much business logic as possible outside of the integration layer, allowing business users to tweak operational rules and ordering - again without needing to engage development teams.
However, no ecosystem architecture should be designed without security at front of mind. To exploit the benefits of a diverse and coordinated system landscape safely, maintaining standards when communicating between platforms is imperative.
2. Keeping pace with the tempo
In addition to directing and coordinating the ensemble, the LOS must be in sync with the rhythm of the orchestra and able to handle changes in the tempo.
Just as every musical score reaches a crescendo, originations volume and load can both vary - peaking at certain periods in the day, or on certain days in the month or quarter. LOS platforms must be able to handle this increased load, remaining performant and retaining the same response standards so individual application response times are not compromised. Selecting an architecture that’s proven at scale, with optionality around tuning, is key to maintaining that performance.
Having automated and accurate performance monitoring and alerting is a necessary fallback, guaranteeing that any drops below acceptable thresholds are picked up immediately.
Together, these attributes ensure that the platform is being held to SLA targets, even during the busiest periods - maintaining dealer satisfaction and confidence in your ability as a lender.
3. Ensuring the show goes on
Even brief interruptions in loan origination can have profound operational and financial repercussions. Building in resilience to a wide (and often unknown) range of circumstances is foundational to stable operations and continued growth, minimizing the number of dropped or lost applications, and maximizing the possibility of winning business.
The first requirement is clear: the LOS platform must have high availability, employing the latest and greatest technology for disaster recovery to ensure that the business can still operate even when facing unknown and unpredictable failures. As cyberattacks become more frequent, many organizations discover - often the hard way - that a resilient data backup and recovery strategy is essential.
Resilience also matters for smaller or recurring issues that may not cause an immediate outage but can have a cumulative impact. Ensuring applications don’t get stuck in the process, or stall due to minor data variations, is just as critical. It is often impractical to design solutions for every possible failure, but establishing a watertight approach for identifying failures, automating retries, and escalating for manual intervention is essential. Real-time data insights are also critical in order to identify patterns and quantify impact, allowing for priority-driven fixing.
4. Introducing new instruments
As in any industry, AI is causing a shift in the underlying originations system. New functions are being established, taking aim at the remaining manual bottlenecks or areas of heightened risk.
One example is intelligent document processing (IDP), which can streamline the time-consuming and error-prone tasks involved in document handling, such as stipulation checks and add-on form verification. Another is using Large Language Models (LLMs) to improve fraud detection, spotting patterns that might be overlooked when reviewing applicants individually.
Explainability and traceability - particularly for highly regulated processes such as decisioning - are crucial not only for compliance, but also for providing feedback and verifying that these tools are performing effectively.
But AI tools are only as good as the data they’re given, and this is an often-overlooked aspect of applying AI solutions to business challenges. Access to real-time, granular insights over originations operations is a must in order to unlock AI’s value.
Originations in Alfa Systems covers direct and indirect lending, from quoting to funding.
Representing an integrated part of the Alfa Systems platform, it allows customers to take advantage of Alfa Systems’ total capability.
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Alfa’s experience delivering efficient operations to complex top-tier lenders means we’re well placed to guide you in achieving your goals around originations, servicing, collections, and beyond.
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