Personalization Strategies to Boost Auto Loan Repayment

Dealers, you know the auto industry continues to struggle with an affordability crisis. Lingering inflation, high interest rates and heavy debt make bill payment tough for consumers, and auto loans often get pushed lower on the priority list. This can be devastating to your bottom line. There’s never been a more important time for Buy Here Pay Here (BHPH) auto dealerships to make it as easy as possible for customers to pay—and that takes a modern payment experience that meets today’s demands.

PayNearMe 2024 research into bill payment behaviors found that 51% of consumers feel anxiety about managing and repaying loans (a whopping 76% increase from 2021). And 60% of surveyed consumers wish paying loans was easier (up 36% since 2021). What we’re hearing is that current payment experiences, even online self-service, are failing to keep up with consumer expectations and needs.

Modernizing and personalizing payment experiences is key for your business to remain competitive and profitable. As a lender, the risk of change may seem a barrier, but that shifts when you fully understand the business value. So here we’ll unpack it by highlighting some top strategies to optimize payments, why it matters and how it can have a transformative impact on your business.

TIP: For a deeper dive on this theme, view our recent webinar on-demand here.

The high-cost impact of outdated payment processes

First, let’s take a quick look through the lens of a legacy payment system. Slow, complicated processes, confusing interfaces and limited payment options are what customers have to deal with each month—and it comes at a high price for your business. These pain points lead to a higher rate of exceptions and delinquencies that drive up your overall cost of payment acceptance.

Customers often forget passwords, have trouble navigating biller payment portals or need to pay with a method that isn’t offered. At worst, they opt to avoid the hassles and delay or skip payments. But a common scenario is that they get frustrated and resort to calling customer service to pay by phone, which is a costly way for lenders to collect.

Nearly one in five consumers (19%) regularly call to pay their loan. That makes simple transactions considerably more expensive. Each support call can cost up to $8 on average, compared with $0.10 for a self-service interaction, according to Gartner.

Phone payments cost up to 80x
more than self-service channels

Gartner

A real eye-opener from our research is that those calls come from customers across all age groups. So it’s not just your older payers (age 60+) who may be less tech savvy. When 18-29 year olds are calling to make a payment, you know something is not working.

So what can you do about it? Next, we’ll explore strategies to hyper-personalize the payment experience in ways that help solve your biggest problems and improve bottom-line results.

Fill critical payment gaps with alternative options

As a lender, you may think exceptions and delinquencies are always rooted in your customers’ limited cash flow, but these issues also come from rigid payment processes that cause friction. The one-size-fits-all approach of getting everyone to use ACH no longer works. Consumers increasingly prefer to pay with digital wallets like PayPal, Venmo and Cash App Pay.

Our survey found that nearly 60% of consumers would be very likely or likely to pay their loans with a digital wallet. And it’s not just younger generations. 64% of people aged 45-60 want to pay bills that way. A critical factor is that many people now keep a cash balance in a mobile wallet for future use. 38% of consumers said they would use a stored balance to pay their loan, if that was an option. This number jumps to 47% with lower income individuals who may be unbanked and use their digital wallet in lieu of a bank account.

When people are struggling to get by and may deprioritize their auto loan, it’s essential for your dealership to offer wallet options that can make it easier to pay. A modern payments platform makes it possible to go to market quickly with a full range of payment options to meet consumer demand and improve outcomes. 

Have concerns around usage, security, and implementation?  Check out our recent webinar where we debunk five common myths about mobile wallets.

It’s been surprising how many people actually use PayPal, Venmo, Google Pay, and Apple Pay. We’re seeing a constant upward trend in the forms of payment our customers are using.

Operations Manager, Heritage Acceptance Corporation

While we’re talking about alternative options, let’s not forget cash. Particularly for lower income and unbanked borrowers, paying loans with cash is still important. However, it can be challenging for customers to get to your dealership during business hours, especially if it’s far from their home or work. And as a BHPH dealer, you know that accepting cash or money orders in person is costly, increases risk and consumes staff time that could otherwise be focused on more complex needs.

With a modern payments platform, you can enable customers to pay loans in cash at convenient retail locations where they already shop, such as 7-Eleven, Walmart and CVS. It makes life easier for them and increases the likelihood that you will get paid on time.

Hyper-personalize to optimize outcomes

Offering more payment types is essential to help reduce exceptions and delinquencies, and meet more of your customers where they are. However, choice is not enough. Consumers are now accustomed to hyper-personalized experiences, and they expect that same personalization when paying their loans. In fact, nearly 70% of people we surveyed said it’s important to have a personalized experience where the platform recognizes them and tailors the billing information.

Not yet focusing on hyper-personalization at your dealership? Here is where small steps can have a big impact. The more you simplify the payment experience with personalized options—the more likely customers will pay on time, on their own. That means less exceptions, less intervention, less cost.

Here are some key examples:

• Send a digital reminder (via text message or email) about payment due dates to solve a major pain point and improve outcomes. 41% of consumers say keeping track of due dates is challenging, and 47% agreed that getting a reminder would make it easier to pay on time.

• Provide personalized, no-login access for making payments. Why? Here are several compelling reasons. Consumers find it difficult to remember logins, and that frustration often translates into calls that increase your costs. PayNearMe research found that 52% of payment-related calls were for password resets. It underscores how an outdated system creates more hassle for customers and derails agent productivity to deal with mundane tasks instead of high-value work.

• Pre-populate payment screens. People resent having to retype account details every time they pay their loan. The vast majority expect payment screens to be personalized, with 80% of consumers noting it’s important to have their payment details (loan number, amount due, etc.) pre-populated.

The right modern payments platform solves these challenges. Digital reminders can be automated and your agents can push them as well. Each message can include a unique, personalized Smart Link™ that gives that customer one-click access into their account with no login required. From there, they can choose their preferred payment method and be done in seconds.

Hyper-personalization can significantly improve on-time payments and lower your overall cost of acceptance. For example, when an auto lender implemented the PayNearMe platform, they pushed hard to convert customers to use Smart Links. Now 90% of their customers use them for self-service loan payments, helping the dealer dramatically cut costs.

Increase autopay adoption with flexible options

Migrating your customers to recurring autopay is ideal, if everyone uses it and 100% of payments process as planned. But neither of those things happen, especially with legacy payment systems, because options are so limited.

Many consumers need more flexibility or they won’t commit. 65% of people we surveyed avoid setting up autopay because they want more control over when their bills get paid. And equally, 65% said that having more flexible options would make them more likely to enroll in autopay.

Choice and personalization (two strategies we highlighted above) are essential to drive autopay adoption. With a modern platform, your customers can choose how and when automatic payments will occur, to better fit their cash flow schedule. 

For instance, they can select a due date that aligns around when they get a paycheck, or split payments within a month rather than paying in one lump sum. Customers can also vary the payment method, which is helpful if they keep money in multiple places (e.g., bank account, digital wallet, cash in hand).

With the right platform, you can also proactively avoid exceptions by sending digital reminders in advance of auto-payments. It helps customers prepare for the upcoming withdrawal to reduce returns. And giving them a heads-up also minimizes chargebacks, which can happen when people forget about autopay and see an unexpected amount deducted from their account. 

Interested in more stats on autopay adoption? See our infographic.

Improve BHPH profitability with modern payment strategies

Your BHPH dealership may be all about delivering exceptional service, but driving profitability is key. To sustain that, you need to get paid on time, at the lowest cost, with the least exceptions and manual intervention. That’s what a modern payments platform like PayNearMe is purpose-built to do.

Seamless access and flexible options enable you to provide a frictionless payment experience, and automated workflows help maximize efficiency for your back-office. 

Ready to learn more? Check out our recent webinar for auto dealers on-demand here. 

See the PayNearMe platform in action. Explore on your own with our interactive virtual demo, or contact us to request a personalized demo.