Wolters Kluwer might have found another indirect impact of inflation and the pinch on households and businesses when the professional information and software solutions and services provider released its latest Auto Finance Digital Transformation Index.

The index tracks the rate at which auto dealers, service providers and finance companies are seeing growth in the evolution from paper-based finance back-office processes to digital.

According to the most recent Auto Finance Digital Transformation Index based on second quarter data, auto dealers, service providers and finance companies showed a digital adoption growth rate of 7% in the second quarter compared with the first quarter.

Wolters Kluwer indicated the growth rate of digital was up slightly in the first half of the year, mirroring the slight uptick in overall vehicle sales activity.

However, Wolters Kluwer acknowledged that historically after the first-quarter spike, the data often shows a new plateau of digital adoption, which appears to be the case again in 2023 and consistent with the previous four years.

In comparing year-over-year data for the second quarter, Wolters Kluwer noted the volume of digital adoption was up slightly at 2% compared with a year ago. The trailing 12-month rate increased 13%, which Wolters Kluwer said is a good sign of market stability and recovery despite the slight uptick year-over-year during the second quarter.

Wolters Kluwer added more context to its index trends by recapping the Federal Reserve System’s June edition of its Beige Book, which mentioned auto finance demand has slowed recently amid high interest rates even as sales continued to be steady, if not slightly up on the year.

“Consumers appear to be selecting lower-priced vehicles as affordability continues to place pressure on loan demand. Despite the sluggish demand for loans, the auto industry continues to show a growing interest in digitizing loans and contracts for better back office-efficiencies,” Wolters Kluwer said in a news release.

Wolters Kluwer’s Q2 Auto Finance Digital Transformation Index also showed that the digitization adoption rate for securitization markets has remained mostly flat, with the number of transactions nearly at and on par with the second quarter previous year levels and in line with expectations.

Overall, the number of transactions over the last three years are still trending slightly down and in line with market conditions, according to Wolters Kluwer.

Tim Yalich is the head of auto strategy for Wolters Kluwer

“We’re beginning to see budgetary pressures of continued sluggish auto sales impact the adoption rate of digitized back-office workflows for many lenders and dealers here in the mid-way point of 2023,” Yalich said in the news release.

“Our customer feedback is telling us that the industry continues to see great value and need to digitize all aspects of the loan and contract phases for both originations and securitization, especially since there are greater efficiencies realized when digitization is experienced along the entire journey, not just up front for the consumer.”

To learn more and to access additional data insights from the Wolters Kluwer Auto Finance Digital Transformation Index, go to this website.