By early 2020, 44% of consumers surveyed by J.D. Power indicated that they were willing—and would even prefer—to complete automotive transactions digitally. Demand for online vehicle purchases have only continued to move in one direction since then: up.

“This adoption rate puts mounting pressure on the automotive industry to address the roadblocks that have held back adoption of end-to-end e-commerce in the sector. One of the biggest hurdles to clear is the extraordinary amount of legal and regulatory paperwork associated with purchasing a vehicle. That’s in addition to verifying the veracity and identity of the buyer,” explains Chris Sutton, Vice President of Automotive Retail at J.D. Power.

At a current average transaction price of around $32,000, new cars and trucks are far more than just big-ticket items. They are moving vessels that require appropriate insurance, proof of compliance with state and local laws, as well as financing arrangements that are structured to mitigate a wide range of risks for buyers, dealers, lenders and the underwriters themselves.

“It’s not like any of the other digital purchases that customers have become accustomed to in today’s increasingly e-commerce driven environment. Far higher levels of trust must be established to initiate, negotiate and close transactions,” says Sutton.

Establishing the necessary levels of trust to conclude large transactions have started by ensuring that everyone involved is who they say they are. Car buyers can take comfort in walking onto a physical location with actual assets and infrastructure. It has traditionally been a tangible experience, which is why so much effort is placed in making showrooms look sharp and reflective of the brand. On the dealership side of the equation, trust is built by verifying identification through official documents with quick credit and background checks.

It’s not until mutual identity authentication is complete that actual business can commence.

“In many states—even in 2020—deals cannot be closed without signed documents that are affirmed by a notary public. In fact, even in states that don’t require a notary, many dealerships turn to mobile notaries to handle their out-of-area paperwork completion for identity verification and compliance concerns,” adds Sutton.

The situation in the digital world is entirely different, with very real implications. There are no shortage of headlines describing how bad actors have used digital camouflage and “synthetic identities” to hide their true selves to deceive and defraud people on the other side of the transaction. Given the deal size and complexity of commerce in the automotive industry, it is easy to see why many dealers as well as lending and financial institutions have balked at allowing the entire contracting process to take place in an entirely remote environment.

To address this requirement, J.D. Power expects to see rising demand for online notary services that offer a completely digital and secure way to fulfill the identity verification & notarization requirements for vehicle transactions in a manner compliant with state and local regulations.

“The emergence of remote online notarization (or “RON”) services that can safely verify the online identities of all involved parties will help to minimize the risk of large and complex online transactions,” Sutton explains.

From the dealer standpoint, there are two main benefits:

• The ability to meet consumer demand 24 hours a day, 7 days a week. Increasing convenience and speed—while remaining compliant with live signature and identity checks that are required by state and local regulations.
• Using RON services to effectively neutralize the threat landscape in the digital environment. Normalizing risk to the current levels that exist for physical, in-person transactions.

The growing popularity of digital retail channels and remote transaction processing in the automotive sector has challenged current operational and cultural structures in the automotive industry in general, but the dealership community in particular.

“Remote notarization offers an opportunity for dealerships to more effectively compete in today’s environment with fewer changes to existing workflows, while also future proofing dealers for a more digital retail-focused ecosystem” concludes Sutton.

# # #

Chris Sutton is Vice President of Automotive Retail at J.D. Power and leads an analyst team who conduct proprietary research and tracking engagements, including sales rejecter, service defection measurement, and mystery shopping. He is responsible for the company’s U.S. syndicated retail studies, Sales Satisfaction Index (SSI) and Customer Service Index (CSI).