Modernizing auto lending for credit unions

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One of the major takeaways from CU Direct’s recent DRIVE conference in Las Vegas was in spite of changing trends in cars – including the popularity of ride-hailing services and the rise of autonomous vehicles – the automotive landscape remains much the same as ever. One thing that may be changing faster than how consumers drive, however, is how they buy their cars.

“We are really focused on helping credit unions,” CU Direct President and CEO Tony Boutelle told CU Journal. “We want to use our technology to connect credit unions to more loans, smooth out the member experience and increase back office efficiency. Those are the three categories we are focusing on.”

One component of that is CU Direct’s Innovation Lab, which opened in March in Irvine, Calif. The lab is seen as a place for credit union and other financial industry leaders to meet with CU Direct, bring in their product ideas, have those ideas tested and potentially see them come to fruition for real world application – all of which is seen as creating a marketplace advantage over their banker competition.

Fintech solutions are also in the works, and Boutelle said CU Direct is in talks with “many” fintech firms to make sure it is plugging credit unions in at the lending level. He noted recent research that found instead of visiting 6.4 dealerships prior to making an auto purchase, consumers only are visiting 2.4 dealerships.

“We are going to do a pilot with both Edmunds and Lending Tree to make sure credit unions can get members pre-approved while they are doing their research,” Boutelle said.

“Right now things are positive,” Boutelle continued. “There is power in our network so more and more people want to connect with it. There are large aggregators who want to be part of a network with more than 1,000 credit unions.”

Communication channels changing
Credit unions need to be able to reach consumers as they are in the market for an auto loan, but not overload them with messaging. Intuvo, a marketing-automation platform built for credit unions, is designed just for that, and Jeff Shood, the company’s founder, told CU Journal it aims to understand members and send them the right offer at the right time.

“The goal is to only reach out to members when the credit union actually has something to help them,” he explained. “We want to reduce the number of messages, because people are so inundated with marketing messages today.”

While much of Intuvo’s work up until recently was in the mortgage space, but in April 2015 Intuvo was acquired by CU Direct to become a credit union industry resource. In addition to mortgage messaging, the company handles all aspects of indirect lending marketing: onboarding, educating what a credit union is via e-mail or text, and cross-selling. After the auto loan goes through, Intuvo offers a credit card with cash back on gasoline purchases, then other deposit products.

Shood pointed to a number of trends CUs should keep an eye on, starting with the channels they use to communicate with members. Text and mobile chat, he observed, are trending upward as fewer consumers want to receive phone calls.

“The technology is relatively easy, but the culture at credit unions is the issue,” he said. “Credit unions need to know they are competing with a broker who will text back at 11 p.m. on a Saturday. Credit unions can use chat bots and after-hours phone centers.”

In the case of someone buying his or her first car or house, said Shood, that person wants to speak with an “actual human,” but if he or she is experienced, then the system does all digital communications. “It is a hybrid experience. To compete with banks credit unions need to leverage technology, but this allows them to keep a personal connection.”

A second trend to watch is CUs wanting to be consistent in their marketing messages. Shood noted e-mail, text, social media, home banking and mobile banking are all different touch points. Credit unions, he asserted, have moved from being “architecture firms” that announce their presence to consumers with an impressive-looking branch, to technology companies.

“Digital banking needs to link with other platforms,” he advised. “The challenge is to have that level of sophistication, so credit unions are hiring technology people.”

A ‘shared’ future?
At the DRIVE Conference, Peter Welch, president and CEO of NADA, the National Automobile Dealers Association, said despite all the headlines about autonomous vehicles, Uber, Lyft and the sharing economy, and millennials not buying cars, NADA expects the auto buying model to be the same 10 years from now as today. Boutelle agreed, saying “there are a whole lot of things that have to change” before the status quo is disrupted completely.

“There are 266 million non-autonomous vehicles out there, so a change to autonomous vehicles will require regulatory change,” Boutelle assessed. “It is a not a case of if but when on some of these changes, but not as fast as people want them to. I would expect credit unions will be part of the financing process as those autonomous cars will be very expensive.”

As for worries that auto sales are slowing in 2017, Boutelle pointed out the jump from 10 million in sales in 2011 to 17 million in 2016 was a “big deal.”

Shood concurred, predicting shared cars “will happen,” but “it’s a matter of when.”

“Credit unions need to think about financing that process. They can use their flexibility. There is so much opportunity. This applies to home lending, also. In San Francisco rents are so high the people who make great money working for technology firms are starting fractional mortgages. This means shared ownership of a property as an alternative to renting.”

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