According to the Internet, Fin-tech, aka financial technology, is the technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. It is an emerging industry that also uses technology to partner with traditional lenders to improve a host of activities.
By the way, fad is shortened for flavin adenine dinucleotide. So there’s that.
And speaking of the Internet, as a young guy back in the late 1990s, I was assigned to work with our head of e-commerce (how are you doing, Melissa?), on this new thing called the Internet to figure out how Wells Fargo could make more auto and personal loans. Almost every day, just to irritate poor Melissa, I would tell her that the Internet was just a fad and that it would be gone within years.
No, I did not actually believe that. It was obvious at the time that the Internet was something that would be transformative. The same is true today with Fin-tech.
But how is auto doing in this space? Well, I spent the past week “attending” Lendit, a 3,000 attendee worldwide conference for Fin-techs, and based on auto industry attendance and the agenda at large, the answer would appear to be badly, but we know better than that, don’t we, Non-Prime Times readers?
Sure, there were multi-vertical providers (nice to see TransUnion, Experian and Deloitte) that were prominent at the conference, but what about auto only Fin-techs, or mainly auto providers? The equity investors have shown a great deal of love for auto fin-techs (hello Carvana and Vroom), so what gives?
In auto finance, new companies have popped up that can help a consumer refinance their car at a 500 basis point lower rate, or a car buyer purchase and finance a vehicle and have it delivered to their home without ever entering a dealership or speaking to a human. Auto lenders can send, track, and optimize through AI a million texts per day to its customer base, while enabling them to make payments, create payment plans, schedule a time to speak with someone from the servicing department or find a customer that does not want to be found.
Fin-techs have been built and deployed at major auto lenders to verify identity, residency, income and employment and to avoid fraud. They also analyze portfolios for sale, optimize funding sources, and make it easier to communicate with dealers. If there is a need in auto finance, there is a fin-tech there to serve, in addition to all the internal technology work done by our lenders themselves.
Besides these examples and the obvious advances we made over the years with connecting dealers and lenders (great job Nowcom, DealerTrack and Route One, among others), our industry is far and away leading the other industries that were very well represented at Lendit when it comes to utilizing data through our technology interfaces to help us make millions of decisions in the span of seconds across originations and all the way through collections and recovery.
Our industry is built off the idea that every application a lender is reviewing has three competitors looking at it at the same time, trying to outsmart the others in terms of rate and structure in order to capture the deal, but only at the right price and terms. This fact has led to lenders using all kinds of data (credit, income, employment, color of vehicle, capture rates by time of day, spending habits, public records, etc.) in order to make decisions from the time the customer is bid on to the time the loan is fully paid out. Other industries could learn a lot for the amount of data, the AI and analytics applied to the data and the speed for which we employ data in our everyday work.
With all that, why are we under-represented when it comes to industries that are recognized as leaders in Fin-tech? Is it because these other industries are more public about their usage (we do tend to keep many of our competitive advantages pretty secret), is it because we’re just a humble, quiet group that doesn’t spend $20,000 per year on expensive suits? Or perhaps because we don’t have as many cool names for things (I learned this week that defi also stands for decentralized finance) or because auto finance is still a highly segmented space with the top 25 lenders only making up about 60 percent of the business.
Whatever the reason, it’s time to celebrate the advances made by our industry in the area of Fin-tech, continue to innovate and be open to take meetings, pilot and partner with the innovators and acknowledge that the use of technology to improve financial services is here to stay.