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Leaders in Lending | Ep. 107

Rapid Digitization in the Auto Market

In this episode, Becky Philippi, Director of Indirect Lending at First Interstate Bank, and Fabien Thierry, Head of Consumer & Small Business Vehicle Lending Product at Bank of America, share what lenders need to know about the future of the auto industry.

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GUEST SPEAKER

Becky Philippi

Becky Philippi is Director of Indirect Lending at First Interstate Bank. Philippi also serves as Chair of the Auto Committee for the Consumer Bankers Association. She has been with First Interstate Bank for over 19 years, previously serving as Underwriting Manager and Systems and Infrastructure Manager. 

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GUEST SPEAKER

Fabien Thierry

Fabien Thierry is the head of Consumer Vehicle Lending Products for Bank of America. He is responsible for delivering a cohesive product strategy focused on the strategy, design, development, and management of Consumer Vehicle Lending Products. Prior to joining the bank 15 years ago, he held multiple positions at Ford Motor Europe, focusing on sales, marketing, and pricing strategies. Since joining Bank of America, Fabien has held roles in mortgage capital markets,
pricing and most recently in marketing for credit products. With his background in product development, credit, marketing, capital markets and strategy, Fabien’s mission is to continue to drive the growth of the consumer and small business vehicle portfolio.
Fabien serves as the Vice Chair of the Auto Committee for the Consumer Bankers Association. He was named “Auto Finance Executive of the Year” in 2022 by Auto Finance News magazine.

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ABOUT

CBA Live

Marking its 14th year in 2023, CBA LIVE is the must-attend annual event for the retail banking industry. Hundreds of senior bankers and industry leaders gather from across the country to experience this premier event.  CBA LIVE offers top-notch programming tailored toward professionals motivated to learn new trends and share ideas with the most influential decision makers in the business.

 

 

 

 

 

 

 

 

 

Key Topics Discussed

  1. The impact of inventory shortages

  2. Digitization in the auto market spurred by changing consumer expectations
  3. Why lenders need to be flexible, devoted to client experiences, and forward-thinking to prepare for the road ahead

EPISODE RECAP & SUMMARY

The auto industry is racing into the future — whether it’s the surge of electric vehicles in the current market or the promise of self-driving cars one day taking it over. 

That means auto lenders must keep pace or get left in the dust. 

In this episode, Becky Philippi, Director of Indirect Lending at First Interstate Bank, and Fabien Thierry, Head of Consumer & Small Business Vehicle Lending Product at Bank of America, share what lenders need to know about the future of the auto industry.

We discuss:

  • The impact of inventory shortages 
  • Digitization in the auto market spurred by changing consumer expectations
  • Why lenders need to be flexible, devoted to client experiences, and forward-thinking to prepare for the road ahead

The impact of inventory shortages

In 2020-2021, the auto industry saw scarce inventory. Many manufacturers are navigating their way back to higher inventory levels after the pandemic. However, according to reports, more than 10.5 million vehicles were cut from production in 2021 in response to the microchip shortage. 

That type of impact does not disappear overnight.

“If you're looking at pricing on new and used vehicles, we've seen both breaching historically high levels,” Thierry says. “Now we've seen used prices coming down slightly. But that's another dynamic we have to deal with at a time of inflation.”

With low inventory comes higher prices and the chance a that the consumer will actually pay that high price due to a lack of choices. This dynamic can create an unstable balance in the auto world.

It will take time to regain a sustainable balance in the auto world. Digitizing the buying experience is one cog in the machine of innovation working to get auto-lending back on the racetrack.

Consumer expectations and demand continue to shift with the introduction of digital-first buying through dealerships and electric vehicle companies.

Digitization in the auto market spurred by changing consumer expectations

With the reinvention of the client experience underway, lenders will need to put aside their usual methods of working in the indirect space. In the new dealer models, top players link loan applications and provide digital tools for contracting that clients can process from their couch — signed, sealed, and delivered without stepping foot on the lot.

“Accelerating that transformation, the digitalization of the space, overall, is better for the clients and the industry. A lot of the players across the spectrum are looking into that solution,” Thierry says.

In these early digitization efforts, there are also some inconvenient processes in need of an update. We may find that a bank does not offer digital car loan applications to clients but will do so when working directly with a dealership on a client's behalf. 

This seemingly unneeded red tape may be a byproduct of the newness attached to the digitization and could fall away in later iterations. For now, the jury is out on what these client experience reinventions will lead to and how they will further impact lending.

Why lenders need to be flexible, devoted to client experience and forward-thinking to prepare for the road ahead

The rollercoaster of interest rates, the cost of funds, and asset value continue to impact the lending space — auto lending is no exception.

“Borrowers out there are in a position with negative equity — buying high and losing value is a risk that might force them to hold on to their older units longer, stretching out loan terms to make payments more affordable,” Philippi says. 

With this rapidly changing landscape in mind, flexibility and forward-thinking are paramount for lenders looking to survive the race of rates and stay on top of the trends.

Philippi and Thierry offer a few key considerations to thrive as a lender in the shifting market: 

  • Be flexible with your methods
  • Keep an eye on upcoming products and solutions for client experiences 
  • Find ways to personalize your application process
  • Think outside of technology

“If you’re implementing a solution, ensure it has built-in open integration capabilities. If you're putting something in place, you might want to add something else in to support the process,” Philippi says.

This approach leaves room for those additions without compromising the entire structure and can open the door for customization. The lenders who embrace adaptability are the ones who will prevail. 

Stay tuned for new episodes every week on the Leaders in Lending Podcast.


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Stay tuned for new episodes every week on the Leaders in Lending Podcast