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Four Ways Credit Unions Can Prepare for Major Indirect Lending Market Shifts

Posted: Aug 8, 2023 | Author: Brit Barker, SVP/Enterprise Solutions, Origence
indirect lending  Origence 

The indirect lending marketplace continues to undergo significant changes driven by evolving consumer preferences and advancements in technology. Credit union leaders can position their institutions for long-term success by embracing modern digital tools that enhance the lending process for internal teams and members alike. 

As we’ve seen, the 2020 COVID crisis accelerated the transition of retail automotive purchases from showrooms to more convenient, self-paced online environments. While many consumers still rely on that fundamental in-person experience, others appreciate the seamless combination of online and physical resources for more streamlined auto shopping and financing.

With today’s rapid market shifts and evolving consumer expectations, credit union lenders must remain competitive to continue serving members effectively. Credit unions can take this time to combine the member-centric approach and community focus that they are well known for with strategically implemented digital solutions to find new top-of-funnel lending opportunities. 

  1. Implement Automated Underwriting to Create New Efficiencies

    Effective underwriting is crucial for credit unions to make informed lending decisions and mitigate risks. Thanks to advancements in artificial intelligence (AI) and machine learning, credit unions of all sizes can access advanced analytics and data-driven underwriting models to automate decisioning without subsequently increasing risk.

    By harnessing the power of AI, credit unions can analyze vast amounts of member data, accurately assess creditworthiness, and identify potential risks early on in the process. This enables them to offer competitive loan terms, increase lending capacity, and expand access to traditionally underserved communities while maintaining a prudent approach to risk management.

  2. Work with Strategic Partners to Expand Opportunities

    Credit unions should actively seek strategic partnerships with automotive dealerships, online car sales platforms, and supportive credit union service organizations (CUSOs) for long-term success. As lending decisions continue to happen earlier in the process, credit unions should align with industry aggregators that ensure member financing remains with their credit union partners, thus helping them secure long-term relationships with borrowers.

    For example, collaborating with reputable dealerships allows credit unions to extend their reach and offer attractive financing options to potential car buyers. From a digital perspective, building strong relationships with online car sales platforms provides credit unions access to a broader customer base and increases their visibility in the digital marketplace. These partnerships create mutually beneficial opportunities for growth and strengthen the credit union’s position in the indirect lending market.

  3. Leverage Data to Create Personalized Member Experiences

    A key advantage credit unions have over larger financial institutions is their ability to provide personalized experiences to their members. To thrive in the competitive indirect lending landscape, credit unions should leverage member data and analytics to understand their members’ preferences and tailor loan products accordingly.

    By offering personalized loan terms, competitive interest rates, and value-added services, credit unions can significantly enhance member satisfaction and loyalty. Providing a customized experience will set credit unions apart and attract borrowers who value a more individualized approach to financing.

  4. Prepare for Shifts Driven by the EV Market
    As the automotive industry rapidly shifts towards electric vehicles (EVs), credit unions need to prepare for the changing ways consumers purchase and finance them. Proactive positioning within the EV market will be critical for a credit union’s success.

    To do this, credit unions can develop tailored loan products for EV purchases, offer competitive interest rates, and establish partnerships with EV manufacturers and dealerships. Understanding the unique financing requirements and incentives associated with EVs will enable credit unions to attract new members and capture a significant share of this emerging market.

 

About Brit Barker
Brit Barker is the Origence Senior Vice President of enterprise solutions, with 20 years of helping financial institutions improve their lending performance and exceed consumer needs. He’s recognized as an industry leader with an innate talent for balancing strategic focus with operational execution.  Brit is an authority on consumer and indirect lending industry.

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