Fintech Continues to Transform Auto Finance, but Will it Take Over?

canstockphoto9505159Fintech companies that advertise efficient financing solutions are becoming more prevalent in the auto industry. Technology is advancing in a way where traditional players have no choice but to partner with new entrants, but the tide hasn’t completely turned from competition to collaboration.

That’s according to Chris Chestnut, president of Payix.

“I think, holistically, from the fintech space, there is still a lot of interest in disrupting traditional models,” he said. “There’s a lot of money being poured in, to try and figure out ‘how to do this better than we did before,’ and I don’t think that’s going to go away anytime soon.”

Payix, which launched last week, provides lenders with white-label, online, and mobile payment channels. Consumers have become smartphone-dependent, and already use their phones to transact with lenders, either through the company’s website or calling, Chestnut said.

“If lenders and borrowers can self-serve, you’re transacting in a medium that they prefer, giving them different payment options,” Chestnut said. “That should translate to decreased calls, [decreased] interactions with your collectors, and your call volume goes down.”

In many cases there are pieces to the puzzle one company has, that others don’t. However, at the end of the day, it will still be difficult to get a “high level” of collaboration on the originations side, he added, “because it is so cut throat, everyone is fighting for that credit app and loan.”

California-based digital car marketplace AutoGravity, for example, has inked partnerships with First Investors Financial Group, Mercedes-Benz Financial Services, and Westlake Financial Services.

Similarly, AutoFi, an online platform where consumers can shop for vehicles and apply for financing while in the dealership, partnered with Ford Motor Credit in late-January. The program went live at Ricart Ford, a dealership in Groveport Ohio, with plans to expand to more U.S. Ford and Lincoln dealerships over time. Also through the partnership, Ford Credit invested “an undisclosed amount” into the AutoFi platform to support “technological advances to make the financing experience better,” a release stated at the time.

Other similar fintech entrants — including Blinker and Honcker — also offer variations on the car-buying experience, including applying for a lease or a loan online, and setting up financing for private party transactions.

AutoGravity, however, doesn’t see itself as a disruptive player, but rather an innovator. Serge Vartanov, chief marketing officer at Autogravity, puts it this way: “We are creating a digital platform that meets the needs of lenders, dealers and consumers, and along the way transforming the way people buy and finance cars.”

Many lenders have embraced all things digital, he said, and customers are looking for a greater sense of control through a digital experience on their mobile devices.

Half of AutoGravity’s employees are Android and iOS engineers, while others are seasoned auto finance folks, including compliance and regulatory staff.

“We constantly look at the way users use our apps, where they get stuck, the pain points, what their unmet needs are, and then we build against those,” Vartanov said.

Businesses are realizing that it’s in their best interest to collaborate with each other, Payix’s Chestnut said, and whether that be through sharing data, processes, or intelligence –collaboration benefits both parties.

“I do think that it [collaboration] is occurring, but I think maybe it’s happening for reasons — on the originations side — that don’t necessarily come from people’s desire of wanting to help each other,” he added.

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