Technology tools will help lenders navigate and excel in the current financial cycle, said Paul Kerwin, Westlake Financial EVP and CFO, at the 18th Annual Auto Finance Summit.
“For auto finance, we’re really in a new cycle and a new game,” Kerwin said. “The cycle started in 2009. Everything was pretty easy — there wasn’t much competition, there was also no funding,”
Kerwin gave an example that auto financers could charge 19% interest on a loan, and dealers would turn around and charge consumers 24%, yet delinquencies were low. But in the years since the financial crisis, the lending landscape has changed.
“The companies that have survived up to this point are going to do a lot better,” Kerwin said. “Recently, we’ve seen signs that the larger banks, even smaller players are continuing to grow their business after a couple years of tightening up.”
For one thing, technology will fundamentally influence lender strategy. “There is a new normal in auto finance, particularly because of technology and automation,” Kerwin said. “Westlake spends a ton on technology. When I started in 2002, everyone would complain [about the technology investment], but now we look back, and it was the right thing. That’s a big reason for our success, but every company that exists in auto finance that’s successful is focused on technology.”
Data-driven decisions will also continue to shape the auto finance segment. “We have a lot of resources specific to data,” he said. “Even though we’ve been using data for a long time, over the last one to two years we’ve made a lot of changes on the data side.”
Strong data analytics will help lenders mitigate fraud. “The best way to prevent fraud, for instance, is to cut off your worst dealers, but you’ve got to be tracking data closely to be able to do that,” he said.
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