4 minutes
Credit unions that adapt to changing consumer needs are poised to lead the pack.
Sponsored by CUESolutions provider Origence.
Consumer expectations and emerging technologies are the underpinnings of a transformation in auto finance, starting with the electric vehicle (EV) market. The digitization of auto financing is becoming a dominant trend, emphasizing a seamless online or mobile experience. This shift goes by various names, such as embedded finance, point-of-sale financing and top-of-funnel lending. Regardless of the label, offering financing seamlessly as part of the shopping experience is reshaping the game, necessitating lenders to position themselves strategically for success.
The Game-Changer—Embedded Financing
While the traditional auto financing model remains relevant, companies like Tesla have capitalized on mastering the digital experience to engage consumers in the early stages of research and consideration. Historically, the focus was on closing deals at the dealership, but the landscape is evolving, compelling lenders to cater to consumers much earlier in the process.
This approach presents significant potential for lenders to secure a larger share of the auto financing market and forge stronger relationships with retailers and consumers alike. By offering financing options congruently with the shopping experience, lenders can influence purchasing decisions and establish themselves as trusted financial partners.
EV Financing as a Catalyst for Change
Electric vehicles have revolutionized the environmental impact of transportation and transformed the way they are sold. Tesla seamlessly integrates financing options into the vehicle purchase experience. This strategy is not merely about selling cars; it's about providing consumers with a comprehensive, streamlined process from research to ownership.
This model disrupts traditional vehicle financing by embedding financing options directly into the buying experience, simplifying the decision-making process for consumers. The convergence of EVs and embedded financing signifies a compelling shift in the auto industry's approach to the buying journey. The forward-thinking technology and consumer appeal of electric vehicles provide an ideal backdrop for the evolution of financing models.
Credit Unions at the Top-of-Funnel
For credit unions, embracing embedded financing represents a strategic move towards meeting consumers where they are—online and at the beginning of their purchasing journey. This shift recognizes the digital space is the new showroom. Credit unions can position themselves as progressive financial partners for consumers navigating the EV market within point-of-sale lending opportunities.
Furthermore, the concept of embedded financing aligns with the broader trend of providing consumers with a seamless and integrated shopping experience. Credit unions must reimagine their role beyond traditional lending processes and embrace a more proactive and member-centric approach.
Getting Involved: Opportunities for Credit Unions
How can credit unions actively participate in point-of-sale financing? Origence, a financial technology company, launched a subsidiary, FI Connect, to bring borrowers, retailers and credit unions together for convenient financing at the point of purchase. In December 2023, FI Connect announced a partnership with Tesla to offer credit union financing to EV buyers through the Tesla website, providing more options for Tesla buyers seeking affordability.
This partnership gives EV buyers easy access to competitive rates and extended financing terms. When consumers finance their vehicle through FI Connect on the Tesla website, a credit union purchases and services the contract.
Credit unions partnering with FI Connect can tap into point-of-sale lending opportunities that are traditionally inaccessible through conventional channels. It also introduces credit unions to a new generation of members unfamiliar with their value proposition.
To actively participate in top-of-funnel financing, credit unions must leverage technology, optimize online platforms and collaborate with innovative partners to create a seamless and user-friendly financing experience.
Looking Ahead: The Future of Auto Financing
Credit unions have traditionally played a crucial role in providing members with affordable vehicle financing. As the auto finance industry evolves, credit unions can continue to be market leaders and play a central role in the point-of-sale experience. This shift is not a fleeting trend; it represents a major change in how borrowers connect to financing.
Credit unions that adapt to changing consumer needs are poised to lead the pack. By getting involved at the start of the shopping experience and focusing on making the entire financing journey seamless, credit unions position themselves as frontrunners in a hyper-competitive marketplace.
This shift is not just about keeping up with the times; it's about actively shaping what comes next. As credit unions navigate these changes, they have a golden opportunity to lead the charge into a new era of auto financing. The future is about smooth, all-inclusive and member-centered experiences. By embracing these new opportunities, credit unions contribute to steering the entire industry towards a future that is innovative and tuned into consumer desires.
Brian Hamilton has 30 years of experience with financial institutions, contact centers and fintech start-ups. He has managed all facets of consumer lending operations and has led key initiatives in the development of groundbreaking online applications, remote delivery, custom scorecards and loan origination systems. He joined CUESolutions provider Origence in 2017 as the vice president of innovation and insights, where he led research efforts on emerging trends and product innovation. Brian moved into his current role as division president of Origence Lending Services in April 2020 and then launched FI Connect, a CUSO lending company, in 2022.
