Member-focused strategy drives PenFed’s product innovation

Ivan McBride is competitive, and it’s easy to understand why. He played professional baseball for the Cleveland Indians before starting his career in the auto industry 25 years ago. Nowadays, though, McBride has tempered that ambition with a healthy dose of patience, learning to “stay focused on what you do well and not get distracted,” he said.

As Pentagon Federal Credit Union’s vice president of automotive lending and sales, McBride analyzes each new endeavor, asking himself if it’s in line with PenFed’s culture and with members’ best interests. That member-focused strategy has resulted in several new PenFed initiatives, including residual-based financing options and better customer communication throughout the application process and after loan funding.

Auto Finance Excellence spoke with McBride about PenFed’s plans to tackle industry challenges and how the credit union is diversifying vehicle payment options to better serve members. What follows is an edited version of McBride’s conversation with AFE.

Auto Finance Excellence: What are some of the lessons you’ve learned from 25 years in the industry?

Ivan McBride: At PenFed, I think the challenge that has been placed on me is, whatever business we enter into, we try to keep it simple. We keep the focus on the member, and we make sure we can standardize it and scale it. I’ve gone in with that approach to every product enhancement and partnership that we’re looking to start, making sure that it’s something that aligns with PenFed’s culture and objectives and making sure it doesn’t distract us from what we do well. That has been my compass as I make decisions moving forward.

AFE: What are the top issues on your radar?

IM: The biggest challenge right now is what the future holds for the U.S. auto market. What’s driving consumer behavior? There’s a lot of concern about tariffs and recession and trying to anticipate what you can in regard to that and also meeting consumer demand.

Consumers these days are really looking for that experience pre- and post-application that’s different, that’s easy. That is something simple that’s really our focus: making sure we can deliver on that and optimizing the member experience post-application, post-approval. I also focus on how we communicate to our members, really sticking to the core of what we do. We’ve got a lot of approvals, but just because we approve the consumer or member for a loan doesn’t always mean that we’re going to get that loan. Because of that, we’re really focused on making sure that we deliver on an experience right after approval and communication that closes that loan as quickly as possible.

AFE: Analysts are predicting an industry slowdown in 2020. What is PenFed doing to protect its business model from this potential downturn?

IM: We really want to be able to offer payments to members that are more innovative than what’s out there in the market. So, we’ve doubled down on the education to our members on residual-based financing — in our case it’s a balloon financing product where we’re able to develop payment solutions for members that they may not typically get with a dealer or another institution.

We want to educate our members on the value of this product, because there’s a lot of inherent distrust of balloon products in general [based on] what used to be an open-ended balloon product in the market for a long time. An open-ended balloon product is when you’re in a balloon payment and at the end of the term you’re still responsible for that large “balloon” payment. With our product, you have the option of walking away from that balloon payment at the end. We’ve got to make consumers aware of the advantages this walk-away balloon product has for them.

The ability to limit the risk of depreciation of their vehicle and negative equity are greatly important to folks right now, plus we can offer them a payment that meets their budget. Consumers are looking for options. They don’t want the average 60-, 72-, or 84-month payment, they’re looking for another way to purchase the vehicle and manage their payment to their budget, so we’re doubling down on this effort with residual-based financing and particularly the balloon walk-away program.

AFE: What lessons do you apply from your non-auto career — your criminal justice degree and time playing in the MLB — to what you’re doing today?

IM: I’m a very competitive guy and so, like anyone else who’s very competitive, I like to win. Although, I’ve learned patience over time. We get a lot of proposals on potential partnerships, there are products that we were considering rolling into what we do now or integrating with our current systems. What I’ve learned is that you’ve got to do your homework ahead of time.

Whatever partnership or product you’re looking to integrate with PenFed needs to be a good fit and something that you can grow with and scale, but it also needs to be simple and easy to understand. So, the answer is my competitive spirit. I want to do well and exceed volume objectives all the time, but sometimes you don’t do it at the speed you want to do it. You’ve got to learn that patience.