As the auto finance industry continues to migrate into the digital landscape, lenders are feeling the pressure to create a culture of innovation to stay ahead of the curve.
How can lenders implement that mandate? Tricolor Auto President and Chief Operating Officer Don Goin and CarFinance Chief Technology Officer Doug Nottage tackled this conundrum at the Auto Finance Innovation Summit in May. Goin and Nottage revealed how they instill an innovation culture at their companies and what it takes from a leadership perspective.
Make It Inclusive
When it comes to innovation, inclusivity has two purposes. One is to encourage everyone in the company — not just the technology experts or product managers — to share ideas and improvements. “You often have a gut feeling something could be better,” Nottage said. “You may not be an expert in it or know how to do it, but you have a gut feeling that there could be an improved process, product, new ideas, new ways of positioning something.”
At CarFinance, “everybody gets that chance to throw out ideas,” he added.
The other benefit of inclusivity is integrating employees who are tech-specific into business operations. “Most of the time we talk about innovation in terms of technology, but innovation doesn’t have to be limited to technology,” Goin pointed out. He said innovation can span other areas including business processes, organizational structure, and customer experience. For larger finance companies that first step could be to bring an innovation team alongside operations, Goin said.
“It’s very difficult to get innovation going inside your operation, because there are just too many competing priorities,” Goin added. “If you’re able to invest in a team that stands adjacent to your operations, you can feed those innovations into your operations at the right time.”
Goin suggested allotting the tech team to give weekly or bi-weekly demos of new technology, so the company can start to think about process and operational changes and impacts to the regulatory agenda from the outset.
Once auto lenders create a culture of innovation, the next hurdle is scaling that technology.
“[The auto finance industry] is quite small,” Goin said. “From a systems perspective, transactionally, if you’re taking in 25,000 applications a day, you’re processing transactions on the border of hundreds per minute.” Compare that to a dealer-broker or stock exchange, Goin continued, where millions of transaction occur per second.
“If you take Google technologies and Amazon, and we apply that to our tiny $1 trillion-dollar industry, you could actually process all the inventory in the U.S. per customer in a couple seconds,” Goin said. Scale is relative, he added, and for auto finance companies, much of the scaling can be achieved without breaking the bank. Nottage agreed, noting that the amount of hardware is “a fraction of what it ever was.”
Scaling operations, though, is not confined to the system hardware. It demands a specific mindset.
Nottage said companies need to frame innovations around speed because consumers, whether dealers or car buyers, aren’t willing to wait that long. “Build APIs, build things that are high-speed, build things that you can readily connect with because this industry is going to see a ramp and it’s going to be a very steep one,” Nottage said. “When technologies come out and companies start to win, you want to be ready for it.”