At the end of January, on the heels of an 11% year-over-year increase in origination volume to $29.3 billion during the prior year, Capital One Financial Chief Executive Richard Fairbank voiced concerns of an “increasing competitive intensity” in the market that could slow the growth of its auto arm. Lenders who had previously pulled back had returned, and pricing was competitive.
By the end of March, that forecast, like so many others this year, went out the window. Capital One Auto Finance’s originations continued climbing on a YoY basis, despite the pandemic: 23% to $7.6 billion in the first quarter, 13% to $8.3 billion in the second, and 10% to $9 billion in the third, landing the financier with a $65.4 billion portfolio.
Enter Ravi Raghu, executive vice president at helm of Capital One Auto Finance’s Dealer Auto business, one of four businesses within Capital One Auto Finance. Raghu told Auto Finance News over Zoom that the increase in origination volume wasn’t the result of actively trying to grab market share, but rather the result of an architecture the lender has been implementing for years.
“We are not a company that chases market share for market share’s sake, or a number for number’s sake,” Raghu explained. “We are a company that firmly believes in setting the right strategy, doing the right thing, and being obsessive about our customer experience. That means lending prudently; that means investing in technology. That means executing with a great quality sales force.”
Chasing excellence in those areas, Raghu said, is the larger strategy. “We go put that into the market, and we take what the market gives us. Sometimes the market gives us more, sometimes the market gives us less. We are at ease with that, because ultimately, it’s about making sure we are here for the long haul.”
So, when the pandemic struck last spring, the relationships the lender had already built with its dealer partners over a long period of time through its sales team, investments in technology — such as moving to the cloud, and reliance on data and analytics — came together and positioned the lender for success in 2020.
One piece of technology Raghu credits for its success is Auto Navigator, a proprietary platform originally built to solve the age-old consumer pain point in the car-buying experience: waiting outside the F&I office at a dealership to sign papers before driving off the lot.
Auto Navigator is a digital car-buying platform that lets customers shop online through an inventory of millions of vehicles across the country and structure financing without any impact to their credit. For its dealer customers, Capital One offers Dealer Navigator, a digital tool which allows dealers to more easily facilitate Capital One Auto Finance deals, no matter where the consumer left off.
“Ultimately, our obsession is about making sure that we are figuring out where the friction is for the customer and the dealer, and solving for that,” Raghu said. “We do a lot of testing with the goal of making this experience truly loved by our customers. Our Auto Navigator and Dealer Navigator will continue to be the key pillars of providing that experience.”
At the end of the day, technology, data and “human-centered design,” as Raghu calls it, have always been the crux of the Capital One plan.
“We are inherently disruptors and innovators at heart,” he said. “That has really paid off huge results.”
Looking back, Raghu credits his “modest beginnings” in India for the trajectory of his career that ultimately landed him at Capital One, where he has held various roles in auto, home lending and credit cards since 2002.
When he was younger, Raghu’s family rallied together with the goal of achieving financial freedom, and most of the decisions he made for his education and career were in service to that goal. After studying a “weird combination of civil engineering and computer science management” at the Indian Institute of Technology Madras, and earning a Bachelor of Science in Civil Engineering, Raghu came to the U.S. to attend Stanford University, where he earned a Master of Science degree in design construction integration, and got his first taste of interdisciplinary study.
“A big chunk of my childhood and the early days in my career was about seeking out [financial freedom],” Raghu explained.
But 2002, when he graduated from Stanford, was a bad year to enter the tech industry, Raghu said. The dot-com bubble had just burst, so he decided to pursue an opportunity at Capital One to build his “business acumen” for a few years.
“It happened serendipitously,” Raghu said. “I had no plans to be in financial services, but something in my gut told me I’ll enjoy this journey. The people that I met through the interview process, the way the company thought about problems — that intrigued me.”
After starting out as a junior analyst in the car division, a critical turning point in his career came after an early promotion.
“I was celebrating with a few friends of mine, and it just hit me like a brick: I could never be like the people I admired secretly,” Raghu said. “I could never be that because they were truly passionate about what they were doing. They were chasing excellence.”
And so, “chasing excellence” became Raghu’s personal motto, eventually finding its way into his leadership style, which colleagues agree inspires them to strive to be the best they can be.
One of Raghu’s greatest qualities as a leader is the way he looks out for his employees’ long-term success, said Greg Neubecker, managing vice president at Capital One Auto Finance.
“He spends a tremendous amount of time actually thinking about what career paths people need to be taking,” Neubecker said. “He makes sure they are successful in those roles and, I think, to be able to achieve those business outcomes, those developmental outcomes, sets him apart from other leaders.”
“Never once in eight and a half years have I ever gotten the sense of Ravi wearing his title,” Neubecker said. “In fact, I think he probably takes great pains to make sure people feel comfortable talking to him. You don’t ever feel like you’re talking to the president of the business. And I think that pays him dividends, because people feel comfortable talking to him.
“They’re going to tell him when there’s issues, and they’re not going to be afraid that he’s going to blow a gasket when we have a problem that’s occurred,” he added. “When something happens, Ravi rolls up his sleeves and gets in there with it. You feel like he’s fixing it with you rather than saying, ‘Hey, go fix this and report back to me.”
That sort of hands-on approach to problem-solving is informed by his engineering background, Raghu said.
“There’s a lot of parallels between engineering and what we do [at Capital One],” he said. “In engineering, when you have a hypothesis, you conduct a test, you collect data, you analyze the data, and then you prove or disprove the hypothesis and keep refining. Financial services are the exact same thing: You have a hypothesis for what customers might like, you go and design a test, analyze the data, and make improvements to the experience. It is a one-to-one pattern.”
Raghu’s ability to “see the field” is also celebrated by those that have worked closely with him.
“His vision is outstanding,” said Steve Chiagouris, managing vice president of auto finance servicing for performing loans.
“His ability to say, ‘We’re here today and here’s where we want to be in five years’ —and inspire people by what that direction looks like — is unparalleled,” he said. “He really paints a vivid picture that people can work back from that’s very real, and it motivates people to get excited and inspired.”
Raghu understands where the leverage should be placed to achieve any given goal, Chiagouris said. “If you want to get from here to somewhere else five years from now, there may be, for example, 100 things that have to go right. But there’s probably like five things that really matter.
“Ravi is able to identify those key details and ensure that he’s got the right resources and accelerated roadmaps to make sure he’s extracting the most value from where the leverage is,” Chiagouris said.
“He sees it so far ahead of where everyone else sees it, he’s basically already solved the problem before some people even realize there is a problem — it’s uncanny,” he said. “I think Ravi’s ability to truly understand what motivates somebody and how to frame what needs to be done in a way that speaks to the motivation and development needs of his teams is another characteristic that lands way above the bar.”
FOCUS ON TECHNOLOGY
Raghu’s people-first approach with a focus on digital technology informs his strategy in servicing Capital One’s customers and dealer partners, too.
“There’s a version of servicing which is just fulfill customer requests — maintenance, updating names, information, etc. And that’s the version I inherited,” Chiagouris said. “Ravi and I sat down when I first moved into the role [two and a half years ago] and we said, ‘Yeah, we could do that. And we should do that. But how instead do we think about it as amazing customer self-service powered by digital? How instead do we think about taking the technology stack that we have and modernizing it? How do you turn customers into customers for life?” Chiagouris said.
When the pandemic struck, Capital One’s investment in technology and the multiple ways customers could interact with the lender helped the lender weather the storm, Raghu said. At its peak, Capital One Auto Finance offered payment assistance to 16% of auto accounts, representing 18% of loans outstanding. As of Sept. 30, only 2.6% of consumer accounts were still enrolled in auto assistance programs.
Dealers, too, benefited from Capital One’s focus on digital, Raghu explained. “Our dealers asked for two things: One, be there for us,” he said, noting that many lenders had “fled for the hills and left dealers hanging” during the Great Recession. The second request dealers had was for Capital One to help them adapt to the new digital-first, socially-distanced environment.
“We heard that feedback loud and clear,” Raghu said. The first thing Capital One did was tighten credit underwriting, and then the second was taking all the lender’s technology investments — Auto Navigator and Dealer Navigator, for example — and provided dealers access to platforms to help “pivot to a more digitally led origination space,” he said.
“The culmination of all that investment in technology and the focus on the customer allowed us to win disproportionately in this context,” Raghu explained. “It’s a combination of years of efforts and frankly, we’re not resting on that. We’re continuing to focus on basics like listen to our customers, focus on technology, and collect the data, so that we keep getting better every day.”
Looking ahead, Raghu has little interest in forecasting next year’s SAAR, opting to just stay the course. “There’s way too many puts and takes,” he said, noting fluctuations in manufacturing, dealer inventory, consumer demand and driving habits. “There’s lots of estimates floating around, and those estimates are all over the map and change month by month.”
“To quote [Wayne] Gretzky, we skate where the puck is going to be,” Raghu said. “And then, we take what the market gives us.”