Competition Hinges on Tech Adaptability
Which lenders are losing out to credit unions? The ones who are slow to upgrade their systems, Ricart said.
“How quickly they can adapt and move and make changes” makes a big difference, he said. Bigger banks can be held back by legacy systems, making it hard for them to be “spry and agile,” Ricart said. “Some of the credit unions and small institutions have been able to move quicker to innovate faster.”
That said, smaller county banks also tend to lack the infrastructure or technological ability to be able to play in the online space, “so I think you’ll see in the next two to five years the number of actual institutions become lower,” Ricart predicted.
CarMax Auto Finance’s Chief Operating Officer Mike Farris said auto finance institutions are at a unique disadvantage when it comes to updating systems to make them more agile. “Legacy systems prevent us from innovating and moving products forward,” he said last month at the American Financial Services Association’s Vehicle Finance Conference, adding that he’s seen product launches delayed for multiple years because systems lacked the ability to onboard new technologies quickly.
Shannon Mokhiber, Ford Motor Credit Co.’s vice president of U.S. brands and marketing, agreed that legacy systems are challenging for auto lenders. “We’ve been slow to change because for the most part, the models work, but there’s recognition now that we can either change or we can be disrupted,” she said.
