Tricolor secures patent for new AI tech

Used-vehicle retailer and lender Tricolor Holdings secured a U.S. patent last week for its AI underwriting technology and interactive tool, Automas, which aims to expand financial inclusion for underserved Hispanic communities. Automas integrates Tricolor’s retail business with its lending business and looks at “over 25 million data points” from past transactions — including data from used-inventory acquisitions, cost to recondition vehicles , vehicle type financed and loan performance data — to underwrite new consumers, Daniel Chu , founder and chief executive at Tricolor Holdings, told Auto Finance News . “From end to end, we have correlations between certain vehicles resulting in better loan performance than others. Similarly, certain profiles of customers result in better loan performance,” Chu said. “What artificial intelligence can do is it can look at those 25 million data points that we’ve collected, and it can say, ‘Here’s this new customer. What is the pattern across their [profile] that’s similar to historical customers?’” Automas uses historical data to put together a financing offer that will give borrowers a higher probability of paying back the loan, he said. The AI technology also recommends a vehicle to the consumer based on past customers with similar credit profiles who successfully paid off their loans. While this increases conversion rates, Chu noted the consumer can still pick the vehicle of their choice regardless of the AI’s suggestion. But, “by optimizing those terms to appeal, it’s going to increase conversion,” he said. Improved CX for purchasing, financing Tricolor developed the technology to enhance the purchasing and financing customer experience, Chu said. When a consumer goes into a Tricolor retailer location and inputs their information, they are presented with an offer on a tablet with a suggested vehicle, term length, down payment and interest rate. The consumer also can see how increasing their down payment affects the term length, interest rate and total paid over the life of the loan. For every $500 in down payment, Tricolor lowers the consumer’s interest rate by 1%, he said. The consumer customization of down payment to see adjustments in interest rates and monthly payment and connecting the historical retail data to underwrite the consumer sets Tricolor’s new technology apart from its old technology, Chu said. “We want [consumers] to have transparency into their pricing, and we want them to understand the impact of different terms on their actual loan transaction,” he said. The patented tech is available at Tricolor’s retailer locations, and the lender is working to integrate the technology on its website, Chu said. Automas “is probably about 85% to 90% implemented as a point-of-sale technology.” Chu said. “There’s some ongoing rollout as we open locations, get them up and running, and then convert them over to the technology,” he said, noting the technology will be fully rolled out by the end of April. Tricolor Holdings developed the technology internally for more than two years and filed for the patent March 9, 2021, he said. “We’re trying to use technology to create a better outcome for consumers, because if our consumers can be successful with us, we’re going to help them mainstream so that in the future, their cost of capital will go down, their ability to access credit will expand and potentially they can move toward financing an asset that will contribute to their wealth creation,” Chu said. “It starts with giving them the best chance to be successful.” Auto Finance Summit East, Auto Finance News’ new spring event, is set for May 10-12 at the JW Marriott Nashville. To learn more about the 2023 spring event and register, visit autofinance.live/afs-east .

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