Rifco National Auto Finance and VW Credit Inc. have introduced twice-monthly payment options to their Canadian customers, though the trend has yet to take off in the U.S.
Dealers often find it easier to close deals if they are able to offer smaller, more frequent payments to customers, said Rifco Chief Financial Officer Lance Kadatz. The Red Deer, Alberta-based company debuted a biweekly payment option late last year, and Kadatz credited the shift, in part, to the lender’s recent record-setting loan volume. Rifco originated more than $15 million in new loans in March; its previous record was $10 million in May 2013.
VW Credit, meanwhile, has so far unveiled the new payment practice only in the Great White North. “With our Canadian customers, that was something that was extremely hot with them,” Senior Manager for E-Commerce Julie Longley told Auto Finance News. The captive is looking to see “if it is as appealing in U.S. as it is in Canada,” and if not, to determine the differences between the two customer bases, she added.
Other financiers might follow suit, as outside-the-box payment ideas could prove beneficial in the long run, said Eric Leiserson, a senior research analyst at Fiserv (www.fiserv.com). “When I look at the future of billing and payments, I try to get radical,” he said. “You start thinking that billing and payment is open for disruption — perhaps disruption means the timing gets disrupted.”
Still, some lenders shy away from weekly or biweekly payments. “We offer just a monthly payment cycle,” said Bill Caan, president of Chicago-based deep subprime lender Blackhawk Finance. “[A bi-weekly payment cycle] really is kind of the world of the payday lenders, or a place that’s buying its own paper.”
Despite Blackhawk’s strategy to minimize payment frequency, the company avoids mobile technology and electronic payments because they minimize customer interaction. “The idea that we’d make life so easy for them that they’d never have to talk to us really isn’t exciting for us,” Caan said. “We like talking to them. Obviously if they’re calling you to make a payment, that’s a good thing.”
Leiserson, though, thinks that mobile tech can bring companies closer to their customers. “You can’t get much closer to a customer than in their pockets,” he said, noting that among the “unbanked and underbanked,” there is significant appetite for mobile technology and mobile apps.
Caan contends that by keeping communications personal and via phone, borrowers are more likely to ask for help from the lender — as opposed to hiding or trying to avoid collectors — if they are unable to make payments. Leiserson countered that making the connection via mobile devices makes it more difficult for borrowers to “disappear.”
“It’s harder for that customer to hide when you’ve got their mobile number,” Leiserson said. “People really are tethered to their mobile phones. Think about texting capabilities.”