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Preparing Credit Unions For The Evolving Indirect Lending Market

Learn how credit unions can embrace digital transformation to foster strong partnerships and prepare for upcoming market shifts.

Even before the COVID-19 crisis, the transition from traditional automotive showrooms to online platforms was underway. However, the pandemic accelerated this transformation and introduced a notable shift toward direct-to-consumer transactions. Many people still expect personalized customer service, as consumer demands change to favor streamlined digital experiences.

As we’ve seen, the indirect lending landscape is rapidly evolving due to changing borrower preferences and technological advancements that have become more accessible than ever before. To stay competitive and more effectively serve members, credit unions must embrace these changes and find new lending opportunities at the top of the funnel.

Enhance Underwriting Automation With AI

In today’s digital-first world, credit unions must prioritize digital transformation to improve operational processes. This entails adopting modern technologies and leveraging automation to streamline processes, improve efficiency, and deliver a seamless member experience. Credit union leaders are starting to notice how optimizing underwriting processes plays a crucial role in mitigating risks and making informed lending decisions.

With advancements in artificial intelligence (AI) and machine learning, credit unions of all sizes can access advanced analytics, automation, and innovative data-driven underwriting models. By leveraging powerful AI-equipped solutions, credit unions can analyze vast amounts of data to accurately assess creditworthiness, identify risks, and offer competitive loan terms. Additionally, by removing human bias, AI can help expand credit access to traditionally underserved communities.

Offer A Personalized Member Experience

Credit unions have a distinctive advantage over larger financial institutions — the ability to provide personalized experiences to their members. To excel in the changing landscape of indirect lending, credit unions should leverage member data and analytics to understand individual preferences and tailor loan products, experiences, and recommendations accordingly. By offering personalized loan terms, competitive interest rates, and related services, credit unions can continue to enhance member satisfaction and foster loyalty.

Prepare For The Rising EV Market

Credit unions must proactively prepare for the rapid shift toward electric vehicles (EVs) and the evolving purchasing habits of current and prospective members. Understanding the unique financing requirements and incentives associated with EVs allows credit unions to attract new members and seize a significant share of this emerging market.

During this time, credit unions can position themselves for success by developing loan products specifically for EV purchases, providing competitive interest rates, and strengthening industry partnerships. With the right digital tools in place, credit unions can thrive by offering members a streamlined experience paired with attentive and personalized service.

Build Strategic, Long-Lasting Partnerships

As the indirect lending market continues to change rapidly, credit unions should establish strategic connections with partners dedicated to their success. For example, collaborating with local dealerships enables credit unions to broaden their reach and offer appealing financing options to potential car buyers. Credit unions should take this opportunity to seek out partners that help expand visibility in the digital marketplace. Such partnerships create mutually beneficial growth opportunities and reinforce credit unions’ position in the indirect lending arena.

Furthermore, as lending decisions happen earlier in the process or move to the top of the funnel, credit unions should align with industry aggregators that ensure member financing remains within the credit union.

Brit Barker is the senior vice president of enterprise solutions at Origence. With 20 years of helping financial institutions improve their lending performance and exceed consumer needs, he’s recognized as an industry leader with an innate talent for balancing strategic focus with operational execution. Baker is an authority on consumer and indirect lending.

This article is sponsored by a recognized solutions provider in the credit union industry. Callahan & Associates does not endorse vendors or the solutions they offer, and the views and opinions offered here might not reflect those of Callahan. If you are interested in contributing an article on CreditUnions.com, please contact the Callahan team at ads@creditunions.com or 1-800-446-7453.
August 14, 2023

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