Auto lending continues to evolve as technology continues to evolve. As the auto industry slowly shifts toward electric vehicles and more buyers go online to shop for vehicles, credit unions need to take steps to make sure their auto lending program can keep up.

Sarah Cooke sat down to talk with the COO of Origence Bob Child to discuss the future of auto lending and how credit unions can make sure they’re not missing out. He also talks about the evolution Origence and the many other changes they’ve made alongside their multiple changes of name.

Read the full transcript below:

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Sarah Cooke 00:00
Welcome, Bob, why don't you introduce yourself? To our audience out there?

Bob Child 00:04
Terrific. I'm Bob Child. I'm the Chief Operating Officer for Origence the CUSO out of Irvine, California. Yeah.

Sarah Cooke 00:13
Welcome. It's great to have you all big changes going on at Origence for sure.

Bob Child 00:18

Absolutely.

Sarah Cooke 00:19

Not the least of which is the name. But yeah, so I want to talk a little bit about you guys have always been, you know, kind of the go to experts for indirect lending for generally, speaking autos, obviously, with that, but talk a little bit about lending and how it's changed, especially has how technology has changed lending.

Bob Child 00:40

Oh, absolutely. So and I know, this isn't a two hour long program, because I could probably go on for for two hours in different ways. But it is rapidly changing and technology's changing. And on for for two hours in different ways. But it is rapidly changing and technology's changing. And I think that COVID changed a lot of things that are out there right now. And so when you look at what's happening, you can look at players such as Tesla, Rivian. And now even Amazon, we used to say that people would shop for a car, and then do their purchasing and financing at the car dealership. Well, that's starting to change as well, too. So right now, as I mentioned, Tesla, selling more than a million units, basically financing done online, shopping, and purchase all done online. Rivian. We had a few months ago, Amazon with Hyundai, where you can now purchase a car on Amazon. And get all the financing. reason why I bring it up. Let me add one more, even Carvana. So I mentioned those were all new cars. But it's even happening in the used car space as well too where you've got players like Carvana, which now you can buy, and get your financing and have a used car sent to you as well, too. So this whole space is kind of changing. We're even seeing it with these large dealer groups like the Auto Nations, the Larry Miller Group, and where they're putting large websites online. So what what does this mean for credit unions? Means a lot for credit unions sort of their perspective that auto lending is one of the largest lending buckets that credit unions have today. And so if they're going to compete in this new phenomenon, which is happening, a couple of things need to happen. One is, it's about the experience, the reason why consumers are going there is they don't like that, four hour plus situation at the at the car, car dealer, it's not a great experience. And so purchasing the car online, is a good experience, there's not a lot of options, they keep it simple. But financing has to be the same way from the perspective that the consumer doesn't want to purchase that car online, and then have to wait three hours for an underwriting decision to find out whether or not they've been approved. They want that instant satisfaction, either they've been approved or not. And so for credit unions to compete here, a couple things have to happen. One is, system decisions have to happen, literally within seconds, can't be three hours with lots of back and forth, that's not going to work. And then second, the other phenomenon that's out there is that they're going to have to work together kind of as a group in some cases. So let me give you an example. As we talked about all the examples from Rivian, to Tesla to Carvana, to things like Click Lane, they don't want 1000 different credit unions or lenders on their website, they only want three or four, they want to keep it simple. So we've got to work together to aggregate in order to play in these new spaces. So that's a big change that that is coming. I talked about speed of decision. Things such as artificial intelligence is playing a huge factor in that. We've partnered with Zest, Synaptic few others, not to find the turned on opportunities, but to find out a secondary score to possibly if somebody's on the fringe, get them approved, versus going back and forth. And then the second piece of it is fraud is a double edged sword in that more and more synthetic fraud is happening out in the marketplace. There's no doubt about that. So all the credit unions are needing tools in order to combat fraud, but at the same time, those tools can help you make the loan faster. So where you may have had to have gone back to the consumer, the member for additional information by doing some of these fraud check tools, you now have some of that information that you don't have to go back. So that's why I say it can be a double edged sword.

Sarah Cooke 05:28
Yeah, you don't have to fill out those forms in triplicate.

Bob Child 05:31

Absolutely. Absolutely.

Sarah Cooke 05:33

Right. When I'm during COVID, I got a home equity loan. Never went in the branch obviously at the time. And yeah, we've got it all signed online. And it was good to go. So yeah, I think that's one good thing. One of the good things that came out of COVID. Yeah. And, you know, you also mentioned Tesla, you guys just had a big partnership. So talk a little bit about that, how that's going to help credit unions out. Yeah,

Bob Child 05:58

so I mean, this is our first foray into what we refer to as the top of the funnel with Tesla. So trying to capture those lost opportunities that credit unions weren't being able to participate in by aggregating them together. And doing exactly what we just talked about. So what we've done is we've set up basically a round robin process. So if an application comes in, let's just say it's in Tennessee, what we do for the our credit unions that are participating in the Tesla program, we round robin it to those to those credit unions. So we take in the application, we approve or deny it, and then instantaneously it goes to the credit union, and is memorized, basically real time to that credit union. So it's an aggregation way in order for credit unions to participate, that they would not have been able to participate in the past.

Sarah Cooke 07:06
Yeah. And credit unions need the volume too.

Bob Child 07:09

they do you know, it comes and goes, they want the volume. But here's the big thing. No single credit union. So for a Tesla, or Rivian, or any of these other programs, no single credit union could sign up with Tesla by themselves. And here's the reason why is because we, we have committed $300 to $500 million a month of Tesla lending to go into that program. No Credit Union could do that. Not that they don't have the financial wherewithal to do it. But the concentration risk that would be on their portfolio, after six months, would be insane. And so they want to participate, but not have that risk exposure. And so this way, we can basically blast it out to all of the credit unions and, and be a real player for the community. Yeah.

Sarah Cooke 08:07
And I like the way you were talking about, you know, how to how do you get some of those denials to a yes to a little bit more into

Bob Child 08:14

that? Sure. Sure. So using artificial intelligence, basically, you're looking at all the alternative data that's out there. And then looking at the performance history of people who look just like that person. So on your book, and regionally, how have they performed, and then having artificial intelligence come back and say, this person's FICO score is a 670. But they would perform more like a 720. And so it gives that credit union the opportunity to go, yes, somebody's on the fringe, but based upon previous history, and all, they would act like a 720 Fico. And so we would approve that.

Sarah Cooke 09:00

Yeah, I love that. Because this is what credit unions are supposed to be doing. Absolutely. Even if the regulator's don't want them to. You don't have to say that that was my work. Well, no. I mean,

Bob Child 09:10

it's, it's about taking appropriate risks, not unnecessary risk. And so we do want to basically figure out ways to get more and more loans to all of our members. And so that's why we I mean, we're excited we're talking about some other programs to bring EV lending into basically CDFI neighborhoods and areas where we can extend basically car borrowing that it didn't exist before

Sarah Cooke 09:45
I was gonna say, I mean, I know the average cost has come down, but

Bob Child 09:48

it has come down. Those aren't cheap. No, but it's good. You know. You got to look at the total cost of ownership on an Eevee though too, and so Oh, you know, you're not paying for gas, It's electric. If you charge at home overnight, it's less expensive. You're not doing oil changes every three months, you're not doing any of the other component replacements. And so when you look at just the number of parts on an EV car, you got 200, basically parts compared to 3000 parts on an ice vehicle. So less opportunity for breakage.

Sarah Cooke 10:31

Makes sense. And so, you know, you all have been doing a lot lately. Obviously talk a little bit about hitting 30 years, 30 years, this is a big deal. Very big deal. Yes, and and Origence and previously, CUDL is very much involved. Talk a little bit about that, and how that's come to be.

Bob Child 10:54

Yeah, and I mean, in your previous roles, I mean, we've spoken before in the past. I've been along the journey with Origence for half of that time for almost 15 years. But, you know, you brought up that the name change by itself. And so, you know, I can just speak to that, because I think it's a good descriptor of how the company has changed. And so people have known us in the very beginning as CUDL, which was the indirect lending channel. So we today we now have 20,000 car dealers in the United States, 1200 credit unions connected to that platform. We process just one application every two seconds a day across that platform. In 2023, we did about $59 billion worth of credit union loans on the platform. We'll do probably about $65 billion this year in credit union loans. But that was where the foundation started. And then we started to branch into some of the technology tools around auto lending. We created a loan origination system, an auto shopping site, but people still didn't think of us as kind of that broader company. So we evolved the name to CU Direct. Yeah, and that started that that change. And then the world continued to change again, and all these fintechs started popping up. And we changed the name again to Origence. And we felt that Origence would give us basically a broader perspective with credit unions as they thought of us thinking more like a fintech. But we wanted the name to stand for something. So that when they thought of us, they would think of who is that company now? Well, we are a fintech. We are CUSO. We are a lending company. We also are a technology company. And so Origence stands for origination and experience basically put together as one. And we hope that people think of us, you know, in a broader context, in this technology world that we live in today, Condor,

Sarah Cooke 13:25

great branding, people are working on that. So, as you mentioned, you've been there 15 years, how do you feel about just the evolution of what you've watched? Because I know, you know, as you mentioned, as a journalist and seeing how that has changed over 20 some years, you know, what do you what do you see in the auto lending as far as like, and the technology and all that, oh,

Bob Child 13:45

my gosh, it's crazy changed. And, you know, pre COVID We had all these futurists that were saying, you know, car buyings dead, because the millennials are never going to buy cars, they're just going to Uber everywhere, and blah, blah, blah. And you know, we were doing, basically all kinds of planning Oh, could this what happens if this starts to happen? We'll that fad is basically come and gone. And the millennials are now all buying cars. They're also buying houses now too. And so we don't see that. But then the next one was autonomous vehicles, all these self driving vehicles, were going to be on the road by 2030. You know, I still think that there is going to be these more of these self driving cars. It's going to be a little bit ways out, I'll put it 2040 plus before we start to see you know, more commercialization of it. But again, we're starting to factor in that and then EVs and so in California and other states there's now mandates that EVs are have to be the only thing that are going to be sold after 2035. And so how does that impact kind of this lending experience and making sure that we are positioned to get credit unions financing on all these fees and this change?

Sarah Cooke 15:19

Yeah. I mean, obviously, they tend to be a bit more conservative. It's got getting a... I think it's evolving again, COVID affected everything everybody does everywhere. But So talking a little bit about, you know, lending on an EV. Lending all these autonomous vehicles, it's different. There's a different risk, and there's different things to consider. What should credit unions consider when they're getting into that? Because they're going to have to, as you said, some states are mandating it.

Bob Child 15:46

Oh, absolutely. So you know, what, what has been perfect right now is the mass adoption to date has been mostly the, I would say, a little bit of a higher income, a higher FICO score, score consumer. And so the risk is, is very low, as you pointed out, this first wave that came through were at a little bit higher price point. And so it wasn't available to all, but you're starting to see the price points coming down. So credit unions are starting to get some of that experience, both in the underwriting of the vehicle, as well as the type of consumer how long they hold on to the car, and then the resale values, the cars. The resale is probably the biggest wildcard right at the moment. And it depends pretty much on one thing, battery, of course, right? So and, you know, it's not a perfect science at the moment. But there are, you know, there's new tools that are coming out to basically test the battery and see its longevity, and how much battery life is, is left out there. But it's going to vary. So a car that's used in California, with a moderate climate, compared to an EV car that might be in Michigan, you could have a completely different scenario. What impacts that battery,

Sarah Cooke 17:25
I think I saw something this winter, where there was a big freeze and a bunch of electronic, electric cars, we're not going anywhere. Right? Yeah, yeah.

Bob Child 17:34

So the other thing that goes with it, then is when you think of, you know, resale, and they're, they're getting more and more is then the number of chargers in your community and type of chargers, things of that nature. So, but it's becoming more common.

Sarah Cooke 17:50

Yes, absolutely. We were at the mall yesterday, just picking up new mics because ours weren't working. And you know, they have those charging stations right there at the front. So you get preferential treatment? For having electronic vehicles, so All right, well, so we've covered a lot of stuff. I'm gonna let you go with any final thoughts, what you'd like to talk about?

Bob Child 17:50

Yeah, I would say, you know, I mean, we talked about evey cars, we talked about top of funnel, basically, the fact that the world is, is starting to change, we're kind of at that point where people are going to either be purchasing cars at the dealership or purchasing cars online, it's not going to be 99% at the dealership, and I don't see it being 99% online, but you're starting to see the shift. And so what would I say for credit unions as a word of advice, is dip the toe in the water. You know, don't you know, don't make all of your portfolio of lending, all EVs are all top of the funnel kinds of things. But start to get in there now start to learn on both of those, you know, a shameless plug for Origence come by, and just, you know, you know, we don't have a high bar to participate, but get in there, just kind of kind of learn it. Because it's this isn't a situation of if it's going to happen. It's just when is it going to happen? This shift and make sure that you're participating in the journey that you're not left behind.

Sarah Cooke 19:34
Yeah, yeah, absolutely. Thank you very much. Thank you for joining us. Appreciate it.

Bob Child 19:39

Thank you. All right.