Lenders turn to fintechs to expand efficiencies

Auto lenders are increasingly turning to third-party technology providers to build tech stacks and expand their capabilities to save time and resources. 

Ally Financial turns to third-party providers for new technology when the lender does not have the capacity to build certain projects, Pat Rinaldo, chief information officer of auto and insurance at Ally Financial, said during a panel discussion at Auto Finance Summit East 2023 in Nashville, Tenn. 

“We have a standing development organization that’s constantly focused on building our customer experiences. … We always have more ideas and more opportunities than we have capacity to build,” Rinaldo said. 

Partnering with fintechs allows Ally to complete tech development two to three times faster than with just its internal teams, he said.  

“We’re looking at our capabilities — where’s our sweet spot and what are we good at?” Rinaldo said. “When we see new opportunities that are outside of that, or we see new entrants into the market that really have a solution to a problem that we have, then we’re going to go after it. It really is to maximize how much we can deliver at any one point in time and focus ourselves on the things we do best.” 

Online used-car dealer Vroom, for one, buys tech when there are opportunities to purchase but builds products internally that are unique to the company’s operations, Bruce Newmark, chief adviser at Vroom, said at AFS East. 

“There’s never enough development resources; we always seem to be scrapping around looking for another developer and another information technology guy,” Newmark said. “The approach that we learned a while back is that the things that are very much proprietary to you that nobody [else] does are the kinds of things you have to develop and dedicate your own resources to because you can’t buy it.” 

Vroom does not want to spend time or resources developing tech that can be purchased in the market, Newmark said. 

“You don’t want to have your developers waste a lot of time reinventing the wheel when you can go out and get it,” he said. “It doesn’t make a lot of sense in our mind to use internal resources to do things that you can go into the market [to purchase].” 

Growth in fintech spending

United Auto Credit Corp. (UACC), Vroom’s captive finance arm, increased its fintech partnership spend following technological innovations that hit the auto finance industry as a result of the pandemic, Newmark said.  

“If you think about what we learned from COVID, it was a pretty good thing for business because it taught us all that, out of necessity being the mother of invention, that we had to do things differently,” Newmark said. “One-hundred percent of all the money we spend on fintechs is money we didn’t spend in 2020.” 

UACC is now spending money to support e-signing, e-contracting and document verification technology to complete contracts remotely, he said.  

“All those things are things we didn’t spend any money on back then because we were still in that paradigm of ‘Get me the stipulations, sign the contract, send me the contract and we’ll fund it,’ but, 2020 shifted all of the paradigms,” Newmark said. 

The Big Wheels Auto Finance Data 2023 report, the only tabulation of the top 200 auto lenders by outstandings, is available now.