Navy Federal Credit Union is developing an omnichannel lending platform as credit unions and captives prioritize technology upgrades in the face of increased competition and changing consumer preferences. 

Along with migrating more processes to the cloud, Navy Federal is aiming to give consumers the same financing and servicing experience regardless of what channel or device they use, Joe Pendergast, vice president of consumer lending, told Auto Finance News, a sister publication to Bank Automation News. He did not provide a timeline for when the omnichannel platform will launch.  

“There is a big push for technology as a whole [at Navy Federal],” Pendergast said. “You can never move quick enough; you always have to try to stay ahead of your competitors.”  

Digital is expectation

Auto lenders transitioning more of the financing process to digital is in line with what consumers expect and is a positive for the industry, Matt Dundas, vice president of finance at used-vehicle retailer Carvana, told AFN, noting that the retailer and lender has been digitally based since the company was founded nearly 12 years ago.  

Digital access offers the convenience of buying a car anywhere, anytime along with transparency, Dundas said. Carvana’s auto originations ticked up 0.5% year over year to $1.5 billion in the fourth quarter of 2023.  

“That ability to shop at home and do your comparison shopping and research is empowering for the customer,” Dundas said. “The key element that we hope we’ll see emerge in the industry is ensuring that the full process can be done online and there’s not a bait and switch going on where you think you’re getting everything sorted out online and then you go into the dealership and things change when you’re there in person; some of that empowerment from digital goes away.” 

While more lenders are upgrading their technology stacks to meet consumer expectations, implementation is expensive, Navy Federal’s Pendergast said.  

“There are challenges when you’ve got competing priorities when it comes to implementing technology,” he said.

“There are challenges when you’ve got competing priorities when it comes to implementing technology.” — Joe Pendergast, Navy Federal

As a not-for-profit credit union, Navy Federal puts profits back into customer service-oriented aspects of the business, including building additional branches and growing its 24/7 contact center as well as improving the lender’s technology stack, Pendergast said. Navy Federal had $24 billion in auto oustandings at year-end 2022, according to Big Wheels Auto Finance Data 2023.  

“Our members increasingly prefer to apply for a Navy Federal auto loan through digital channels,” he said. “We continuously make enhancements to each application channel to provide more ease, convenience and speed with auto loan approvals and funding.” 

PenFed to invest more in tech

Navy Federal isn’t alone. Pentagon Federal Credit Union continually invests in technology and innovation, including moving legacy systems onto new platforms and improving customer experience operations, Sean Worthy, associate vice president of consumer banking loan products, told AFN.  

PenFed had $5.2 billion in auto outstandings at year-end 2022, according to Big Wheels. 

“We’re investing more this year [in tech] than we did last year,” Worthy said. “Even in these hyper-competitive environments — you have liquidity risk and balance sheet concentration risk across the industry — we’re continuing to invest in all things technology. Whether that’s credit application experiences, operational systems of engagement [such as] CRMs or security infrastructure. That’s going to be in our playbook for the next three to five years.” 

“Even in these hyper-competitive environments … we’re continuing to invest in all things technology.” — Sean Worthy, PenFed

Technology is also crucial as banks and credit unions face competition from captives, finance companies and fintechs, Worthy said.  

“We’re seeing some new fintech companies starting to get into the indirect lending space and starting to offer direct financing to either their existing customer base or through their web-based auction and lead-generation site partnerships,” he said. “That’s a big focus of ours.” 

Shift toward digital 

Captives, too, have prioritized technology, with many working to offer more digital tools for consumers and get dealers signed up with e-contracting. Hyundai Capital America, for one, has a nearly 90% adoption rate for e-contracting among its dealers, a spokesperson previously told AFN. 

Toyota Financial Services has 95% e-contracting utilization, a company spokesperson told AFN.  

“We’ve worked closely with our dealer partners to understand their needs and deployed appropriate training solutions to help the transition,” the spokesperson said. “E-contracting offers many benefits, and one that is particularly popular with dealers is the fact it allows us to fund deals faster.” 

Digital contracts provide faster funding and leave less room for human error, Carvana’s Dundas said. 

“Our customers can sign contracts prior to delivery,” he said. “As essentially a captive finance company for Carvana, we start out with that digital contract in our possession.  

“It’s easy for us to, through partners that we work with, transfer that contract to a document custodian and then ultimately to a buyer of one of our loans, securitization transactions or our partner Ally Financial, which has bought several billion dollars of loans from us exclusively on our digital contracts. That whole experience is seamless,” Dundas said. 

Editor’s note: This article first appeared on Auto Finance News, a sister publication to Bank Automation News. 

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