The Future of Autonomous Lending is Now
I recently had the opportunity to research some of the emerging transportation technologies that will affect our lives over the next ten to fifteen years. Alternative fuels, autonomous vehicles and the ride sharing economy have been discussed in media for several years, and today we are beginning to experience how some of these technologies are applied in our world today. Take autonomous, or self-driving vehicles, for example. These are vehicles that can operate in some form or fashion independent of driver input. Applications range from collision avoidance systems to vehicles like the Navya Shuttle that is currently being tested in Las Vegas, transporting commuters down Freemont Street between Las Vegas Blvd. and Eighth St. As Ron Frey, Chief Strategy Officer at CU Direct puts it, “There are a lot of questions with autonomous transportation that need to be answered, but they will be answered, and we will see these vehicles on the road in the near future.” In fact, industry leaders are predicting that autonomous vehicles will be operating globally on the same roads we currently drive by 2030.
What does any of this have to do with consumer lending and the credit union industry? This is a good question. We often miss the hidden story in technological events that occur outside of our field of interest. But, there is one commonality that links to all of the current technology innovations; they are intended to be disruptive. One might argue that they are not truly disruptive in the sense that they totally replace one way of doing things for another, like streaming music has disrupted CD production. Cars will still be on the road in the future; they simply will not have an active driver in many, or all, cases. These technologies will have a significant impact, however, on our transportation choices in the future. The question for lenders is, “are there any processes in the lending business that need to be disrupted?” If so, who is going to do the disrupting?
Before we come to a conclusion on this question, let’s take a look at what has happened over the past two decades in relation to service industry disruptions. The most obvious trend is that the companies who have created disruptions have been, for all intents and purposes, technology companies, not operating within the industry they’ve chosen to disrupt. Amazon, for example, was not a brick and mortar retailer that decided to leverage the efficiencies of the Internet to improve the customers’ buying experience. It was started by a former Wall Street executive that wanted to get his piece of the new Internet bonanza. Companies like Tesla, the electric vehicle manufacturer, and Uber, the ride-sharing company, have chosen from the onset to operate outside of the traditional framework of the industry segments they entered. When it comes to lending, QuickenLoans has become the second largest retail lender in the U.S. without building one branch. There is a common thread that runs through each of these companies that has contributed to their success. Each of them began their journey by identifying the pain points and inefficiencies of the current process and leveraged emerging technologies to eliminate them. Allow me to take you on a journey of what the auto-buying process would be like if Amazon decided to become the largest automobile retailer in the U.S.
I wake up in the morning and speak into my Echo Dot that I purchased from Amazon for $49, “Alexa, what’s the weather forecast for today?”
Alexa responds, “Good morning Michael. Today it will be partly cloudy, with a high of 75 degrees.” By the way, did you know that today you have owned your current vehicle for three years and you currently have $7,500 in equity in this vehicle? You typically own your vehicles for three years. Have you considered your next vehicle purchase?”
“That’s a good question, Alexa. Do you have any suggestions?”
“Yes, Michael. I have a few questions first.”
Alexa continues, “I notice that you currently own a truck, but your most frequent trips are to Whataburger approximately 1.2 miles away and to DFW airport. You currently get 14.1 miles to the gallon based on the type of driving you do. Would a hybrid sedan be a better choice for you?”
“Alexa, I live in Texas. Of course not!”
“Very well,” she responds. “I will update your preferences. Please wait while I do some research.” I begin to catch up on my daily emails, and a few minutes later I’m interrupted by a familiar voice: “Michael, I’ve found several new vehicle options for you. Would you like me to list them for you?”
Of course I allow her to list the options and in the meantime, I am able to conduct other business as I listen to the options available to me. From her list I find something that I am interested in and decide I would like to move forward with a purchase. Alexa provides me with all of my finance options based upon the information she has stored about me over time. Information that I have either freely given or given her permission to access. Now it’s time to “pull the trigger,” or push the “buy” button, if you will.
At this point, the decision to buy a new car triggers an hours – if not days – long process of arranging for financing, signing documents and transferring paperwork from one entity to another. Imagine, if you will, that all I have to do in Alexa’s world is say, “OK Alexa, I’m ready to buy.” I don’t have to call anyone, complete any applications, or sign any paperwork. All I have to do is say “OK” into a little black box; everything else is automated.
While this may sound far-fetched, it’s reality. Every step of the current auto-buying process that I have described can be supported by available technology. Autonomous lending is here. Are there unanswered questions? Sure, but they will be answered, sooner than later. The bigger question is who will answer them? Will it come from an outsider technology company or a current financial institution that wants to survive the new era of autonomous lending? It’s my hope that the credit union I bank with, and am passionate about, will answer the call.