Hi Matt, welcome to our Fintech Interview Series. Please tell us about your fintech journey so far.
I’ve been with automotive lending enablement provider Open Lending since 2007 and held several roles before becoming chief revenue officer in 2019.
In my current role, I work across marketing, implementation, operations, finance, and IT systems, collaborating with teams and leaders to achieve our growth targets and other business objectives. One of my former roles at Open Lending was system and product analyst, which serves as a technical contact for clients during the implementation phase of our Lenders Protection™ offering. That experience affords me a unique perspective, and I bring those learnings with me as we continue to evolve and enhance our services and customer experience.
What makes Open Lending a unique automotive lending enablement platform?
Open Lending has 20+ years of experience focusing primarily on automotive lending and near-prime borrowers. This expertise and our Lenders Protection™ offering, which employs data from over $19.2 billion across over 850,000 insured loans, helps financial institutions effectively originate near-prime automotive loans.
Lenders Protection™ combines the power of sophisticated risk-based pricing techniques, financial modeling, loan portfolio default modeling, automated underwriting, and default protection insurance to empower automotive lenders to achieve yield targets, offer better rates, and mitigate risk. This solution is the only one on the market that offers high-quality loan default insurance from “A” rated carriers, absorbing more than 85% of expected deficiency balances.
Also, our approach is purely success-based. Open Lending™ is free to try, and any fees are recouped in the interest rate to the borrower on funded loans.
How have you leveraged AI and ML for loan analytics and risk modeling?
With over 20 years of data, our solution’s artificial intelligence can look through more than 2 million risk profiles in five seconds. Our AI-powered decisioning analyzes the broadest range of rich data to determine more near-prime, high-yielding opportunities for automotive lenders.
AI conducts more accurate evaluations of borrower qualification and enables faster decisioning speed, a core element of automotive lender success in today’s competitive and rapid landscape. Our 2023 Lending Enablement Benchmark survey of financial institution leaders revealed that the increase in the use of AI was one of the top three areas of improvement for automated lending platforms.
Consumers need more options in today’s market when it comes to vehicle financing. What are your strategies?
As vehicle prices increase and loan standards tighten, vehicle ownership is becoming harder to achieve. To provide consumers with more options for financing, we recently extended our loan terms to 84 months, up nine months from our previous maximum term. This is especially significant as Edmunds reported that almost 16% of consumers who financed a new vehicle in Q4 2022 are paying a record-breaking monthly payment of $1,000 or more.
Additionally, Open Lending now offers financing for vehicles up to 11 years old, up from the previous nine years. This move aims to address the number of aging cars on the road. S&P Global Mobility reports that the average age of light vehicles in operation in the U.S. is now at a record high of 12.5 years, a three-month increase year over year.
Amid rising market challenges, the underserved near-prime credit segment has the fewest options for vehicle financing. Empowering automotive lenders with Lenders Protection™ allows them to make the dream of vehicle ownership a reality while mitigating risk.
Nearly 22 % of data is breached under cybercrime, what do you think poses the greatest challenge as a digital platform?
According to American Banker, nearly 90% of banking professionals said cybersecurity threats are a “moderate” or “significant” challenge to their digital banking strategies. American Banker also reported on a recent cyberattack involving Progress Software and its MoveIt solution. At least 91 organizations, including 10 U.S. banks and credit unions, were impacted.
I see fraud and identity theft as the greatest threat to digital platforms. As companies increasingly rely on digital lending solutions, their rapid adoption of these technologies must be paired with the appropriate safety protocols like fraud mitigation and digital identity verification to protect user data and finances.
Financial institutions must do their due diligence when partnering with a digital platform provider to ensure they are trustworthy and reputable and incorporate cybersecurity applications beyond a mere AI offering.
What is the one thing that you would like to modify with the help of technology to get improved results?
With near-prime borrowers becoming an increasingly disadvantaged audience, I am committed to empowering automotive lenders with technology that identifies often overlooked qualified applicants to improve vehicle accessibility in America.
Experian’s Q1 2023 State of the Automotive Finance Market Report clearly shows the burgeoning issue of automotive loan unavailability for near-prime borrowers by reporting that financing for this audience has fallen to 17.59% of total financing from 18.46% in 2022.
Vehicle ownership opens up access to better job and education prospects, but near-prime borrowers are facing increasing hostility when trying to obtain an automotive loan or being shut out altogether. Open Lending has made it our mission to expand automobile access to more deserving near-prime borrowers.
We empower financial institutions with our Lenders Protection™ solution to serve these alienated credit segments while mitigating risk and meeting yield targets. AI and analytics can make the tumultuous automotive lending industry more inclusive and fruitful to benefit people on both sides of the loan.
How does the Lenders Protection™ risk-based pricing model work?
Lenders Protection™ uses extensive proprietary and third-party data (a detailed database of over $19.2 billion loans and borrower, vehicle, and loan attributes) and analyzes 2 million risk profiles to deliver accurate and profitable scores in as little as five seconds. This technology predicts the probability of defaults with 99.1% accuracy in addition to predicting prepays and default severity. Automotive lenders don’t just receive a score; they receive a score plus an approved or countered loan structure, risk-adjusted price, and default protection.
Lenders Protection™ returns suggested contract rates based on the risk of the loan and the lenders’ targeted yields. Lenders Protection™ is free to try as the suggested contract rates also incorporate the costs to insure a loan in the program.
This technology helps financial institutions achieve ROA targets by booking 20%-30% more automotive loans with a 2.5% historical return on assets.
We’d love to know what are your predictions for the fintech domain for 2023.
Greater adoption of AI and ML
As AI permeates multiple markets, the fintech industry, in particular, will continue to explore these solutions for various applications like risk assessment and mitigation, customer service, personalization, fraud detection, and loan decisioning speed. For example, since credit scores alone don’t tell a borrower’s full story, AI can look at an individual’s complete profile and payment history to provide a fairer, more accurate description of a person’s creditworthiness.
Financial institutions that don’t adopt these technologies will be left behind in the increasingly competitive lending landscape that continues to prioritize speed and accuracy.
More stringent fintech regulation
The bank failures earlier this year, starting with Silicon Valley Bank and combined with the collapse of cryptocurrency FTX, mean confidence in financial institutions and unregulated digital currencies is waning. I expect to see greater scrutiny toward fintech vendors and partners to protect consumers and the economy. The desire for growth and evolution must be tempered with safety and intelligence to ensure these improvements don’t come with unmitigated and wide-reaching costs.
Increased focus on cybersecurity
In addition to regulation and safeguards for the fintech industry, I foresee many companies emphasizing cybersecurity and fraud mitigation internally. Protecting consumer data and finances is imperative and adopting new technologies without proper safeguards will lead to more data breaches and identity theft.
Without focusing on these necessary protections, consumer trust and confidence will continue to erode and undercut the advancements these technologies offer.
One word that best describes how you work.
Empowering.
Tag (mention/write about) the person in the fintech industry whose answers to these questions you would love to read!
Laura Spiekerman is the president and co-founder of Alloy, a company that helps financial institutions reduce bias in decision-making by helping verify applicants beyond traditional identification like driver’s licenses.
Open Lending and Alloy have complementary missions to provide greater access to financial freedom for frequently disregarded applicants, and I look forward to seeing how she continues to champion this mission to reduce risk while helping underserved audiences.
Thank you, Matt! That was fun and we hope to see you back on globalfintechseries.com soon.
[To share your insights with us, please write to sghosh@martechseries.com]
Matt Roe is Chief Revenue Officer at Open Lending where he reviews sales and account management strategies and consistently identifies opportunities to increase productivity, efficiency, and enable growth. Matt has been with Open Lending since 2007, serving a variety of crucial roles within the company for more than ten years. His experience as a National Account Manager and Marketing Manager enables him to create and oversee cutting-edge marketing strategies and implementation.
Open Lending provides loan analytics, risk-based pricing, risk modeling, and default insurance to auto lenders throughout the United States. For 20 years we have been empowering financial institutions to create profitable auto loan portfolios with less risk and more reward.
