By Brad Powell

"We're sensing a really deep, pent-up demand for automobiles. ... Auto loans are really a place where we can have our strongest impacts."
I wasn't surprised to read that quote in a story from earlier this year on lending projections by David Morrison of the Credit Union Times. It makes sense for two reasons:

1) Opportunities for credit unions to handle automotive loans have been growing in recent months, and experts expect that trend to continue.

2) Consumers are becoming more and more comfortable using mobile devices for lending transactions. The credit unions who embrace mobile technology soon will capture more than their fair share of the market opportunity.

When you consider that most automobiles are purchased when the member or consumer is not at home or at the credit union itself, embracing mobile devices becomes an essential component for success.



The Potential Opportunity

Many recent studies and reports support the notion of increased auto lending, especially when you embrace mobile technology. Let's take a look at a few of those studies and reports:

● Credit unions saw impressive growth in auto loans in 2014.

Automotive News reported that Credit Unions using the CUDL platform extended a record $22.2 billion in auto financing last year, a 36 percent increase over 2013.

CU Direct Connect, which competes with CUDL, reported that its auto loan application volume increased by 25 percent in 2014, the Automotive News report said. Meantime, its affiliated credit unions closed the year with a 30 percent gain in loan originations funded through CU Direct Connect.

And of all financial institutions, credit unions experienced the largest percentage gain in market share of auto loan originations in the second quarter of 2014, jumping 9.1 percent to 16.7 percent, according to a Credit Union Magazine report. In the third quarter, new auto loans were up 19.4 percent year over year for credit unions, another Magazine piece reported.

● Insiders project even more consumers to take out auto loans in 2015.

Peter Turek, automotive vice president in TransUnion's financial services business unit, echoed Campbell in a recent press release, saying "We expect the auto loan market to continue to perform exceptionally well in 2015, with more sales leading to continued increases in auto loan debt per borrower as the national portfolio gets younger on average."

● Credit unions continue to offer the best auto loan rates.

Another reason to anticipate growth – consumers can count on credit unions to save them money on auto loans. According to The Motley Fool, "on average, used car buyers would save as much as $398 by using a credit union, while new car buyers who pick the lengthiest loan term would save the most -- $1,220."

● Credit union members are using mobile more often.

In a recent piece on optimizing credit union websites for mobile, Steve Hoke notes that, "new smartphone lending data from CUNA Mutual Group shows that 25 percent of all loan applications to its loanliner.com service now come through a mobile device. In all, loanliner.com generates $4 million per day in loan applications on mobile devices – a natural extension of the fact that, "63 percent of auto shoppers researched and shopped online using their mobile device while at a dealership."

● New entries into the lending space are serving young customers who live on mobile devices.

Banking startups profiled by the New York Times are targeting "financially responsible young people," who they consider "the most mispriced" group in lending. These early adopters tell them they like the speed and simplicity of the mobile borrowing platforms.

● There is room to grow, according to surveys and some credit unions' experience in the field.

A Celent survey of North American financial institutions (FIs) makes the situation clear: "Barely a third of surveyed FIs leverage automated (paperless) account origination systems in the branch, and fewer have similar lending systems."

The chart below shows that 45 percent of the institutions surveyed offer auto loans online, but just 11 percent offer them on mobile:

(Graphic: celent.com)

Finally, in May 2014 the Washington State Employees Credit Union (WSECU) introduced a mobile lending app that produced results quickly.

WSECU had offered similar loans through traditional channels for 10 years, but "right after the May 15 [mobile] launch, WSECU received 20 percent of its applications through that channel— without push from marketing or advertising."

CEO Kevin Foster-Keddie "foresees auto lending as the next mobile loan frontier," and says "many members who take out these loans migrate to customary unsecured personal loans after building a reliable credit history."

What Should You Do?

If you add up all the evidence, it is clear that Campbell, Municipal Credit Union and many other credit unions have reason to be bullish on auto lending in 2015. When you add mobile to the equation, the reasons for optimism multiply.

The Moment Of Truth

The question is: What is your credit union doing to take advantage? If you could rapidly enable your members to initiate, sign, submit, and fund loans from anywhere (smartphones, tablets, laptops), how much might your loan portfolio grow? If you beat your competition to market, what might you see as a result? More importantly, what happens if you don't get there before them?

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Compliance and Your Credit Union

• Face an daunting burden of regulatory requests?
• Struggle to manage the multiple experts inside and outside your organization who must respond to exam requests?
• Use email for regulatory communication -- possibly opening yourself to legal discovery?
• Receive the same request more than once but provide a different answer each time?

If these challenges sound familiar, Axiaware's new credit union compliance software product, Redboard, could help.