Opportunity and Disruption in Auto Finance

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How PwC Supports Auto Lenders Automotive Finance Industry Highlights PwC has a team of dedicated professionals with unparalleled levels of automotive industry experience and insight Our in-depth automotive finance experience within all functional domains of an auto finance organization allows us to address our clients’ distinct needs today while looking ahead to tomorrow’s opportunities. Our automotive finance team routinely addresses contemporary problems with innovative solutions in response to today’s business challenges. Regulatory CFPB and regulatory readiness. Consumer complaints. Fair Lending. Originations & Dealer Relations Dealer segmentation and scoring. Pricing elasticity and optimization. Cost and profitability analysis. Risk Management Risk identification & assessment. Internal controls, process review and effectiveness. Process optimization. Strategy Market entry strategies. Customer experience strategy. Alternative data and social media strategy. Servicing & Default Segmentation and dynamic scoring. Default process design. Call center management. Repossession and reinstatement. Digital & Mobile Digitizing processes. Enabling company and customer digital interactions. Transform business through innovative business & product models. Recent client engagement experience includes: 10/10 PwC has worked with the top automotive captives within the last 5 years and most large bank auto lenders Access to 500+ PwC professionals that have worked with automotive finance lenders PwC has published numerous automotive finance papers and are industry thought leaders 150+ Automotive finance projects in the last three years 2
Overview 1 2 3 Industrywide Disruption - Today’s world of auto finance includes constant innovation, exponential growth, and rapid expansion. Even existing lenders, such as banks and captives, are finding themselves as part of the industry redefining itself - as mobility and car sharing providers. Disruption being fueled by megatrends and burgeoning regulatory scrutiny, is forcing auto finance companies to adopt new strategies to align with escalating and more stringent oversight, changing consumer behaviors, and threats from innovative competitors. As such, companies must continue to engage the customer digitally throughout the loan life cycle similar to the new market participants and alternative lenders by enhancing online and mobile capabilities, increasing customer’s visibility into the financing process, and increasing participation in the online purchase market. Regulatory Compliance - Aligning compliance with federal regulatory expectations across a group of often times siloed functions can be challenging, particularly for institutions not accustomed to federal supervision. Technology and automation can help increase efficiency, accuracy, and transparency of compliance related functions. However, significant progress can also be made by considering traditional compliance strategies. For example, documenting compliance programs that address key Compliance Management System (CMS) expectations of regulators and operational process maps that identify the process owners’ roles and responsibilities, particularly at critical “handoff points”, are useful to mitigate compliance risk. Trends in Collections and Servicing - Automotive finance has enjoyed record low delinquency for the past few years, but recent trends may indicate upward pressure is on the horizon, particularly in higher customer risk tiers. As the world becomes ever more mobile, the challenge of speaking with delinquent borrowers has exponentially increased for lenders that rely on traditional contact and dialer strategies. In today’s fast-paced environment, auto lenders must make every collection attempt count. Implementing dynamic scoring strategies to prioritize accounts and aligning contact attempts with the probability of rightparty contact, while providing lower risk customers with alternatives to collection agent contact, such as self-service and mobile solutions, are a few ways we see the industry addressing the challenge. The automotive finance industry shows significant opportunity for evolution, provided that lenders are quick to adopt to the expected market driven changes Market disruption opportunity increases Technology-enabled disruptors are forcing lenders to change the way they operate, but for many lenders, these emerging trends are opportunities that present a chance to increase their competitive edge Cost reduction is a top priority While increasing automation presents operational transformation challenges, it offers the potential for significant cost reductions and increased operational efficiencies Digital auto finance gains momentum Direct lending platforms and mobile channels continue to increase market-share in auto finance transactions making a strong digital strategy necessary for companies to remain relevant Compliance costs continue to increase The cost of managing compliance with regulatory requirements is requiring Auto Finance companies to invest in technology solutions to help automate compliance that will ultimately reduce compliance costs PwC capabilities 3
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Opportunity and Disruption in Auto Finance

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