By Glenn Wheeler, Catalyst VP of Payments Products & Innovations
The automotive market in the U.S. is strong with over 15 million new cars and light trucks sold in 2023, of which over 1.2 million were electric, and over 35 million used vehicles moving off lots and out of driveways. Today’s fast-moving auto market now includes many manufacturers selling direct to consumer and many more vehicle sales going through non-traditional means. What these new channels often value is speed, visibility and technical prowess, which is why credit unions must begin implementing innovative lending strategies that keep them relevant in the market.
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Recently, Catalyst hosted an interactive webcast titled “FedNow® Service Essentials: Use Cases and Industry Adoption,” with subject matter experts from credit union service organization (CUSO) Origence®. Catalyst’s VP of Correspondent Services, Justin Lutes, moderated the discussion where panelists detailed current use cases of the FedNow Service, with a key emphasis on indirect lending within the auto landscape, specifically with new electric vehicle sales.
The indirect lending advantage for CUs
One emerging use case for instant payments is supporting indirect lending activity. When a consumer wants to purchase a new vehicle and takes out a loan from a participating credit union, loan funds move instantly from the credit union originating the loan to the seller of the vehicle through Catalyst’s instant payments solution leveraging FedNow. Providing instant funding enables credit unions to better compete in the indirect auto lending space where speed, timeliness and reliability of payment is of high importance.
How Origence has helped CUs expedite the auto lending process
Consumers want to be able to purchase a vehicle whenever and however they want, not constrained by the time of day or the day of week, while sellers want to receive payment in minutes instead of days. To address these evolving demands, Origence introduced FI Connect to allow credit unions to offer embedded financing opportunities directly at the point of sale, where purchasing decisions are made.
“The role FI Connect plays is that for the top of funnel providers there is less friction,” stated Neetu Bhagat, Chief Financial Officer at Origence.
Origence’s Vice President of Corporate Services, Tom Cole, discussed the operational components stating, “The funding process starts with Origence. We call for the fund transfer from the credit union over to FI Connect. Once accomplished, we make the call to transfer funds via Catalyst and its connection to the FedNow Service.”
Bhagat emphasized how the partnership between CUSOs like Origence and the FedNow Service can position credit unions to compete effectively in the massive auto loan market.
Indirect lending use case
The potential for the FedNow Service to revolutionize the indirect auto lending space was a major takeaway from the webinar. “All these transactions are happening within minutes of originating the loan, thanks to the speed of the FedNow Service,” said Bhagat.
After months of research, Origence found “Catalyst’s faster payments solution provided the capability to collect funds from credit unions and disperse in the same-day, every day, including weekends and holidays,” added Cole.
“We have best of breed and hold your hand through the onboarding process, coach credit unions on handling paperwork and we have a dedicated onboarding and implementation team,” Catalyst’s Senior Manager of Product Strategy and Innovation, Mark Keeling, added.
Catalyst continues to launch innovative use cases that utilize faster payments to better serve credit unions and their members. In just over a year, more than 1,000 financial institutions have begun using the FedNow Service, and exciting new use cases stand to further accelerate adoption. The time to get on board is now, and Catalyst stands ready to assist credit unions in their strategy development and implementation of instant payments.
Stay in the know on all things faster payments with the FedNow Service Essentials webinar series, now available on-demand. For more information on Catalyst and the FedNow Service, visit catalystcorp.org/fast