Alliant deploys BPO solution to deliver indirect lending growth
CENTENNIAL, CO (March 25, 2021) —
The impact of COVID-19 has left many lenders concerned about investing in operations without assurance of meeting aggressive growth goals.
Not Alliant Credit Union. The $13 billion credit union is planning to double its indirect auto lending business year-over-year in 2021, from funding $400 million to $800 million in new indirect loans.
How will Alliant capture, process and fund 100% more indirect loans in just one year?
Benefits of Outsourcing
The answer is the business process outsourcing (BPO) solution offered through CU Direct Connect (CUDC). BPO solutions have traditionally been used to support business continuity plans, offer service after business hours and handle overflow. However, lenders are now turning to using BPO to reduce risk as they grow loans through expansion into new geographic areas or new product offerings.
The Chicago-based Alliant is known for its lean operating model and has a history of leveraging technology and innovative operational strategies to support growth. In fact, the nation’s ninth-largest credit union serves a nationwide footprint of technology and transportation professionals without any branches.
However, casting such a wide indirect lending net without physical locations might not seem feasible. Historically, successful indirect lenders have put boots on the ground to cultivate relationships with dealerships and support aggressive local marketing campaigns.
That’s where Alliant’s CUDC partnership comes in. With CUDC, Alliant can enter new markets without large capital expenditures on infrastructure because the indirect lending CUSO is a plug-and-play outsourcing solution. Scalable growth – even doubling in size in one year – is possible.
BPO manages growth risk
When loan volume from a new geographic market or product offering is unknown, it presents significant risk to investing in staffing. Even lenders with established, centralized operations such as Alliant look to BPOs when expanding into new markets.
A credit union can partner with a BPO while expanding, and then insource functions once volumes are established, stable and predictable. By de-risking new ventures, the business case for expanding into new markets or product lines is much more compelling, because the financial exposure is mitigated by variable expense rather than a sunk-cost investment.
Building business in existing markets and entering new markets are both part of Alliant’s 2021 growth plans, and CUDC’s BPO structure will support both goals. In addition to fewer costs to enter new markets or expand in existing markets, CUDC also reduces Alliant’s risk by allowing the credit union to “unplug” from a market if the venture isn’t profitable, with limited losses.
“To build out an infrastructure to scale out at this pace would take millions,” explained Alliant VP of Consumer Lending Jeremy Pinard. “We could never do this with a traditional model, we’d have to hire too many market reps. With this partnership, it’s possible, because they [CUDC] are used to building quickly.”
“Obviously we want to be a good partner,” Pinard continued. “The ability to regulate our demand and volume, that’s a key benefit of this kind of partnership. If you need to pull back, it’s harder if you build it yourself. You’d have to look at reducing staff, and nobody wants to do that.”
When everybody knows your name
CUDC is also a good match for Alliant because it maintains strong relationships with auto dealer groups that have national reach and a digital-first strategy, like AutoNation, Cox Automotive and Berkshire Hathaway.
“We can leverage these large dealer groups with great partnerships in certain markets,” Pinard said. “And, when we go into new markets, they already have some awareness of us through our partnership with CUDC.
Making the best use of capital is important to Alliant, and that means dedication to efficiency. According to its Dec. 31, 2020 financials, the lender served 851 customers for every FTE, more than double its peer average of 389. A service-minded BPO partner is key to achieving efficiency, without sacrificing a best-of-class experience for borrowers when they purchase or lease their next new or used vehicle.
CUDC feels like more than just a partner, said Pinard, who regularly participates in CUDC’s lender committee meetings. “CUDC feels like part of our team. I speak with their leadership almost as much as I talk to my own. They’re that important to our business.”
Pinard said he also appreciates the collaborative philosophy CUDC brings to the table.
“The great thing about working with CUDC is they’re willing to improve to benefit both organizations, dealer relationships and the user experience,” he concluded.
About CU Direct Connect
Formed in 2002, CU Direct Connect (CUDC) is a credit union service organization (CUSO) providing state of the art vehicle lending and origination-funding platforms utilized by credit union members and auto dealer partners. CUDC enables any size credit union to generate auto loans and acts as a risk consultant to all partners. Based in Colorado, CUDC currently serves 39+ credit unions throughout Colorado, Wyoming, and Arizona for vehicle lending, which supports the hundreds of auto dealer partners currently enrolled in the CUDC program. CUDC, through its member credit unions, is collectively one of the largest auto lenders in Colorado and is actively expanding into new markets. For additional information, visit us online at www.CUDirectConnect.com.