Lender-dealer partnerships key in digital shift

Tanya Sanders, 46, was named the new head of Wells Fargo Auto in July. She joined Wells Fargo in 2019 and has more than two decades of financial services experience. She succeeds the retiring Laura Schupbach.

Sanders spoke with F&I reporter John Huetter. Here are edited excerpts.

Q: What are some goals you're focused on as you start this new role?

A: It's been an interesting time for us as we look at the goals with me coming into this role and just the environment, right? The whole context has changed for our business. I've been in auto finance now for over 15 years. I've seen a lot of the change and the acceleration that we've had more recently.

Our basic mission that we have right now is to really work with our customers and empower our customers to achieve their dreams. And this is how we look at our vision for Wells Fargo Consumer Lending and what we can do for customers. We want to focus on delivering digital experiences, meaningful experiences for customers and that includes working with our dealers.

How do you differentiate your dealers as customers and the consumer as a customer?

What we recognize is that in partnering with our dealers in understanding the end consumer, that's how we're going to help our dealers be successful at their business. And we hear that from them every day. How do we create a faster F&I experience, one that is easy to understand, with programs that are not only competitive but help customers really understand the lending that they're getting into?

I would say we look at both as our customers — the dealers and consumers. And as we're working with dealers, what they're telling us is speed is important, transparency is important — and how we plan to execute on that. And it's consistent with our goals, which is automation. We're going to try to automate as much as we can — both in the credit decision process when we receive that initial application, the funding process as we're processing the paperwork that comes through our interactions with dealers, and some of that back and forth. We want to provide tools that help them self-service. And then we're also looking at ways to support dealers if they're moving more and more into the digital retailing environment.

And that's one of our key goals — we want to create end-to-end digital experiences for end consumers. We're doing that with our dealers, and as they're building digital retail experiences for their stores, we want to be a part of that. We're making sure that we're investing in the technology so that we can plug in to the experiences that they're delivering.

How do you work to continue to improve dealer relations?

I would say, we were there for our dealers through the pandemic. It's been a rough ride for all of us. And rough may be an understatement. But we all had to adjust early on in the pandemic, take care of not only the health and safety of our employees but also understand how do we continue to run a business that satisfies consumers at the same time. I think we've actually reinforced our relationship with our dealers through this past experience. Where we will continue to focus is on being a better partner through some of the things that we've talked about — being along the journey with our dealers on creating those digital experiences, being more automated, being faster in our lending processes around decisioning and funding so that they can deliver the best customer experience on their end. So I think those are all the things that will help to continue to improve our relationships with our dealers, but certainly I would characterize our relationship as strong and reinforced through what's been a pretty challenging time.

Are most dealers ready for a more robust digital experience?

It's a mix. It really just depends on what part of the process our dealer customers are trying to digitize. If we go way back, there was a lot of focus on e-contracting and digitizing the actual contract. Creating a more seamless experience for the customer to sign, remote sign or e-sign — whether it's in the store or remotely — and then using that digital contract as a faster way of getting that document to us as a lender. Then on top of that, we can process that more quickly. We've seen heavy adoption on the front end. When we think about e-contracting and remote sign or e-sign, a lot of that has been accelerated by the pandemic.

Where it starts to separate is full online experiences where a customer can start shopping online, find the car, understand their trade, select the car and purchase fully online. That's where you start to see separation with dealers, and many are on different parts of that journey. What we've done is we're partnering with our dealers to understand where they are in that journey. And we're working really hard to bring those capabilities — whether it's single capabilities around remote sign or in e-contracting or broad capabilities where we can plug into their online experience and receive applications digitally — and then help them fund electronically.

How close are you with automated decisioning?

We've made a lot of progress to date, and we've still got some ways to go to get to our goals here. We're at about 60 percent automated on our credit decisions today. Keep in mind we're a full-spectrum lender, so it's important to us that we strive for more automation. We'll continue to see that number go up in 2022. But we also believe that we need skilled underwriters to help for an automated decision process because not all deals are easy to automate. And we know our dealers — they like the opportunity to have a relationship where they can work deals and get customers in cars as much as they can.

Is it possible to achieve 100 percent automated decisioning?

One of the ways that we're looking at it is, we're going to continue to test it and learn. As we increase our automation, what is the consumer experience? What is the dealer experience? Are we still competitive as we increase automation? Because there's two ways to automate — auto approval and auto decline. Automation also includes the counteroffers.

As we look at it, 80 percent is probably a good spot to aim for us right now because at some point we're still going to want to have the underwriter involved — but we'll see. We're going to continue moving that number up and understand the consumer and the dealer experience and that will tell us where we need to be.

How do you balance your dealer customers' capabilities with the rapid acceleration of digitization that many consumers favor?

Our business today is 100 percent through dealers. Because of that, we're always balancing what the consumer is looking for as well as what the dealers are looking for. What our dealers are telling us is they want the same thing. They want flexibility for customers who want to do things online. So we have to show up and we have to be a good partner there with capabilities. Our dealers are also telling us that they want the flexibility for a customer to start online and finish in the store, so that's where making sure we're flexible with how we bring those solutions to our dealers is really important. So I think it's something that we carry together, frankly, as a lender partner with our dealers.

Have you noticed whether the move to more digital deals has resulted in the sale of more F&I products?

Anecdotally we do hear from our dealers that they are seeing much more F&I success as far as aftermarket products and customers selecting more online. If you think about a customer being online and having full transparency to the options that are available, they have time to really understand and do research potentially on what's being offered. I think they get more comfortable with that level of transparency online. It's not a data point that we track ourselves, because when we receive business from dealers, we see it whether the customer was in the store or online. Our goal is only to support the dealers with options, but we're not necessarily tracking specifically fully digital experiences on our end.

Are direct loans a possible business strategy in the future?

Yeah, I would say it's definitely an area of focus for us as we go into 2022. As a part of a larger bank, it's really important for us that we have Wells Fargo customers, that we want to make sure that we're providing auto loans as an offering for them because we want to be their full bank. Today, if a Wells Fargo customer wants an auto loan, they would start with a dealer and they'd likely request Wells Fargo as their bank or as a consideration. So we're definitely looking at opportunities for us to go into the direct-to-consumer space, but we will do that with our dealers. Dealers still have the inventory. We have over 11,000 dealer relationships, and that's important for us to continue to keep that connectivity between a Wells Fargo customer and our dealer relationship.

How has the chip shortage affected business at Wells Fargo, and what have you learned during this crisis?

We talk to our dealers every day and we understand through their lens the impact of the chip shortage and how that's contributing to inventory constraints for them. And it's been interesting because it definitely makes their job harder, especially on the new-car side although on the used-car side, we started to see that level out quite a bit. Some of our learning has been just seeing the supply and demand dynamic and what we've all learned as this has played out.

We do continue to see or hear the chip shortage will take some time to resolve itself, so that puts pressure on inventories. But we're primarily a used-car lender. Our origination mix is about 70 percent used car. So for us, while there's continued pressure on the new-car side, what we're seeing is, because we're primarily used and that's where our program has been focused, we're seeing a positive impact on our originations. We continue to see really strong origination volume. And that's driven by two things: one, our focus on used cars; but two, used-car prices have helped to benefit our overall originations numbers. The other place where that's been a benefit for us is on the remarketing side. So if you think about the back end of our business, as we're selling repossessed units, we're also seeing a positive effect there.

What is your approach to F&I sales?

Aftermarket is definitely a place that's important for dealers. Customers certainly find value in these products — protects their purchase, protects from uncertainty down the road. From a lender perspective and as a lender, we look at the aftermarket product as part of the financing. So if a customer chooses to purchase and finance aftermarket, we're looking at it relative to, is it within our risk appetite with the goal of supporting our customers with an affordable loan. In the end, we're working with our dealers to understand what types of aftermarket they're considering to finance for their customers. And then, with each decision, we're looking at that customer and just ensuring that the loan that they get that includes that aftermarket product makes sense for them.

You're involved in diversity, equity and inclusion efforts at Wells Fargo. How do those efforts work their way into auto lending?

DEI efforts for the company are pretty significant. We're very supportive of creating a culture where everyone feels like they can bring their true selves to work every day. I've been leading an effort for our consumer lending business as one of the co-chairs for our Diversity, Equity and Inclusion Council. It is a personal commitment of mine to be involved in all the programs and the initiatives that we roll out.

When we think about diversity, it's not just about representation, which we're committed to at all levels and we're continuing to track and make improvement — particularly at senior management level. But even within our auto business, we think about diversity of experiences for all of our employees. How do we bring those experiences to our ideas for our business and what we take to market for our customers as well as our dealers. Definitely [it's] a big factor in the culture of our business and how we show up in the market with our customer and dealer relationships.

Our focus is going to be on responsible lending. Ensuring that we are inclusive in our lending practice is important to our business. There are different ways that we would track and monitor and ensure that we're being an inclusive lender, so the DE&I does play a role in our F&I business from that perspective. I think there's continued progress to be made, and I think we'll see this industrywide as more data becomes available. As we continue to evaluate our models, we will lean into how we ensure we're creating more inclusive practices for responsible lending.