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.