Tools to Boost Auto Lending

By Betty Seifu, Lending Program Manager, Allied Solutions.

A recent report released by the National Automobile Dealers Association predicted an increase in auto sales and leasing for a third straight year in 2017.[i]

With these car activities building momentum among consumers, there is an increased opportunity, and honestly, a need, for a strong game plan for scoring these potential auto loans.

Not only are you already competing with other financial institutions for loan opportunities, but now you’re also up against new players who have entered the field. Less traditional businesses like retail, mobile and peer-to-peer lenders are getting into the game to expand their services and attract new members.

This poses a threat to what credit unions have been seeing in terms of winning over auto lending consumers; many individuals are now looking for the best deal on the market no matter who is offering it to them.

Get ahead of your auto loan competition by building a strong lending program with unique and attractive consumer benefits.

Rewards Programs

Offering retail or cash rewards to borrowers who finance their vehicle through your institution is one way to draw in new auto loan business. One vendor surveyed participants of their auto rewards program and found that 95% of the respondents rated the program 5 out of 5 stars. In fact, this program vendor reports that their auto rewards program has increased their lending approval-to-book ratios as much as 90% on direct auto loans![ii]

Consumers are clearly very interested in auto loan rewards. And why wouldn’t they be? It is basically free money! These programs are likely to entice your consumers and generate a lot of new auto loan traffic for your institution, so why not sweeten the pot with multiple benefits for your borrowers?

Load up the bases so you can get that grand slam!

Cash Rebates

An independent study performed in 2016 by Aha! Online Consumer Research reinforced how much of a win-win complementary benefits really can be for lending institutions and businesses alike. More specifically, the study found that just about any individual presented with the opportunity to earn cash back would be interested in participating. In fact, 97.3% of consumers surveyed said they want their insurance company, employer or association to offer a cash back rewards program.

Much like a retail incentive in an auto rewards program, do not underestimate the value of a rebate check! According to this study, 82.6% of consumers surveyed prefer receiving a $500 check from their employer, insurance company or association over an offer of $1,000 off the price of a vehicle.

Take a look at the scoreboard: consumers want cash back, so offer them cash back!

One such cash-back rewards program offers a $500 rebate check to consumers leasing or purchasing a new vehicle from participating vehicle brands. This auto rebate program, called BonusDrive, is new, simple and quite attractive to consumers in the market for a car. In fact, BonusDrive is so new you may not even have been aware of its existence.

This puts you in pretty good field position considering that your competitors have likely not even heard of auto rebate programs, let alone thought about offering a program of their own.

By marketing this program to your consumers you place yourself at the top of the roster for financing when it comes time for your consumers to apply for an auto loan on their new car. Move to the top of the league today by adding unique auto loan benefits programs to your starting lineup. With the added bonus of being able to market and cross-promote these various programs, you will ensure that your credit union stays top of mind for consumers looking to choose an institution for their car buying and financing needs. Game over. The final scores are in and everyone wins!

Be sure to catch up on Allied Solutions’ recent auto loan podcast series to learn ways your credit union can take action today to better attract modern consumers, especially millennials. These podcasts address how to use market data to attract auto purchasers and utilize digital communication channels to invest in a stronger auto loan program.

Listen now: 

Building a Competitive Auto Loan Package: Go Big or Go Home

Understanding the Auto Market: Get Into the Minds of Millennial Buyers

New Allied logoAllied Solutions is the NAFCU Services Preferred Partner for Insurance- Bond, Creditor Placed (CPI), Guaranteed Asset Protection (GAP), and Mechanical Breakdown Protection (MBP). More educational resources and partner contact information are available at www.nafcu.org/allied.

 

[i] National Automobile Dealer’s Association https://www.nada.org/steven-szakaly-auto-sales-forecast-2017/

[ii] AutoLine Marketing Group http://myautoline.com/

 

The 3 Most Effective Methods for Managing the Equifax Breach

By Ann Davidson, VP of Risk Consulting at Allied Solutions.

The enormity of the Equifax® data breach has left a wake of fear and frustration among businesses and consumers alike. Names, social security numbers, birth dates, addresses, driver’s license numbers, and other pieces of private data were stolen from an estimated 143 million American consumers earlier this year.

Below are a number of things you can do to better protect your business and consumers from potential fraud exposures in the wake of this massive data breach:

1. PlanImplement rigorous security measures to better catch fraud attempts before they occur

  • When authenticating an account user, require personal information (i.e. high school crush, best friend from childhood, pet’s name) along with identifying information for access to the account to help prevent the identity theft of your consumers.
  • Require that the account holders have a password or passcode to access their account
  • Use multi-factor authentication:
    • Who you are: Inherence factors, such as biometric methods
    • What you have: Possession factors, such as ATM card numbers
    • What you know: Knowledge factors, such as password, pin or secret question
  • Don’t just rely on SSNs, birth dates, home addresses or driver’s license numbers for granting account access.
  • Adopt advanced tools, like biometric authentication, for verifying the identity of account holders.
  • Verify you have up-to-date contact information for all of your members’ accounts, including consumer cards and online accounts.
  • Set up a website with information regarding how you plan to communicate with your account holders about updates related to the Equifax cybersecurity breach.
  • Post and share contact resources and information for consumers so they know where to go to have their questions or concerns addressed.
  • Share educational resources and tools with your account holders that aim to help them prevent and manage identity theft and fraud.
  • Train staff on fraud warning signs and job-relevant fraud prevention/response procedures.
  • Proactively build a response plan, so you can swiftly implement the plan should any fraud exposures occur. See our Data Breach Preparedness Checklist for recommendations on building a strong plan.
  • Monitor likely points of entry for fraud, such as:
    • New membership requests
    • New products or services requests
    • Change of account holder information for existing members, such as change of address
  • Purchase institutional coverage that ensures your financial institution should a cyber attack occur.
  • Consider partnering with an identity theft vendor that offers “deeper” fraud monitoring services for consumers, namely:
    • Dark web monitoring
    • Social security monitoring
    • Address change monitoring

2. RespondAct swiftly and efficiently to help protect your business’s finances and brand, should an exposure occur

  • Set-up a designated resource or hotline for handling account holders’ concerns and questions related to the breach, such as:
    • Answering questions about fraud and identity theft
    • Assisting with credit and other monitoring services enrollment
    • Assisting with placement of fraud alerts
  • Offer professional identity fraud investigation and fraud remediation services.
  • Consider providing credit/other monitoring services at no-cost for consumers.
  • Contact Allied Solutions’ risk consultants if you are experiencing an uptick in identity fraud so we can help you to minimize the fraud exposure.
  • Notify law enforcement and regulators about the exposure.
  • Work with internal or external resources to notify your members about the breach:
    • Draft notification letters
    • Distribute employee scripts
    • Create FAQs for website
    • Write and send press releases
  • Contract with external resources to provide printing and mailing services for notification letters.
  • Contract with external resources to provide specialized legal assistance and forensic investigative services, if necessary.
  • Send out educational information to your consumers, about recommended steps they should be taking to protect themselves from identity theft, such as:
    • Monitoring accounts daily
    • Registering for free fraud monitoring services
    • Purchasing comprehensive identity theft protection
  • Use multiple channels to communicate with account holders – email, direct mail, text, etc. – so you are reaching them through their preferred channel and device.

3. Recover: Evaluate fraud damage and response effectiveness so you can modify your breach prevention and response measures accordingly

  • Evaluative questions to ask:
    1. Where did the fraud occur, and what could you have done to better protect that point of compromise
    2. Are there security tools you need to purchase or replace to more effectively prevent breach exposures?
    3. Where were critical errors made in following the plan’s procedures?
    4. Where did the procedures come up short in providing the direction that the team needed?
    5. What steps/issues could have been avoided with proper pre-planning or different procedures?
  • Once you have answered all of these questions:
    1. Prioritize next steps for improving your breach prevention and/or response processes.
    2. Implement prioritized changes immediately.
    3. Train employees on lessons learned and new processes.
    4. Set-up a timeline for adopting all other changes.

As you work to mitigate the impact of the Equifax breach, we strongly urge you to also share breach information and updates with your consumers, while also educating them about how they can prevent and manage the risk of identity theft. Watch Allied’s recent webinar for more best practices for educating and protecting your members in light of the Equifax breach.

Also, for a dive into the root causes of fraud and for advice and tools on how to prevent future attacks listen to our fraud series webinar here.

Sign up for Allied’s Risk Alert newsletter if you are interested in receiving regular fraud and security related insights and education.

Allied Solutions is the NAFCU Preferred Partner for Insurance—Bond, Creditor Placed (CPI), Guaranteed Asset Protection (GAP), and Mechanical Breakdown Protection (MBP); and rateGenius. Learn more at www.nafcu.org/allied.

NAFCU Services Announces 2017 Innovation Award Finalists

We are proud to announce the 2017 Innovation Award finalists. An Innovation Award is the highest distinction offered to a NAFCU Services Preferred Partner. The awards honor the companies that demonstrate extraordinary creativity and commitment to solving challenges specific to credit unions. The 2017 award winners will be announced at the NAFCU 50th Annual Conference and Solutions Expo this June in Honolulu, Hawaii.

“I am proud of the unique and innovative solutions our partners bring to the credit union industry year over year,” said NAFCU Services’ President, Randy Salser. “The solutions created by these partners mean success for credit unions in the form of better bottom line, competitive advantage, and enhanced member engagement.”

Each year, a panel of judges evaluates solutions based on the degree of innovation and the impact on credit unions’ success. The judges include prominent members of the credit union media and respected industry executives. The 2017 judges are: Adele Glenn, Emerging Channels Innovation Architect at the San Antonio Federal Credit Union, Steven W. Gorrie, CPA, Chief Financial Officer, State Farm Federal Credit Union, Mike Lawson, Creator and Host of CUbroadcast, Jim Pack, Senior Vice President, Chief Member Service Officer, Coastal Federal Credit Union, and Randy Smith, Co-founder and Publisher of CUInsight.com. Learn more about our esteemed judges: Meet the 2017 judges.

Learn more about the 2017 Innovation Award Finalists by clicking here

Affinion Group for the LUX 360°℠ Analytics Package

CUNA Mutual Group for TruStage Life Insurance

DDJ Myers for the Transformative Change Model (TCM)

Geezeo for Responsive Tiles

Insuritas for +Plus Down Payment Protection

Mastercard for the Mobile Product Showcase

Pentegra Retirement Services for The Pentegra Fiduciary Outsourcing Advantage

Q2 for Q2 SMART

Quantivate for Dynamic Workflow Engine

TrueCar for Integrated Car Buying Service

Velocity Solutions for CashPlease

Vantiv for OmniShield

Vantiv for Vantiv Resolve

Wolters Kluwer for E-Sign

 

The Most Popular Posts of 2016

2016 was an eventful year, and the experts have provided educational material you can’t miss. From card fraud to millennials, credit scores to new IRS regulations, we’ve rounded up the top 5 webinars and blogs that cover the most important topics of the year. Keep yourself in-the-know and be prepared for a strong, successful 2017.

Webinars

Card Fraud on the Rise: How Financial Institutions Can Help Prevent It
Ann Davidson, VP of Risk Consulting at Allied Solutions; Tammy Behnke, Program Executive at ProSight Specialty Insurance

Possibly the most relevant concern for financial institutions right now is costly card fraud risks. Learn the fraud prevention best practices that could save your credit union from hundreds of thousands of dollars in payment card losses.

Understanding Credit Scoring and Credit Reports
MaryKay Scully, Director of Customer Education at Genworth Mortgage Insurance

Everything you need to know about credit scoring and reports, inside and out. This webinar covers report preparation, the information contained and where it comes from, what types of reports are available, how to use the codes in each section of the report, how the scoring model works, and more.

NAFCU/BFB Gallagher 2016 Executive Compensation Survey Report
Christine Burns-Fazzi, Co-Founder of BFB Gallagher; Jack E. Clark, PhD, Clark Research Associates

Now in its 10th year, the annual NAFCU/BFB Gallagher Executive Compensation and Benefits Survey is the trusted source for comprehensive data on credit unions of all asset sizes, coast-to-coast. Get data on important topics like total executive compensation by asset size, types of nonqualified plans, demographic profiles, and more.

Top Risk Concerns: A Look Back and a Look Ahead
Ann Davidson, VP of Risk Consulting at Allied Solutions; John Buzzard, Product Manager of Network Products at FIS Global

Don’t wait until disaster strikes. Arm your credit union with the knowledge of the most prevalent risk exposures from years past, and prepare for 2017 with the best methods to mitigate these risks.

Data Breaches Continue to Rise: How Financial Institutions Can Prepare & Respond
Ann Davidson, VP of Risk Consulting at Allied Solutions; Sally King, Managing Partner and Co-Founder of NXG Strategies

Build a proactive data breach response plan that will help reduce the financial and reputational impact of an attack inside your organization or in your community. Get educated on secure policies and third-party programs, effective account holder response plans, methods for offsetting the costs of responding to an attack, and compliance with FTC regulations.

Blogs

Four Emerging Risks Challenging Credit Unions Today
Roger Nettie, Senior Risk Management Consultant at CUNA Mutual Group

Four major emerging risks at-a-glance: wire transfers and ACH, overdraft fees, collection letters, and ATMs and the Americans with Disabilities Act (ADA) compliance.

How to Speak the Millennial Language
Larry Pruss, Senior Vice President of Strategic Resource Management

Making up nearly 25% of the US population, it’s no wonder millennials were one of the hottest topics of discussion in the financial services industry this year. If you know how to connect with them, millennials represent a huge opportunity for your membership, educational content, and sales teams. Read the top five tips on how to leverage a millennial engagement strategy today.

Card Data Breach Loss Prevention Checklist
Ann Davidson, VP of Risk Consulting at Allied Solutions

Eleven key steps to ensure your credit union is doing everything possible to prevent card data breaches. From evaluating the compromised card number and determining the level of risk, to reporting the fraud to the Visa Fraud Reporting System and/or MasterCard’s Safe System (a requirement under card association rules), you can’t afford not to implement these best practices.

The 7 Most Expensive Vendor Management Mistakes
Patrick Goodwin, President of Strategic Resource Management, Inc. (SRM)

Even the wisest professionals at financial institutions overlook savings opportunities when dealing with third-party vendors. From the insidious, to the emotional, to the downright dangerous, here are the most expensive mistakes credit unions make with their vendors—and how to prevent them.

Card Fraud Lessons Exposed
Ann Davidson, VP of Risk Consulting at Allied Solutions

When Allied Solutions presented a webinar on card fraud, they conducted a poll and found that 81% of attendees had personally experienced an uptick in card fraud during the preceding 12 months. Allied reached out to individual financial institutions to perform an assessment of their risk programs and help uncover potential causes of the card fraud they were experiencing. Read on to find out what they found.

 

Back-of-Card Branding Webinar Q&A

MC_backofcard_brandingAnd the questions kept on coming! One of our last webinars of 2015, “Preserving Credit Union Income:  The Impact of Back-of-Card Branding to Your Bottom Line,” sparked so many questions that Caroline Heller, industry expert and webinar speaker, decided to follow up to those we didn’t have time to address during the webinar.

To Catch You Up…

On average, approximately 20% of a credit union’s non-interest income is derived from payments.  In recent months, many institutions have seen some erosion of their payments-based income, but have not been able to specifically identify the source of the erosion.

This webinar helps your institution focus on one area of potential revenue erosion – back of card branding.  In addition to the brand mark found on the front of your debit card, there are usually one or more brand marks present on the reverse side of the card.  It is important to understand the implications of the back-of-card brand marks to your transaction routing and subsequent revenue stream.

Watch the full webinar here:

Click here to watch the presentation in a new window

Webinar Q&A

Caroline Heller, Vice President of Core Payments Solution Sales with MasterCard, responds to your questions:

1. What are a few of the key questions we ought to be asking our current back-of-card brand to ensure our revenue is not eroding?

  1. You may request these reports from your PIN Networks and/or your processor.  First, request reporting that separates PIN transactions from PINless. Ensure you have transaction count, amount, and interchange earned. These may come from various reports vs. one report. Second, request historical reports to look for trends of the above.  Look at a year ago (or two.) Is PINless increasing?
  2. Ask if your PIN Network supports dual message (aka “signature”) transactions or if they have plans to support in the future.
  3. Request current and historical Top Merchant Reports to look for trends.  Is their significant growth (above your overall growth)? This could be a shift from your other PIN network or from signature debit transactions now routing as PIN.  Compare the Top Merchants across all of your networks.

2. How do we know the optimal number of PIN POS Networks on the back of the card?

You may want to consider pairing down the number of PIN POS Networks on the back-of-card.  For instance, if you have 3, I would consider reviewing the economics and need for each network.  If it makes sense, I would limit to 2 networks.

3. Right now we have a rewards program that only gives points for signature debit transactions. Is that still okay, or what do you recommend?

I recommend doing a thorough profitability analysis on your portfolio including the cost of rewards and the estimated increase in usage before changing anything.  However, there are a few things to consider:

  1. When cardholders are encouraged to use their card for all purchases, regardless of signature/PIN, both transaction types tend to increase.
  2. The signature vs. PIN methodology will become more complex with EMV. For instance, a cardholder could enter their PIN, and the transaction is still routed dual message to MasterCard or Visa (what would have been a “signature” transaction prior to EMV).
  3. PINless transactions as they work today definitely are confusing to cardholders when they are motivated to sign for the purchase. The cardholder is not given a choice at the point-of-sale for these transactions when the PIN network is participating in PINless transactions.

4. Can you explain the term ‘exempt issuer’?

ExemptIssuer2I am referring to Section 1075 of the Dodd-Frank Act (aka “Durbin Amendment”).  One portion of the Durbin Amendment caps debit interchange with specific exemptions.  One exemption is for small issuers defined as an issuer with assets less than $10B.  These issuers are often referred to as “Exempt Issuers” when talking about debit interchange and profitability.

This ABA article details the competitive advantage of “exempt issuers” over “regulated issuers” relative to Durbin.

5. Are there any negatives to the issuers that opt out of PINless? Loss of small transaction volume, customer satisfaction, anything else?  

Generally speaking, we don’t believe there would be any negative repercussions were you to opt out of PINless, neither relative to volume or revenue, nor to customer satisfaction.

6. In the event that we were to manage opting out of PINless with our PIN networks, would those transactions which might route as PINless fallback on signature rails?

Yes.  These transactions would likely fall back on signature rails with no signature required.

7. I am an FI. To whom do I opt out of PINless with? MasterCard or my network?

You would opt out with PINless on your PIN Networks.

8. How is EMV going to affect routing? 

The Card Verification Method (CVM) on an EMV card authenticates the Cardholder, but does not dictate routing.  A cardholder could enter their EMV Card PIN, and the merchant can route the transaction to any of the applicable networks on the card including MasterCard or Visa.

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MasterCard is the NAFCU Services Preferred Partner for Credit, Debit, and Prepaid Branded Products. For more information, please visit www.nafcu.org/mastercard

©2015 MasterCard Worldwide Proprietary and Confidential

The information provided herein is strictly confidential.  It is intended to be used internally within your organization and cannot be distributed nor shared with any other third-party, without MasterCard’s written prior approval.

Information in this response relating to the projected impact on your financial performance, as well as the results that you may expect are estimates only.  No assurances are given that any of these projections, estimates or expectations will be achieved, or that the analysis provided is error-free.  No reliance can be made on this response and MasterCard will not be responsible for any action you take as a result of this response, or any inaccuracies, inconsistencies, formatting errors, or omissions in this response.   This response constitutes willingness, in good faith, by MasterCard to explore the possibility of a business arrangement between the parties and does not contain all matters upon which agreement must be reached in order for the proposed transaction to be established.