Investor capital is flowing to tech startups looking to automate the origination process, putting traditional direct lenders in a “waiting moment” for the industry, said Gerry Quinn, vice president of business development and business development. the commercial strategy at CarFinance.com.

Before direct lenders can attract more investment, they will need to prove themselves in the digital space, Quinn told AFS 2016.

Joe Pendergast, assistant vice president of consumer loans at Navy Federal Credit Union, echoed this sentiment and said most of the money is currently going to startups.

“I think it’s probably smart for any bank, financial institution, or credit union to perhaps consider a fintech acquisition or buyout so you can access their skills,” Pendergast said.

Appealing to millennials with a new digital offering and building relationships with dealers to limit the turnaround remain challenges in the direct lending space, agreed Quinn and the other panelists.

CarFinance, in particular, plans to address the dealer problem by leveraging its relationships with 10,500 franchised dealerships under the Flagship Credit Acceptance brand, its indirect unit, Quinn said. By the end of the year, the company hopes that its
efforts will reduce consumers returned to the dealership.