Real-time lending is a type of financial technology that allows borrowers to receive funding in a matter of minutes, rather than hours or days. This innovative method of lending is made possible by cutting-edge technologies that allow lenders to quickly assess a borrower’s creditworthiness and make a decision on whether to approve the loan. While traditional lenders may take days or even weeks to process a loan application, real-time lenders can often provide funds within minutes of receiving an application. How would real-time auto loans make an impact?
As financial institutions think about the opportunities to monetize their investments in faster and real time payments, one of the use cases that is frequently discussed is providing loan proceeds. While transaction speed is nice to have, the ability to transact over weekends and on banking holidays probably has a greater impact.
Today, U.S. Bank announced that they are offering auto dealerships the opportunity to receive loan funds immediately after a loan contract is finalized by the bank. The transaction is processed through The Clearing House RTP network and is now available at 800 dealership locations.
Here’s more from the bank’s press release:
Following a successful pilot completed in June, U.S. Bank has already enabled more than 800 auto dealers to receive funds from auto loans via a real-time payment. The bank expects to deliver the solution to more dealers in the coming months as the bank continues to improve operational efficiencies for auto dealers.
While the traditional ACH payment method for funding auto loans can take several days – especially when sales are made outside of banking hours – real-time payments to dealers are fast, secure and available seven days a week, including holidays.
Auto dealers using real-time payments gain a competitive advantage, with greater control over cash flow and improved Contract-in-Transit metrics, a key performance indicator for auto dealers and their employees. The solution is also available to recreational vehicle dealers.
U.S. Bank is focused on delivering innovative real-time payment solutions to resolve what our customers tell us are their payments pain points,” said John Hyatt, president of dealer services at U.S. Bank. “We’re simplifying loan payment processes to help our dealer clients better control their cash flow, which gives them a competitive edge and peace of mind. Dealer interest in this solution over the last few weeks has grown rapidly, with many particularly excited about finalizing their deals within moments after a consumer is approved for a loan, especially during the evenings and even on Saturdays and Sundays.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group