Technology Powers Productivity Benefits in the Auto Credit World, Too!
by Keith B. Stein

At first glance, the room looks like any contemporary office scene. Ever so quietly, neatly arranged platoons of employees scrutinize data on computer screens, or speak in hushed, muffled tones into tiny microphones wired to their headsets. Periodically, telltale hums and whirrs signal a document’s creation or transmission. Cynics might entitle it all “a Dilbert slice of life.”

But they would do so in error, and do the platoons of talented employees a gross disservice. Study this scene more intently and one will start to grasp why our economy continues to thump along like an Energizer bunny.

With scant fanfare, technology is now delivering to the service realm the same kinds of productivity elixirs that helped nourish American manufacturing’s stunning renaissance. Indeed, since a majority of U.S. employees toil in the service realm, technology’s latest contributions may prove to be even more dramatic. At last, we are enjoying the dividends in office productivity that were first promised more than a generation ago.

Most significant of all, these dividends don’t benefit just the behemoths that drive the stock exchanges or this week’s dot-com darlings. Companies of virtually every stripe who compete in the less-heralded corners of the service world are equally enriched. Our relatively modest financial services company stands as one example of how technology is arming firms with potent weapons that can be wielded to achieve whatever growth plans are on the table. Interestingly, while the Internet is certainly among them, it remains but a part of this arsenal, at least for the moment.

Wielding these weapons properly, we now can manage and direct our resources with a precision, a squeaky-clean efficiency and an overall effectiveness that we once could only dream about. Without these weapons, in fact, organizations like ours might well contemplate bleak and uncertain futures.

Just how is technology humming within our walls? Let me show you around.

Our collections operation has been streamlined by numerous advances. First, a “predictive dialer” speed-dials 50 telephone numbers simultaneously, five for each of our 10 collectors. This enables our staff to concentrate on their No. 1 task: talking to customers. Upon completing a conversation, the dialer will reach another customer within 15 to 30 seconds. All told, we get equal or better results from significantly fewer positions, thus significantly cutting our overall cost of collection services. While the payback is proving to be the 12 months we estimated, another payback is more important. Our collections staff enjoys speedier, more challenging and more satisfying days, and not solely because it can maintain tremendous productivity levels. Because the dialer is linked to department computers, it also retrieves data about the customers staff members are speaking with, to help them direct conversations.

A second telephony advance further assists collections. First, the voice response unit in our telephone system directs callers to a menu system. Then, if the account number that a customer dials in is past due, the call will be automatically routed to the collections department, thus creating an opportunity to discuss the account’s status and help us collect a payment.

Our business partners bring more technology to our cause. Western Union, to cite one, provides a trio of capabilities. For a modest flat rate, “Quick Collect” enables customers to wire money directly to us and immediately update accounts. The impact has been dramatic. Within an hour after talking to a customer, a collector can confirm that payment has been made in certified funds and the account credited. Western Union also has given us the ability to literally print a customer’s check in our office. While this service has stringent guidelines based on payment history and is extended only to our better customers, it, too, has made a positive impact – as have a special set of collection letters, Western Union’s third automated service. Its design and bright yellow envelope, combined with efficient distribution, has proven very effective in getting people to take it seriously.

Technology has made a positive impact elsewhere, as well. The single, completely integrated database we have installed has both improved the integrity of our customer account information and made it accessible to every part of our business. Being able to store and retrieve all comments – from initial discussions with the dealerships that we arrange loans for to the point when a customer pays off a loan – reflects still more progress. And thanks to a new imaging system that copies and stores all our documents, collectors can pull up the information almost instantaneously and start working on an account. The time saved has generated yet another significant productivity gain. 

Yet, the most dramatic and far-reaching technological advances can be found in the so-called “front end” of our business. 

Built expressly for us from the information we provided from some 10,000 loans, our “credit scoring” system gives us a tool to project the future performances of prospective loans, based on past information. What we now have is consistency that individual buyers making individual decisions for individual dealers couldn’t begin to match, given the myriad forces at work in our financial niche. Being able to assure dealers and customers that each application will get the same consideration, regardless of who looks at it or who sends it in is a striking advance, and has immeasurably strengthened our decision-making process at the same time.

And, that’s just the beginning. Enlightened by this data, and by related performance factors, we can project loan performances and results, and fine-tune our entire business as never before. If, for example, we feel we need to achieve a certain loss rate, we now have information to help guide our strategy. Even more significant, we can tap into data to help us determine what kinds of loans we should be pursuing. It’s not a fail-safe system, of course, but it is leaps and bounds better than what we had before.

Similarly, technology helps us forecast far more accurate operating results. Given what we know about the loans we’re making and their respective risks, we can manage with more precision. Indeed, we can almost customize our risk factor – which gives collectors yet another leg up: the data that our credit scoring system generates strengthens our ability to build a sound portfolio. And, it already has bestowed an unexpected benefit: First installment defaults have dropped sharply since the inception of our credit scoring system. 

Odds are, such defaults will keep tumbling. Thanks to parameters that technology helps us set, we weed out bad loan applications faster, and before our buyers ever see them – so they can focus on business worth pursuing and use their talents to structure deals worth making. We now kick out 10 to 12 percent of applications we receive daily. That alone represents an immediate 20 to 30 percent increase in overall efficiency. Moreover, this technology enables us to review100 loans per day. Without it, we would do well to review 45 or 50.

In addition, technology-derived parameters help our loan buyers fairly and consistently price loans. In short, buyers can focus on credit analysis and determine if we should make the loan, and at what payment – much as our collectors can concentrate on collections. This is yet another quantum leap.

Yet, the implications of technology’s benefits are more staggering still.

For one thing, we can avert virtually all concerns about discrimination. That alone is priceless. Equally important, we can predetermine risk far more accurately. Already, for example, we’ve learned that some factors we thought were important predictors were not, while some of  the factors we used to ignore altogether turned out to be tremendously important.

All told, we are now blessed with decision-support data that gives us a far better feel for how we allocate funds and utilize our resources. Even a small competitor like NAFI already possesses more information today that even a giant, mature competitor would have had 15 or 20 years ago … because the information simply didn’t exist then. And, because we are far more savvy about our business, we have improved operations, boosted our ability to service greater volume at this facility, and positioned the organization to attain the next competitive level it aspires to reach.

Make no mistake, however. We still need human resources to realize our goals. Given the size of our organization, our investment in technology is very substantial – as visitors to our company have expressed. And, it enables us to operate with a smaller staff than we otherwise would need. Still, we continue to seek skilled individuals, because a quality technology platform still depends on people. So do the quantum leaps in service sector productivity we now enjoy.

These same leaps deliver one final contribution. It’s a benefit that merits serious consideration.

For capitalism to flourish, it needs to direct resources into the right hands as efficiently and as quickly as possible. In the final analysis, technology has brought us the tools to direct our assets and capabilities incredibly faster and with eye-opening precision. It may look mundane, but it really is marvelous. And it may well be a key reason why our economy, like our office, keeps humming.


Keith B. Stein is Chairman and CEO of National Auto Finance Company, Inc. (NAFI), a publicly-held non-prime auto finance company headquartered in Jacksonville, Florida. Mr. Stein’s unique 15-year background as a corporate finance lawyer, investment advisor and business change agent has given him unparalleled experience and expertise with everything from raising capital through IPOs and asset-backed securitizations to financial and management restructurings and implementing advanced technology. At NAFI, Mr. Stein has proven himself in a substantial way by dramatically turning around an organization devastated by changing market conditions, ineffective management, unaddressed technology issues and a lack of investor confidence. He may be reached via e-mail at kbstein@yahoo.com.

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Copyright 2000 by Keith B. Stein. All rights reserved.

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