Inovatec, AFG Canada to Provide Auto Lease Services to Canadian CUs
By Roy Urrico
Two British Columbia, Canada-based fintechs — Inovatec Systems (Burnaby) and AFG Canada (Vancouver) — announced they reached an agreement to support automotive leasing programs available to Canadian credit unions. As part of the partnership, AFG Canada will leverage Inovatec’s consumer direct portal to provide lease origination services to credit unions.
AFG Canada provides technology and staff that enables Canadian credit unions to offer automobile leasing programs to consumers and businesses. AFG Canada manages the residual value risk and the vehicle turn-in process, making the leasing experience more convenient for members.
By integrating technology from Inovatec, a provider of cloud-based lending solutions, into its offering through an application programming interface (API), AFG Canada now allows credit unions to add automobile leasing services without having to invest in infrastructure or personnel. This enables credit unions to quickly offer auto dealers competitive leasing programs.
“Our partnership with AFG Canada will directly benefit the hundreds of credit unions across Canada that are eager to offer compelling automotive leasing programs to consumers and businesses,” said Vlad Kovacevic, co-founder and chief executive officer of Inovatec. “We always strive to deliver innovative origination and management features that enable our customers to expand their portfolios, increase revenue, satisfy customers, and lower expenses. The relationship with a like-minded organization like AFG Canada gives us the ability to help credit unions provide competitive leasing options to their members.”
Inovatec’s cloud-based solutions enable lenders to expedite underwriting and improve loan management through intelligent automation customized to meet lender needs. “We are very proud to join forces with Inovatec, which has been at the forefront in creating reliable, secure, and flexible origination and management solutions for lenders,” said Mark Caschera, vice president of AFG Canada. "We are confident that this partnership will become immediately beneficial to the many Canadian credit unions that are looking to add leasing programs to their portfolios.”
Releasing Indirect Lending for Credit Unions
Inovatec, founded in 2006, set out to create a best-in-class infrastructure, systems and processes designed to facilitate all aspects of online loan origination and loan management workflows quickly and securely and protect against what it says is “book-to-look” (the number of people who visit a website compared with the number who make a booking) erosion.
Inovatec Systems lending solutions include:
• Inovatec Direct Portal allows vendors and lenders to communicate in real-time from the point of an application’s submission through booking.
• Inovatec LOS (loan origination system) offers crediting, auditing and income verification for financing applications, and supports self-configurable credit decisioning, tolerance limits and risk parameters with full auto decisioning and scorecard capabilities.
• Inovatec LMS (loan management system), provides servicing and after-care for loans, leasing, consumer/commercial customer service and collections, and third-party vendor management.
Bryan Smith, head of customer growth and strategic partnerships at Inovatec Systems, said “Our bread and butter is really in automotive finance cases, but a few years ago we branched out into power sports, marine financing, all those fantastic toys, as well as home improvement and a few other assets, even unsecured money. Leasing is a big part of our component.”
Caschera explained AFG Canada, the sister company to Houston-based Auto Financial Group guarantees residual value, when it comes to auto leasing. They offer residual based financing as well as lending. “We seek out lenders and partners that can distribute funds, adjudicate loans, process the loans, service the member, and then AFG Canada will provide that residual value guarantee.”
AFG Canada also provides the networking and the system tool calculator and together with Inovatec provide a streamlined connection for credit union partners.
Caschera pointed out in the U.S. credit unions can provide leasing directly and indirectly through a financial partner. Canada bans its federally chartered banks from entering the auto leasing business, but because provinces regulate Canadian credit unions, they can provide indirect leasing options. “The lion’s share of leasing in Canada is still with the captive finance entities,” Smith maintained.
“Leasing in Canada has been on a steady increase, we're seeing upwards of 40% of the market is leasing right now,” Caschera said. “There are limitations, but what is important about leasing it is capturing a market primed and ready. There is a great opportunity for credit unions to jump on board.”
How Does the Partnership Work
Both Smith and Caschera pointed out the partnership was an easy decision that will stimulate the general credit union leasing audience in Canada. The principal benefit is to allow credit unions to get into automotive leasing quickly.
Smith noted in the partnership with AFG Canada, Inovatec supplies two systems: the direct portal and the LOS. “Traditionally that direct connection with an LOS is not only very time consuming and costly to do, it is very hard to maintain.”
Smith also cited the ability of Inovatec to overcome legacy-system barriers with its cloud-based platform through an open API via “standardized plumbing” to create a standard leasing program with the ability to connect with really powerful marketplaces like AFG.
AFG's provides the front end, the lease product that credit unions seek to do the residual value risk. “So, the partnership has actually been quite perfect. AFG has a great leasing product, they can brand it through our credit union. And we have the systems that can support it,” Smith maintained.
Smith mentioned how the Canadian fintech partnership provides a nice all-in-one package for credit unions. The lease application travels from the AFC system to Inovatec for the funding side of the deal. The credit union can then decide on the particular structure they want within the confines of the auto leasing program.
Credit Union Benefits
Smith emphasized there is no cost to add the Inovatec/APG Canada automotive leasing program because it is transaction based. “It is basically plug and play. That takes away a lot of the burden for credit union.”
Another credit union benefit, Caschera added, is the diversification the leasing program provides to the credit union portfolio. “The ability to provide another avenue to your balance sheet, leasing does that.”
In addition, leasing allows credit unions to attract new members. “That's the big one, right there. I would say 90% of all the lease applications are non-members. When you have a lease set up through dealerships across the country, you are going to add non-members,” Caschera said.
Which credit unions get the application? Caschera said, “We do have the ability to directly connect specific credit unions to specific dealers, or we can broker it with dealers that can have access to multiple credit unions or the vice versa. The credit union can have access to multiple dealers as well.”
Leases appear on a credit union’s books just like a loan. Caschera said, “When it comes to a lease, a vehicle has to be sold.” The dealership technically sells the vehicle to AFG Canada, but it does not actually buy the vehicle. “We have our credit union partners provide those funds on our behalf. Then when the maturity date hits, its AFG's responsibility to dispose or terminate that lease.”
Ultimately the credit union or financial partner takes on the loan-lease collections as well, according to Caschera. “They are the ones that are providing the funds, setting up the loans and servicing those loans, we give them guidance. Ultimately that has a bearing on what we call our guaranteed residual value.”