Passions to Purchases - Financing Your Next Adventure Starts Here

Mike DuShane: 00:00:00

We see is that dealers and OEMs,

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they want to control the experience because they want to make it more

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personalized and reduce friction.

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We're really excited about building products that do that

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because they also help us.

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To make better loans, have better experience for our

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borrowers,

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Tedd Huff - Fintech Confidential: Welcome to Fintech Confidential, bringing

Mike DuShane: 00:00:23

you the people, tech, and companies that change how you pay and get paid.

Tedd Huff: 00:00:30

welcome to Accrued, the Fintech Confidential Series presented by LoanPro.

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In this series, we're deconstructing the complexities of lending and exploring

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compliance, optimization, modernization, and personalization through insightful

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conversations with the industry's best.

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I'm Tedd Huff with my co host Colton Pond, and we're here to guide you

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through the intricate lending world.

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Whether you're deep into Lendtec or just intrigued on how the

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technology is reshaping lending, you're in the right place.

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Now let's dive into another episode of Accrued.

Tedd Huff: 00:01:06

Hey Colton, welcome back, man.

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After a short hiatus, we're so happy to have you

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back.

Colton Pond: 00:01:13

It's good to be back in a new location as well.

Colton Pond: 00:01:15

I'm in the studio this time, so we should have better audio.

Colton Pond: 00:01:18

Um, but it is good to be back.

Colton Pond: 00:01:19

Thanks so much, Tedd.

Colton Pond: 00:01:21

No worries.

Colton Pond: 00:01:22

So let's go ahead and kick off this episode.

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Octane is quite the powerhouse and they're transforming

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how we finance all the fun,

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Making those dream purchasess of power sports vehicles, RVs;

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And so much more.

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But as we start talked about in the very beginning of before we hit record,

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not sub Marines, but some Marine stuff.

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And it's not just a possibility, but

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octane is really created a seamless.

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Experience to make those dreams become a reality.

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Their end to end digital buying experience is truly setting a new

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standard and recreational financing.

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And it's not just about the tech Octane's business model is a perfect blend

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of business of business to consumer

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partnering with recreational vehicle giants like Polaris, partnerships

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that ensure that dreamers and doers alike get to experience the

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thrill of ownership without any of the traditional financial hurdles.

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Mike, you've been in the driver's seat of product direction, strategy

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implementation since joining Octane in August of 2018, and it seems that You

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have a knack for launching innovative products that push the envelope and

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it is significantly contributed to Octane's growth and your journey.

Tedd Huff: 00:02:45

So I want to welcome you to the show and, um, well, welcome.

Mike DuShane: 00:02:53

Thank you.

Mike DuShane: 00:02:53

Thank you.

Mike DuShane: 00:02:54

Good to be

Colton Pond: 00:02:55

Mike, it's good to have you, my friend.

Colton Pond: 00:02:57

Uh, we know each other well for the audience and viewers.

Colton Pond: 00:03:01

I found out that Mike at Octane and Octane is a customer of LoanPro.

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And we met at a dinner in New York city and realized that we live a

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few blocks away from each other

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and decided, you know what, uh, we're going to become workout

Colton Pond: 00:03:12

buddies and go, go work out.

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So my one workout a month is with Mike.

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I need to do it more often.

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I need to get in better shape.

Colton Pond: 00:03:19

Mike always pushes me.

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But in addition to that, uh, Mike is an avid.

Colton Pond: 00:03:23

Um, traveler, swimmer, all things, uh, fun, but on the business side, one of

Colton Pond: 00:03:28

the most brilliant product leaders that I've had the opportunity to engage with.

Colton Pond: 00:03:32

So if you wouldn't mind, Mike, uh, give the audience a view into your

Colton Pond: 00:03:38

career path, how you got to Octane.

Colton Pond: 00:03:40

And what I would personally love is before this, we talked about

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guiding principles that guide you illustrate one of those guiding

Colton Pond: 00:03:48

prinicples that is really impactful.

Mike DuShane: 00:04:21

Absolutely.

Mike DuShane: 00:04:22

Well, thank you for the kind words, Colton.

Mike DuShane: 00:04:23

First, let me say that our success at Octane is not due to me, but due

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to an amazing team of people here.

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Um, I believe, you know, jumping right to guiding principles.

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One of those is that your success in business is all

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about the people in the team.

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And I don't just mean the leadership.

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I mean, every single person in the company where real ideas, um, turn

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into execution and come to fruition.

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I am a longtime car nut.

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So throughout my career, I've been in various product management jobs for

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a quarter century now, um, starting while I was at University of Michigan.

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Um, throughout my career, I'd say there's one simple thing

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that's tied it all together.

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That was empathy, um, understanding what people actually want and going

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out of my way to give it to them first.

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And then thinking about how do you make it a business?

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How do you actually monetize it?

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How do you, um, you know, connect the dots so that the thing can scale.

Mike DuShane: 00:05:23

So my passion is cars.

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It has been since I was a little kid.

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I attribute that to being born in Los Angeles where everybody's into cars.

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kind of have be to live in LA.

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So when I first started my career, I was involved with a couple of startups

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that had nothing to do with cars.

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They were fun.

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I learned a lot, but at the same time, I was freelancing and writing

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about cars for various outlets just because it was a fun hobby.

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Doesn't pay Never did.

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Certainly doesn't now,

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and eventually I joined those two things together.

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First, I joined, uh, uh, Prime Media, which was a media company that owned

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Automobile magazine, and, uh, I led the web product and editorial function

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there, which, uh, to be honest, at first was just me, um, and then, uh, moved on

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after a couple of years to car and driver magazine, which was and is the biggest

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circulation car magazine in the world, um, has the largest, uh, automotive media web

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presence in the world, led digital efforts there for the better part of a decade.

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And was able to kind of bring my passion for cars and what I knew car

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enthusiasts wanted to digital platforms.

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After that, uh, did some corporate stuff at Hearst for a few years,

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uh, relaunched the Cosmo website.

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Uh, put together a business plan for Hurst Automotive.

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Um, but then I, I followed one of my mentors, a guy named Chip Perry.

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Went to TruCar, where I worked on automotive marketplaces.

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But both Chip and I left.

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Uh, after a few years and I found, I think the right place for me, which is

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octane and octane is exciting because.

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We're not doing cars right now,

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but we are doing power sports and power sports are actually an even more

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fun kind vehicle because cars have gotten so fast that you can't really

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drive them on public roads to their limits or anything close to them.

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But power sports, you can use off road, you can bomb around.

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There are more raw experience and a lot of big car nuts are really

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starting to turn to power sports.

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for a lot of car nuts, Power Sports is the new hot sports car.

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And that's because they're raw, and they're fun, and you can use

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them anywhere, um, and really push them to their limits.

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And that's a ton of fun.

Mike DuShane: 00:07:44

So, moving to Octane for me was really a natural progression.

Tedd Huff: 00:07:49

Mike, it's funny as you, as you talk about this, all I can think

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of is all the UTVs that are around my neighborhood here in Arizona, man, I've

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got, there are some that have got like.

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30 inch wheels and tires on it.

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Some have got these huge stereo systems you can hear from a mile away.

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And I'm not even exaggerating when I say

Mike DuShane: 00:08:11

Oh, I know.

Tedd Huff: 00:08:12

Uh, but it's just crazy to see how a lot of these guys that

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used to tinker on their car, tinker with their cars and do all this

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customization of made that switch over.

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To those vehicles.

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It's just, it's, it's awesome to see that there's that enthusiasm

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that continues to go through.

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But one of the things that you pointed out, and I really, like, I really like you

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to break down for us how you're leveraging technology to make the loan process

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for these as friction free as possible.

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Especially for those who are really looking to finance

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their recreational dreams.

Mike DuShane: 00:08:52

Octane developed its own platform, and that doesn't sound

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super sexy, but what it allows us to do is manage the whole buying

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and lending process end to end and make it simple and automated.

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Before Octane, the process of financing PowerSports and the

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majority, the vast majority of new PowerSports purchases are financed.

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And the process sort of looked like fill out a paper app, your dealer

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faxes it somewhere, come back in a few days once everything is, you

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know, done and you have a decision.

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Um, and it was, it was quite opaque and, and a lot of deals got lost or people,

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got frustrated because of that long lag.

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And so we turned it on its head and we said, well, why not allow people to, um,

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either do a digital credit app through a dealer or with our prequel product,

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do it right on their phone or their computer, uh, at home or in the dealer.

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Take that process through from applying to getting a loan.

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In minutes and not days.

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So it really is, you know, by automating every single piece of it

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from the, uh, document processing to even the credit decisioning,

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all of it is instant, and it allows us to turn people's passions into

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purchases in minutes and not days.

Tedd Huff: 00:10:11

Oh, I'd love that.

Tedd Huff: 00:10:12

Passions to like passions to purchases.

Tedd Huff: 00:10:14

I love that.

Tedd Huff: 00:10:15

I love that statement.

Tedd Huff: 00:10:16

I'm going to put that one in the old mental bank.

Colton Pond: 00:10:18

Yeah.

Colton Pond: 00:10:19

Uh, Mike, dive in deeper there.

Colton Pond: 00:10:21

So this segment that we're doing on, we're doing three episodes

Colton Pond: 00:10:24

with consumer lenders, folks that, that lend to, to consumers.

Colton Pond: 00:10:28

Octane being squarely in there.

Colton Pond: 00:10:30

One of, one of the unique aspects that I love as a marketing person

Colton Pond: 00:10:33

is your, your Go-to-market approach.

Colton Pond: 00:10:35

In a B2B2C way in partnering with retailers and OEMs and others.

Colton Pond: 00:10:43

So give us context on what role that plays in enhancing the customer experience.

Colton Pond: 00:10:47

You shared a little bit on what they were used to.

Colton Pond: 00:10:50

But

Colton Pond: 00:10:50

how does that play a fundamental role?

Colton Pond: 00:10:52

Because I can't just go to Octane's website and get a loan.

Mike DuShane: 00:10:54

yeah.

Mike DuShane: 00:10:55

So Octane is a point of sale lender.

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It means that every loan that we do is actually originated

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by one of our dealer partners.

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And what we've done is we've created a suite of technology tools that

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joins together our OEM partners.

Mike DuShane: 00:11:11

So OEM partners help us provide low promotional rates.

Mike DuShane: 00:11:15

with our dealer partners who actually engage the customers and, you know, sell

Mike DuShane: 00:11:20

them the units and finalize the financing.

Mike DuShane: 00:11:23

We've created these digital tools that sit on the OEM websites and they sit

Mike DuShane: 00:11:27

on the dealer websites so that instead of customers just kind of applying

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into some random form or CRM, they're actually applying and filling, um,

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submitting their information directly to.

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Our loan origination system and instantly getting qualified for loans.

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So that means that somebody who goes on an OEM website or a dealer website from

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their home and then walks into a dealer, they're already qualified and ready to go.

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The dealer in many cases can just click contract and the customer then

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signs it on their phone and that's it.

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So it's having the partnerships with the dealers and the OEMs

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and they're using our technology.

Mike DuShane: 00:12:09

That allows us to, to, um, make those loans pretty instantaneous.

Colton Pond: 00:12:13

and I'm sure that that drives increased trust, right?

Colton Pond: 00:12:15

If we think about financial services and lending and especially consumer

Colton Pond: 00:12:19

lending, previously, there's been a lot of distrust you going directly to folks like

Colton Pond: 00:12:24

Polaris and the customer engaging with Polaris with Octane behind the scenes.

Colton Pond: 00:12:28

I'm sure it drives greater trust, which drives greater conversion rates

Colton Pond: 00:12:31

and all the things that they want.

Mike DuShane: 00:12:34

No, that's all true.

Mike DuShane: 00:12:35

And it, it, um, it does.

Mike DuShane: 00:12:36

We, you know, we have trusting relationships with our dealer

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and OEM partners and you know, that, that trust is mutual.

Mike DuShane: 00:12:44

And yes, there is the conferred trust that comes from associating with them,

Mike DuShane: 00:12:49

but we also have a very transparent experience where you understand right

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away if you're, um, pre qualified to buy.

Mike DuShane: 00:12:57

our prequalification is unlike pretty much any prequalification out there

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in that when you get prequalified with us, the rates and terms that are

Mike DuShane: 00:13:07

generated are the real rates and terms.

Tedd Huff: 00:13:11

Hey, Ted Huff here.

Tedd Huff: 00:13:12

Ever thought about how you could streamline your application

Tedd Huff: 00:13:15

and underwriting process?

Tedd Huff: 00:13:16

Well, let me introduce you to UNDER.

Tedd Huff: 00:13:18

Why keep using the outdated methods of PDFs when you can

Tedd Huff: 00:13:23

digitize them effortlessly?

Tedd Huff: 00:13:24

All you gotta do is upload the PDF, send it out for digital signature, and

Tedd Huff: 00:13:29

voila, you're set for the digital age.

Tedd Huff: 00:13:31

Are you curious how to make that happen?

Tedd Huff: 00:13:33

Head over to under.

Tedd Huff: 00:13:35

io forward slash FTC and get started for free.

Tedd Huff: 00:13:39

It's really that simple.

Tedd Huff: 00:13:41

as you, as you talk about all these different ways that you've, you've

Tedd Huff: 00:13:44

reduced the friction, you've made it easy for them to understand where they

Tedd Huff: 00:13:48

stand, can you give us a sneak peek maybe behind the curtain a little bit and help

Tedd Huff: 00:13:52

us understand like, What technologies you guys are using to, to make this

Tedd Huff: 00:13:58

such a revolutionary way to apply for these, these, these, uh, financing.

Mike DuShane: 00:14:06

Yeah, absolutely.

Mike DuShane: 00:14:08

Our stack, our core stack is proprietary.

Mike DuShane: 00:14:12

Um, and also, but, but our proprietary stack really just

Mike DuShane: 00:14:18

covers the things that we are going to do better than anyone else.

Mike DuShane: 00:14:22

So the way that we decision loans, the way that we process loans, those are

Mike DuShane: 00:14:28

things where our proprietary stack.

Mike DuShane: 00:14:30

is necessary and where we've built that up over the past decade,

Tedd Huff: 00:14:34

I hear proprietary, and that means Tedd, I'm not really going

Tedd Huff: 00:14:37

to tell you, but I'm going to give you a little bit of information.

Colton Pond: 00:14:41

secret sauce!

Colton Pond: 00:14:42

Come on, it's a secret sauce!

Mike DuShane: 00:14:44

yeah, I mean, we're, we're not, I mean, and

Mike DuShane: 00:14:47

honestly, it's not the technology,

Mike DuShane: 00:14:49

it's the team of people building it and it's how we have broken

Mike DuShane: 00:14:53

down the walls between risk and technology and our organization, yeah.

Mike DuShane: 00:14:59

So that we can build things quickly and we can build things that both satisfy

Mike DuShane: 00:15:03

our risk and compliance appetite and are delightful to our customers and our

Mike DuShane: 00:15:08

dealers, partners, and our OEM partners.

Mike DuShane: 00:15:11

that is the secret sauce.

Mike DuShane: 00:15:12

Honestly, the hardest thing we've done as a company is figuring out how you take,

Mike DuShane: 00:15:18

a technology forward organization,

Mike DuShane: 00:15:20

which is also a very mature financial institution.

Mike DuShane: 00:15:25

So how do you join that rigorous culture, financial culture with a

Mike DuShane: 00:15:29

technology culture so that you can build products that, um, produce great.

Mike DuShane: 00:15:35

Um, financial returns, but bring customers in the door because they

Mike DuShane: 00:15:41

are a great product experience.

Mike DuShane: 00:15:43

it's really that cultural thing that is our secret sauce.

Mike DuShane: 00:15:46

It's not any one piece of technology.

Mike DuShane: 00:15:49

The cultural thing allows us to build the great platform.

Colton Pond: 00:15:52

So I love that, Mike, and jumping in a little bit more,

Colton Pond: 00:15:55

tying back to the guiding principle you brought up of empathy, and having

Colton Pond: 00:15:59

empathy for, for people in the end customer and building around that.

Colton Pond: 00:16:03

I feel like, man, if product leak leaders could capture that principle

Colton Pond: 00:16:07

and that guiding principle, we have way better product leaders to understand

Colton Pond: 00:16:10

customers and what they're going through.

Colton Pond: 00:16:11

would love your thoughts on how you look at that market and, and how you

Colton Pond: 00:16:17

drive, like, uh, determining is this a qualified, uh, borrower or not?

Mike DuShane: 00:16:24

well, I think, um, In a nutshell, first it

Mike DuShane: 00:16:27

comes down to the culture.

Mike DuShane: 00:16:28

The product and engineering teams partner very closely with the RISC team

Mike DuShane: 00:16:32

to figure out the most innovative ways.

Mike DuShane: 00:16:35

To assess risk, and I'll say that we slight distinction.

Mike DuShane: 00:16:39

We don't really do much subprime for us.

Mike DuShane: 00:16:42

Subprime is a little bit of a different sector.

Mike DuShane: 00:16:45

We do primarily prime lending, um, but we also do near prime.

Mike DuShane: 00:16:50

And that was where we initially entered the market is, you know, think of it

Mike DuShane: 00:16:53

as people with a FICO score in the six hundreds, low seven hundreds,

Mike DuShane: 00:16:58

um, and how do you, you know, they typically get left behind by big banks.

Mike DuShane: 00:17:02

So how did we.

Mike DuShane: 00:17:04

Figure out how to responsibly lend to those people.

Mike DuShane: 00:17:07

Well, it's about data and it's about modeling.

Mike DuShane: 00:17:11

Um, so we don't do manual processes.

Mike DuShane: 00:17:13

There's no review, like the dealer calls and says, Oh,

Mike DuShane: 00:17:16

this is a really good customer.

Mike DuShane: 00:17:17

Trust us.

Mike DuShane: 00:17:18

No, it's all about data and modeling.

Mike DuShane: 00:17:21

And so we bring in as many data sources as we can.

Mike DuShane: 00:17:24

And they help us decide everything from what kind of credit offer, if any, do

Mike DuShane: 00:17:28

we want to make, to what is the fraud risk that we see with this person, to,

Mike DuShane: 00:17:35

um, what is this person's income and do we need to validate this person's

Mike DuShane: 00:17:41

income to make the right decision..

Mike DuShane: 00:17:43

So we've always been pretty conservative, but by using great

Mike DuShane: 00:17:48

data and sophisticated models, we're able to expand our lending box

Tedd Huff: 00:17:53

So it sounds like every one of the loans that you're doing

Tedd Huff: 00:17:56

is It's very custom to each one of the individuals and delivering

Tedd Huff: 00:18:03

that out to your partners that are

Tedd Huff: 00:18:05

on the dealer front and actually selling them.

Tedd Huff: 00:18:08

It sounds like it gives them a little bit of a, and maybe not a

Tedd Huff: 00:18:12

little bit, probably quite a bit

Tedd Huff: 00:18:13

of a home field advantage when, when competing against the others out there.

Tedd Huff: 00:18:18

How does pulling some of this alternative data in and

Tedd Huff: 00:18:21

comparing it to the other stuff,

Tedd Huff: 00:18:24

Help us understand how that works in the real world compared to the way

Tedd Huff: 00:18:28

you guys thought it would be going when you first started doing it.

Mike DuShane: 00:18:33

Yeah, well, in the real world, first, I'll nerd out a little

Mike DuShane: 00:18:37

bit and tell you technology wise, most lenders have a FICO buy box.

Mike DuShane: 00:18:42

They pull the FICO score.

Mike DuShane: 00:18:43

And if you're between A and B, you get this rate and B and C, you get that rate.

Mike DuShane: 00:18:48

It's purely based on FICO.

Mike DuShane: 00:18:49

We have a proprietary model that is based on, um, a lot of

Mike DuShane: 00:18:54

our own homegrown attributes

Tedd Huff: 00:18:57

Sorry, you said proprietary again, and it took everything.

Tedd Huff: 00:19:00

I couldn't not laugh.

Tedd Huff: 00:19:01

So continue my apologies, Mike.

Mike DuShane: 00:19:05

we have our own model that, uh, that, that produces

Mike DuShane: 00:19:10

a score that's different to the FICO score, but more predictive

Mike DuShane: 00:19:13

in our market than the FICO score.

Mike DuShane: 00:19:16

And that includes data from the credit bureaus, but it also includes other data.

Mike DuShane: 00:19:20

So what does that mean in the real world?

Mike DuShane: 00:19:22

It means that when a dealer gets an offer from us, often times Well, A,

Mike DuShane: 00:19:27

it's quicker because it's instantaneous.

Mike DuShane: 00:19:29

But B, we oftentimes have a better offer, um, or an offer where

Mike DuShane: 00:19:35

competitors have none because we're able to see these other data

Mike DuShane: 00:19:39

attributes about people and understand,

Mike DuShane: 00:19:42

that not all, but, but some of them are going to be a very good Uh, credit risk

Mike DuShane: 00:19:49

that that we would take where others might say no, or others might give them

Mike DuShane: 00:19:53

a poorer offer based solely on FICO.

Mike DuShane: 00:19:56

So it gives us more insight into who the customer is so that

Mike DuShane: 00:19:59

we can make better decisions.

Mike DuShane: 00:20:01

For the record, we also pull FICO and, you know, that is absolutely

Mike DuShane: 00:20:05

one of the factors we use.

Colton Pond: 00:20:06

What I love about that, Mike, at a prior job.

Colton Pond: 00:20:10

We did some cashflow underwriting stuff.

Colton Pond: 00:20:12

And we would talk about this all the time where FICO is, is an indicator,

Colton Pond: 00:20:17

but does not need to be the only indicator of should I lend money or not?

Colton Pond: 00:20:22

Because there are people with high FICO scores.

Colton Pond: 00:20:24

You think about if I had a job at Metta and I make 400, 000 a year.

Colton Pond: 00:20:29

And I get laid off tomorrow and I have a 780 FICO, I could go get a loan.

Colton Pond: 00:20:34

I could go get a personal loan and I would be just fine.

Colton Pond: 00:20:37

But I may not be the best person to loan to.

Colton Pond: 00:20:38

I just lost my job where there's people with like a 650 or 630.

Colton Pond: 00:20:43

Credit score, really good income, really good at their

Colton Pond: 00:20:47

attributes that you can depict.

Colton Pond: 00:20:49

And those are great people to lend to.

Colton Pond: 00:20:51

I'd love to tie this then together with thinking about portfolio

Colton Pond: 00:20:55

performance and default rates.

Colton Pond: 00:20:58

Um, I know Octane has an amazing portfolio and very perform portfolio.

Colton Pond: 00:21:03

Y'all do a lot of good things.

Colton Pond: 00:21:05

Help us understand.

Colton Pond: 00:21:06

That philosophy there, how you think about tying those two

Colton Pond: 00:21:09

together in relation to portfolio

Colton Pond: 00:21:11

performance.

Colton Pond: 00:21:13

The most common cause of bad customer experience isn't that high tech.

Colton Pond: 00:21:19

It's embarrassingly simple.

Colton Pond: 00:21:21

Yep, it's answering questions.

Colton Pond: 00:21:24

In e commerce, it's really easy to get bogged down with common questions.

Colton Pond: 00:21:29

Whether that's, where's my package?

Colton Pond: 00:21:31

How do I return or exchange this item or just to cancel a subscription?

Colton Pond: 00:21:36

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Colton Pond: 00:21:42

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Colton Pond: 00:21:48

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Colton Pond: 00:21:50

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Colton Pond: 00:21:55

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Colton Pond: 00:21:56

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Colton Pond: 00:21:59

com.

Mike DuShane: 00:22:04

Well, first I want to give a shout out to our amazing risk team.

Mike DuShane: 00:22:07

We wouldn't be the company we are without them.

Mike DuShane: 00:22:10

And that's true on,

Mike DuShane: 00:22:11

their modeling, um, in, in terms of how we extend offers to how we

Mike DuShane: 00:22:17

actually service our loan book and we, we partner with loan pro, uh, to, uh,

Mike DuShane: 00:22:25

loan pro runs our servicing platform.

Mike DuShane: 00:22:28

what we love about loan pro is that because it's a API driven, we

Mike DuShane: 00:22:33

can connect it directly into our proprietary platform and make it

Mike DuShane: 00:22:40

part of our overall stack seamlessly.

Mike DuShane: 00:22:43

And what that means is that as we develop.

Mike DuShane: 00:22:47

models for how we,

Mike DuShane: 00:22:51

approach servicing loans or for collections.

Mike DuShane: 00:22:54

When we want to bring in additional vendors who help us automate some of

Mike DuShane: 00:22:59

those things, we can easily connect them to both loan pro and our own systems.

Mike DuShane: 00:23:03

It's about.

Mike DuShane: 00:23:04

Dotting the I's and crossing the T's and making sure that you do things

Mike DuShane: 00:23:08

well, making sure that you do things compliantly, and then being smart about

Mike DuShane: 00:23:13

who your contact, which customers you're contacting, when you're contacting them.

Mike DuShane: 00:23:18

What kind of messaging are we using when we're contacting them

Mike DuShane: 00:23:21

to give them the best experience?

Mike DuShane: 00:23:23

Because if they get the best experience, they are going to be

Mike DuShane: 00:23:26

better at repaying their loans.

Mike DuShane: 00:23:28

And that's a big part of Why we see such great loan performance.

Tedd Huff: 00:23:32

Mike, I'm super curious because you've talked about like

Tedd Huff: 00:23:35

all these different things that you think about and how you approach the

Tedd Huff: 00:23:39

experience from the consumer side.

Tedd Huff: 00:23:42

What strategies has Octane implemented to really keep these default rates down?

Tedd Huff: 00:23:47

Because you've mentioned it, Colton's mentioned it, and I'm assuming that

Tedd Huff: 00:23:51

when they do default that you guys are having a much higher success rate.

Tedd Huff: 00:23:56

With collections.

Tedd Huff: 00:23:57

What are the strategies that you can share that aren't proprietary

Tedd Huff: 00:24:02

help us understand how and why.

Mike DuShane: 00:24:05

Part of it is having great people who know what they're doing.

Mike DuShane: 00:24:08

We didn't just assume like so many tech startups do that.

Mike DuShane: 00:24:13

Hey, because we're a tech startup, we're smarter than everyone else.

Mike DuShane: 00:24:15

We actually brought in a lot of people who have significant

Mike DuShane: 00:24:19

experience in loan servicing to help us spool up that function.

Mike DuShane: 00:24:23

And they've done that very well.

Mike DuShane: 00:24:25

But then what we did is we said, all right, we're going to start with kind

Mike DuShane: 00:24:27

of the normal way that you do things.

Mike DuShane: 00:24:30

And then we said, help us understand your process, help us

Mike DuShane: 00:24:33

understand how to make that better.

Mike DuShane: 00:24:35

And where we've used technology is saying.

Mike DuShane: 00:24:37

Hey, instead of some supervisor having to pour over things and

Mike DuShane: 00:24:41

figure out who's going to call whom,

Mike DuShane: 00:24:43

where it's just as likely as not someone just spaced out on paying a bill.

Mike DuShane: 00:24:48

We can do that without annoying people.

Mike DuShane: 00:24:49

We're actually looking now at reducing frequency of contact because, um,

Mike DuShane: 00:24:55

incremental contacts may not actually drive better performance, and it

Mike DuShane: 00:24:58

makes the customers happy if they just get the context that they want.

Mike DuShane: 00:25:02

Indeed,

Mike DuShane: 00:25:02

and, uh, and we've seen great results with that.

Colton Pond: 00:25:06

Love that.

Colton Pond: 00:25:06

And it goes to a theme that we've talked about on this podcast series on

Colton Pond: 00:25:10

transforming lending from a transactional relation or transaction to a relationship

Colton Pond: 00:25:17

and how to do that efficiently.

Colton Pond: 00:25:19

And a lot of people have previously done lending.

Colton Pond: 00:25:21

I give you money, you give me money back.

Colton Pond: 00:25:23

You don't give me money back.

Colton Pond: 00:25:24

I heard your credit score and I repo my asset, uh, relative like.

Colton Pond: 00:25:29

Consumers want to pay their loans, right?

Colton Pond: 00:25:31

And one of the coolest things I've seen with Octane,

Colton Pond: 00:25:34

Mike, hopefully you don't mind me sharing, but Octane does a really good job when you

Colton Pond: 00:25:37

look at portfolio performance on when a customer gets a borrower gets 30, 35, 40.

Colton Pond: 00:25:44

50 days past two, how do you get them back?

Colton Pond: 00:25:46

So many lenders out there.

Colton Pond: 00:25:49

Oh, you're 30 days past two.

Colton Pond: 00:25:51

Okay.

Colton Pond: 00:25:51

You owe me double as much.

Colton Pond: 00:25:52

And I'm going to hit fees, fees, fees.

Colton Pond: 00:25:54

And then you remember me triple as much.

Colton Pond: 00:25:55

And then all of a sudden the consumer sitting back and being like, I'm never

Colton Pond: 00:25:58

going to be able to dig out of this hole.

Colton Pond: 00:25:59

You know what?

Colton Pond: 00:26:00

Forget about it.

Colton Pond: 00:26:00

Uh, I can just totally default on this, this loan.

Colton Pond: 00:26:03

It's no big deal to me.

Colton Pond: 00:26:04

Um, but in reality, the lender wants the money.

Colton Pond: 00:26:07

The consumer wants a better financial relationship and Octane has done

Colton Pond: 00:26:12

a really good job of how to help customers that are About to go, uh,

Colton Pond: 00:26:17

uh, default, come back and get right.

Colton Pond: 00:26:19

Um, so we'd love your thoughts there, Mike, of how you approach

Colton Pond: 00:26:22

that and how you approach it from having empathy and a customer

Colton Pond: 00:26:25

centric view, as you, you mentioned.

Mike DuShane: 00:26:26

You know, when we say the word empathy, sometimes we think

Mike DuShane: 00:26:29

that it's just a one on one thing.

Mike DuShane: 00:26:33

But the reality is that we can train our models and our systems based

Mike DuShane: 00:26:39

on what consumers actually want and what they do so that we're exhibiting

Mike DuShane: 00:26:43

empathy through our platform.

Mike DuShane: 00:26:45

And that's a big part of it is saying, all right, given everything

Mike DuShane: 00:26:49

we know about this customer

Mike DuShane: 00:26:50

what is the thing that's most likely going to engage them to actually want to pay?

Mike DuShane: 00:26:55

And so

Mike DuShane: 00:26:56

that is part and parcel with what is going to engage the consumer the best, what's

Mike DuShane: 00:27:02

going to give them the best experience so that they actually want to pay us back.

Mike DuShane: 00:27:06

And so using, um, we, we use loan pro as our core platform, and then we put

Mike DuShane: 00:27:12

our own collections models on top of that, using all kinds of different data.

Mike DuShane: 00:27:17

And then

Mike DuShane: 00:27:17

layering those pieces on so that we're making the right decisions about who

Mike DuShane: 00:27:21

to call, how to call them, when to call them, how frequently, uh, what

Mike DuShane: 00:27:26

messaging to use, um, that's how we drive really great performance.

Mike DuShane: 00:27:31

So it is systematized empathy.

Tedd Huff: 00:27:33

How are you using these strategies really to shape

Tedd Huff: 00:27:36

the future

Tedd Huff: 00:27:37

of lending at Octane?

Tedd Huff: 00:27:38

How is it helping you when you're thinking about strategies to extend

Tedd Huff: 00:27:43

maybe into other areas of lending?

Tedd Huff: 00:27:47

How, how are you thinking that from a strategic perspective?

Mike DuShane: 00:27:50

it really comes back to our culture.

Mike DuShane: 00:27:53

Joining technology with high performance lending products.

Mike DuShane: 00:27:59

And so as we're working with dealers and as we're working with

Mike DuShane: 00:28:02

manufacturers, that's usually how we enter or always how we enter markets.

Mike DuShane: 00:28:06

We are not a direct to consumer lender.

Mike DuShane: 00:28:08

And so it's really about going to them and saying, yeah, we

Mike DuShane: 00:28:12

know you have lending, but

Mike DuShane: 00:28:14

think about how lending can be a driver of your business if you put it

Mike DuShane: 00:28:18

at the forefront of your experience,

Mike DuShane: 00:28:20

we actually go through an exercise internally called hopes and fears,

Mike DuShane: 00:28:25

where we say, what are the customers hopes and what are their fears and

Mike DuShane: 00:28:29

how do we address those things in a meaningful way so that they get more

Mike DuShane: 00:28:34

excited and reduce their anxiety.

Mike DuShane: 00:28:39

So, for example, by taking a prequalification product and putting it

Mike DuShane: 00:28:43

right on a manufacturer's site in a very non confrontational way where a customer

Mike DuShane: 00:28:49

can use it in their own home, they can get more excited about a purchase and

Mike DuShane: 00:28:53

alleviate any anxiety, especially if they don't have perfect credit about

Mike DuShane: 00:28:57

whether or not they could qualify.

Mike DuShane: 00:28:59

And from an OEM's perspective, we can also take their promotional

Mike DuShane: 00:29:03

rates that they have and bring that right into the experience.

Mike DuShane: 00:29:07

From a dealer's perspective, we can take the inventory that they have and

Mike DuShane: 00:29:11

apply offers directly to that inventory.

Mike DuShane: 00:29:14

So that it isn't this abstract concept of, Oh, I sort of like this vehicle, and I

Mike DuShane: 00:29:19

guess I need to go in and get it financed.

Mike DuShane: 00:29:21

It's very real.

Mike DuShane: 00:29:22

It's very actionable for people.

Mike DuShane: 00:29:24

Um, so we continue to expand our end to end process to cover ever more pieces

Mike DuShane: 00:29:30

of it so that OEMs and dealers see us not just as a lending partner, but as

Mike DuShane: 00:29:38

a way to increase their customer base.

Colton Pond: 00:29:42

So on that expansion note, uh, I love that because it ties into

Colton Pond: 00:29:47

embedded finance and embedded lending.

Colton Pond: 00:29:49

And a lot of what octane is doing is around embedded lending, which I believe.

Colton Pond: 00:29:53

Uh, the future of finance has a large aspect of embedded lending with brands

Colton Pond: 00:29:58

who have customers and how to reach those customers through financial products.

Colton Pond: 00:30:02

we love the, the power sports market, right?

Colton Pond: 00:30:05

Cause it's fun and exciting.

Colton Pond: 00:30:06

Right.

Colton Pond: 00:30:07

Uh, and Tedd here's, here's that all the time in his backyard.

Colton Pond: 00:30:11

Um, but I know recent somewhat recently octane made the pivot and shift or, or

Colton Pond: 00:30:16

addition to go into the RV lending space.

Colton Pond: 00:30:19

So help us understand that leap.

Mike DuShane: 00:30:21

From a customer perspective, there's crossover, right?

Mike DuShane: 00:30:24

If you're somebody who does power sports, you may also like to go camping.

Mike DuShane: 00:30:29

You may also like to, to use an rv.

Mike DuShane: 00:30:33

Um, it is a really different market though.

Mike DuShane: 00:30:35

Uh, RV loans are much longer.

Mike DuShane: 00:30:39

The average weighted life of our power sports loans is just over two years.

Mike DuShane: 00:30:43

Um, in rv it's, it's many years.

Mike DuShane: 00:30:45

Um, and the initial loan terms are, are.

Mike DuShane: 00:30:48

Twice to three times as long as well.

Mike DuShane: 00:30:51

Um, they're, they're bigger, more expensive purchases.

Mike DuShane: 00:30:54

Um, and the dealers operate a little bit differently where,

Mike DuShane: 00:30:59

um, there is a higher degree of consolidation in the dealer market.

Mike DuShane: 00:31:03

So there are a few big players and that's interesting because they're willing to

Mike DuShane: 00:31:07

invest a lot in building great digital experiences with great embedded lending.

Mike DuShane: 00:31:14

And so that's where we've been able to capitalize is that.

Mike DuShane: 00:31:17

Um, most lenders, when you talk to them about embedded lending, when you

Mike DuShane: 00:31:21

talk to them about building an end to end experience in partnership with,

Mike DuShane: 00:31:26

um, whether it's a large dealer group or a large OEM, it's very difficult

Mike DuShane: 00:31:31

for them to conceptualize anything other than, I don't know, can you

Mike DuShane: 00:31:34

embed a fax machine into your website?

Mike DuShane: 00:31:36

And that's where we've been able to really change the market is by

Mike DuShane: 00:31:40

saying, yeah, we can we can embed the whole process end to end.

Mike DuShane: 00:31:45

Um, give the customer everything they need, give the merchant everything

Mike DuShane: 00:31:48

they need, give transparency and visibility through the process

Mike DuShane: 00:31:51

and monitor KPIs in real time.

Tedd Huff: 00:31:53

You mentioned something that I guess I just natively

Tedd Huff: 00:31:58

thought about is that crossover between the RV and the power sports.

Tedd Huff: 00:32:03

they're so similar, like you were mentioning.

Tedd Huff: 00:32:06

Um, actually I can't think of anybody that's a friend of mine that has an

Tedd Huff: 00:32:10

RV that doesn't have power sports.

Tedd Huff: 00:32:12

So when I think through that, but although they're the same person,

Tedd Huff: 00:32:18

How does the lending approach to RVs differ from what you've done in the power

Tedd Huff: 00:32:24

sports space, even though they're similar?

Mike DuShane: 00:32:26

The payment's larger, it's it's falls at a different place in the

Mike DuShane: 00:32:30

customer's payment waterfall in terms of what bills they're paying and when.

Colton Pond: 00:32:35

what I've had my eyes opened up into in this conversation has been,

Colton Pond: 00:32:38

um, There is so much data and there's so much data to look at that actually is

Colton Pond: 00:32:43

indicative and predictive of a performance portfolio, which is what any lender wants

Colton Pond: 00:32:48

is to drive portfolio performance and that customization and personalization.

Colton Pond: 00:32:52

I feel like it's key.

Colton Pond: 00:32:54

How do you personalize and how do you customize what y'all are doing?

Colton Pond: 00:32:57

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Colton Pond: 00:33:04

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Colton Pond: 00:33:10

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Mike DuShane: 00:33:59

on the servicing side again, it's about getting ever more

Mike DuShane: 00:34:02

personalized so that no two customers are having the same experience

Mike DuShane: 00:34:07

and we're actually delivering a customized one on one experience

Mike DuShane: 00:34:11

to every single borrower when it comes to how we engage with them.

Tedd Huff: 00:34:14

From your perspective, how would you overcome that

Tedd Huff: 00:34:16

feeling of uncertainty?

Mike DuShane: 00:34:19

We've got to prove that it's better to our dealer partners.

Mike DuShane: 00:34:22

That's all it is.

Mike DuShane: 00:34:23

We have very close relationships with a lot of dealers.

Mike DuShane: 00:34:27

They trust us and we trust them and they have been great at

Mike DuShane: 00:34:31

helping us pilot new products

Mike DuShane: 00:34:33

if we do it well, they're going to see a better product,

Mike DuShane: 00:34:37

better rates, better products.

Mike DuShane: 00:34:38

Um, higher approval rates or, you know, getting more butts in seats.

Mike DuShane: 00:34:43

And if that's the case, then they're going to like it and

Mike DuShane: 00:34:46

they're going to want more of it.

Mike DuShane: 00:34:48

Our goal is to offer the best possible, um, overall deal structure to every

Mike DuShane: 00:34:55

customer where it's more personalized.

Mike DuShane: 00:34:56

All the data sources we use are highly vetted to make sure that they are not

Mike DuShane: 00:35:01

having a disparate impact on people.

Mike DuShane: 00:35:04

So instead of trying to make it this very subjective thing where biases can come

Mike DuShane: 00:35:10

into play, we're using models that we know are unbiased with data sources that we

Mike DuShane: 00:35:16

know are unbiased and truly looking at,

Mike DuShane: 00:35:20

capacity and propensity to repay.

Mike DuShane: 00:35:22

it's about making sure that we're not, um, enabling any kind of,

Mike DuShane: 00:35:28

unfair lending and automating it and using objective data sources

Mike DuShane: 00:35:33

we're not using like large language a I, you know, a lot of

Mike DuShane: 00:35:38

companies say they're using it.

Mike DuShane: 00:35:39

I haven't seen any way to actually use some large language model to

Mike DuShane: 00:35:43

make a credit decision in a way that is, um, unbiased and fair.

Mike DuShane: 00:35:48

So our eyes are open.

Mike DuShane: 00:35:50

We'll use a I for other things, like how do we communicate with customers better?

Mike DuShane: 00:35:54

That kind of thing.

Tedd Huff: 00:35:55

Well, I'm super glad Mike, that you're the one that

Tedd Huff: 00:35:58

brought up the buzzword AI.

Tedd Huff: 00:36:00

I didn't do it this time.

Tedd Huff: 00:36:01

I think that's the first time in this entire series that's happened.

Tedd Huff: 00:36:04

We always like to end the episode by saying, let's pull out the crystal ball.

Tedd Huff: 00:36:11

Let's look ahead to the future and understand from your and

Tedd Huff: 00:36:16

Octane's perspective, what are the.

Tedd Huff: 00:36:19

the trends that you're seeing in financing, where are they headed?

Tedd Huff: 00:36:24

and especially where do you believe that Octane is, is going to be able

Tedd Huff: 00:36:30

to lead the charge in those changes?

Mike DuShane: 00:36:34

One trend we see is that dealers and OEMs, they want to control

Mike DuShane: 00:36:38

the experience and they want to control the experience because they want to make

Mike DuShane: 00:36:42

it more personalized and reduce friction.

Mike DuShane: 00:36:46

We're really excited about building products that do that

Mike DuShane: 00:36:50

because they also help us.

Mike DuShane: 00:36:52

To make better loans, have better experience for our customers, our our

Mike DuShane: 00:36:57

borrowers, um, and ultimately see lower credit losses and better loan performance.

Mike DuShane: 00:37:02

The other big trend that I see right now is a rapid acceleration of the amount of

Mike DuShane: 00:37:10

data and kinds of data that are available to make decisions, which will help us.

Mike DuShane: 00:37:17

Further expand beyond what we already have, even, um, the pool of customers

Mike DuShane: 00:37:23

who can get great financing and to do so in a way that is not only fair

Mike DuShane: 00:37:28

and compliant, but that has great, um, credit performance as well.

Mike DuShane: 00:37:34

Another big trend is that I'd say data rules the world and,

Mike DuShane: 00:37:40

um, and, and leveraging that data quickly is one of our superpowers.

Colton Pond: 00:37:45

You mentioned something data rules world.

Colton Pond: 00:37:47

I have a shirt that says the data doesn't lie.

Colton Pond: 00:37:50

And then I also have a shirt from Mike that says compliance is cool.

Colton Pond: 00:37:54

So I can authorize that they are very focused on compliance.

Colton Pond: 00:37:56

I should have worn it today.

Colton Pond: 00:37:58

I'll wear it next time we work out for sure.

Colton Pond: 00:38:00

Um, but what I loved about this conversation is.

Colton Pond: 00:38:03

The focus on technology, the focus on innovation, but the end message

Colton Pond: 00:38:08

of how to drive personalization and lending and finance to eventually

Colton Pond: 00:38:13

the segment of one, right?

Colton Pond: 00:38:15

And, um, there's a big vision and passion project of mine of how to do,

Colton Pond: 00:38:20

uh, drive greater personalization and,

Colton Pond: 00:38:22

in what we do within finances on, on your end, uh, Mike, any

Colton Pond: 00:38:27

concluding remarks in relation to.

Colton Pond: 00:38:31

The role that you're using technology and innovation to truly meet

Colton Pond: 00:38:35

customer's needs where they're at.

Mike DuShane: 00:38:38

A job is fun when I'm learning and when I'm making a difference

Mike DuShane: 00:38:41

for people and I'm having fun in this job,

Mike DuShane: 00:38:45

having been here now for 5.

Mike DuShane: 00:38:47

5 years because we continue to learn, we continue to build new things and all those

Mike DuShane: 00:38:52

things make our customers lives better.

Mike DuShane: 00:38:54

Um, so I don't know, maybe that sounds a little bit, um, uh, like,

Mike DuShane: 00:39:00

like, yeah, it sounds a little cliche, but it really is true.

Mike DuShane: 00:39:05

It takes a great team of people to do that.

Mike DuShane: 00:39:07

You've got to empower your people and you have to be radically

Mike DuShane: 00:39:11

empathetic to your customers.

Mike DuShane: 00:39:12

And as long as you do that, you'll keep making products better and you'll

Mike DuShane: 00:39:15

keep gobbling up market share and having a great profitable business.

Tedd Huff: 00:39:20

Mike, you know, this episode has been a lot of fun.

Tedd Huff: 00:39:25

Like Colton mentioned, uh, it's really nice to sit down with you again.

Tedd Huff: 00:39:30

I got an opportunity to sit down with you in January and And learned a little

Tedd Huff: 00:39:34

bit about your perspective, but this is completely expanded my understanding

Tedd Huff: 00:39:39

of, of how you approach everything.

Tedd Huff: 00:39:41

So I, I really appreciate you being, being on the show today,

Mike DuShane: 00:39:45

No, it was a lot of fun.

Mike DuShane: 00:39:45

It was good.

Mike DuShane: 00:39:46

I still can't live up to, you know,

Colton Pond: 00:39:49

Cliché

Mike DuShane: 00:39:49

dying and coming back to life and you know, everything else, but.

Colton Pond: 00:39:54

Mike, Mike texted me last night and said, I can't live up to Brett

Colton Pond: 00:39:56

Beard all the, the man is a legend.

Colton Pond: 00:39:59

Like he is a legendary for sure.

Colton Pond: 00:40:02

And then the other exciting part is we're actually recording this

Colton Pond: 00:40:05

episode on Pi day, March 14th.

Colton Pond: 00:40:09

I'm actually, I just got a ping for my team.

Colton Pond: 00:40:12

Cause I'm 15 minutes late and I'm supposed to go get a pie in the face for my team.

Colton Pond: 00:40:15

So hopefully Mike, you got me out of like being late and getting a pie in the face,

Colton Pond: 00:40:20

but I'll let you know how that goes.

Mike DuShane: 00:40:22

You'll have to tell me about the

Mike DuShane: 00:40:23

pie in the face when we see each other Saturday.

Tedd Huff: 00:40:26

but just kind of recapping the things that we've talked

Tedd Huff: 00:40:29

about and Colton, you did a really good job of it just a moment ago,

Tedd Huff: 00:40:33

but what I take away from it is.

Tedd Huff: 00:40:35

Treating everybody as an individual through the data that is available, that

Tedd Huff: 00:40:42

is compliant, uh, to, to really give them the best opportunity at not only acquiring

Tedd Huff: 00:40:49

that dream recreational vehicle, but Also doing it in a way that doesn't make

Tedd Huff: 00:40:56

them feel like less if they're having to move forward throughout their life.

Tedd Huff: 00:41:04

And, and I think

Tedd Huff: 00:41:05

that's really interesting.

Tedd Huff: 00:41:06

And I love the level of empathy that you guys have brought

Tedd Huff: 00:41:08

into the whole experience.

Mike DuShane: 00:41:13

Well, thanks for having me today.

Mike DuShane: 00:41:14

It's been a lot of fun.

Tedd Huff: 00:41:16

All right, so that is a wrap for this episode of

Tedd Huff: 00:41:20

Accrued, a fintech confidential series presented to you by LoanPro.

Tedd Huff: 00:41:26

And if you haven't already, if you made it this far, congratulations,

Tedd Huff: 00:41:30

I, give you a round of applause.

Tedd Huff: 00:41:32

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Tedd Huff: 00:41:45

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Tedd Huff: 00:41:50

And as always keep moving forward.

Tedd Huff: 00:41:54

As we wrap up today's episode, I've got one last thing for you.

Tedd Huff: 00:41:58

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