Lending in Digital Times explores the dynamic lending landscape and how the latest technologies are transforming it. John Michael, from Conduent’s Consumer Finance and Mortgage Solutions, interviews fintech leaders and experts to discuss how digital transformation is impacting the lending business and shaping its future.
Read this case study to learn how Conduent's auto finance solutions transformed a small auto lender into an industry giant.
Episode 3: Embracing Technology is Key to Success in Auto Finance
In this podcast, Dave Bertoncini - Chief Strategy Officer at CarFinance, shares personal and professional tips for the auto finance community. Why do both large and small auto finance dealers need a digital team? How are today’s customers embracing technology that lets them shop for cars without leaving their homes? Dave loves sports and believes that sports draw perfect parallels to business. He talks about his late grandfather who inspired him to be disciplined and have the right attitude. And he also discusses his management style and the ways he interacts with his team to provide maximum freedom and lasting success.
Chief Strategy Officer, CarFinance
David has been a business leader and strategist his whole career. Passionate about the auto buying and financing space, he brings over 20 years of experience in consumer lending, and most specifically auto financing. He was one of the pioneering leaders of Capital One’s entry into auto finance two decades ago, and has held C-level roles in student lending and with Flagship Credit Acceptance.
John Michael (00:04):
Welcome all and thank you for tuning in to Lending in Digital Times, a Conduent production. My name is John Michael and I will be your host for this episode. If you are interested in a podcast that tackles the technology helping to transform the consumer lending space, then this is the show for you. My job here is quite simple. My job is to provide a platform for the amazing thought leaders throughout our industry. Consider this podcast, if you will, your resource for all things consumer finance.
John Michael (00:45):
Okay everybody, so today we are sitting here with Mr. Dave Bertoncini of CarFinance. You want to go ahead and say hello to all the listeners, Dave?
Dave Bertoncini (00:56):
Hello, everybody out there. Good to be on this today.
John Michael (00:59):
We are so glad to have you, Mr. Dave. So why don't we start out by, first of all, you giving a little bit of a, I guess a biography of yourself? Talk about you, your career, and also what kind of problems that you solve over there with car finance.
Dave Bertoncini (01:16):
Absolutely. Hopefully I won't bore everybody with my long history. Still coming to terms with the fact that I'm an old timer within the space and not one of the new people into the industry. I started my professional career back in 1995, left graduate school and was recruited and hired by a small Richmond-based credit card company called Capital One. Knew nothing about it as a young student in school. Finance, financial services, not an area, but fell in love with their process, fell in love with the interviewing, which was very case-specific and analytical in approach.
Dave Bertoncini (01:56):
So spent about a year there right out of grad school in the credit card side, and they moved me into their Growth Opportunities Group, which was a Business Development team. Long story short there, got real involved with auto finance, saw it as a great next step for Capital One to expand outside of just credit card lending. Mid-nineties was a crazy time in subprime auto and auto in general. In fact, most of the companies we did due diligence on to acquire ended up folding before we could even get back to them with a potential offer.
Dave Bertoncini (02:30):
But it did lead to a great small company out of the Dallas market called Summit Acceptance. That became the first acquisition that Capital One had made and became the footprint in the ground for what ultimately is now Capital One Auto Finance. That taught me a lot, I learned a great deal, fell in love with auto finance as part of the process.
Dave Bertoncini (02:52):
Jumped around a few other startup and new business development-type activities both in consulting and student lending, but in 2007, came back to auto finance. That's where my passion was. Joined another small starting company called Flagship Credit, kind of unexpectedly jumped into Flagship right before the financial crisis. So I also learned how a small independent finance company can be a risky challenge for financing and liquidity, and all those things that you never really think about when you're younger in your career. You always assume that the company and the balance sheet are always going to be there.
Dave Bertoncini (03:31):
So again, learned a great deal about business risk beyond credit risk. Helped the company survive through the process. We sold some portfolios, kept the lights on up until the crisis had somewhat ended. Another private equity firm, came in 2010. We re-equitized, relaunched the company, and were able to grow while I was there. I was intimately involved in almost every process within the company. Grew it to a little over $3 billion in portfolio.
Dave Bertoncini (03:59):
Part of that we merged with CarFinance, which was a sister entity of our private equity firm, and and as part of the subsequent to the merger, we spun out of CarFinance a digital fintech-type platform. My expertise being both risk and business strategy, business development, I stayed with CarFinance, left Flagship, and have now for the last about 18 months been dedicated to CarFinance and trying to build out a fintech platform.
John Michael (04:29):
So you mentioned there that your passion has always been auto finance. Do you have any idea what called you toward that segment of the industry?
Dave Bertoncini (04:38):
Yeah, I have to say, when I went to graduate school to get a PhD in economics, it was not so that I could be in auto finance and, more specifically, in subprime auto finance. I know some of the questions that we'll get to over the course of this is what advice do you give or how... Part of it is your paths are never known. Some people might know from the time they're five years old, they're always going to be a doctor, they're always going to be a lawyer. I've always just been entrepreneurial. I've always been inquisitive and always wanted to be involved in things in a greater capacity. And it was just a path that formed itself.
Dave Bertoncini (05:14):
Capital One really created the imprint on me on how I think about business and lending and risk management, obviously that's their forte. Seeing auto finance just was really exciting. I also did a brief period in student lending. I would go back and say it's very similar in that there's multiple parties to the transaction, there's dealers that you deal with, there's consumers, there's lenders, and all those interactions and how you solve for them.
Dave Bertoncini (05:39):
The fact that it's a little bit of a dirty business, so it's not glamorous, it's not sexy. I actually like that part of it. I found a lot of the most successful people are those that do the dirty work and a lot of the really glamorous types of businesses are often very hard to be successful. But it's just imprinted on me, and it's just become part of what I know myself as. I'm an auto finance guy.
John Michael (06:03):
So you just kind of grind it out and the-
Dave Bertoncini (06:06):
John Michael (06:06):
I get it. So the title of this, as you know, is Lending in Digital Times. Let's talk about technology. How would you say technology has helped to streamline your organization?
Dave Bertoncini (06:22):
Ah, interesting. So you could look at it as I've been with Flagship as a lender for 12 years. CarFinance, we're actually now not a lender as CarFinance, but maybe this is the best way of answering that very question. We started out as a lender, but now we're a technology solution to dealers and lenders.
Dave Bertoncini (06:40):
So how does technology impact lending? Well, it actually, to our company, created a pivot where that's now all we do is provide technology services backed with all the knowledge of understanding how lending works and how people buy cars and how people finance cars. I think the biggest change that has affected the industry globally over time has just been the creation of the internet and the open access to information that consumers have.
Dave Bertoncini (07:08):
As that's grown over the 20 years, people can shop for cars without ever leaving their home. They shop for everything now without ever leaving their homes. So they have such widespread information. You know, when you, when you do show up, you've already researched, you understand which car you want, what the features are, what other people are saying about it. So that's a big change in the information.
Dave Bertoncini (07:30):
But the process has, until very recently, it stayed very traditional, the indirect lending model. A lot of technology has changed for the lenders and for the dealers, but the way a consumer bought a car really hasn't changed until fairly recently. Probably 2013, 2004... I mean, there were direct models back in the late '90s but not like you see with the Carvanas in the rooms, and CarMax and what they're doing today. And with some of the sites that are out there, the shifts in the fair.
Dave Bertoncini (07:58):
You're really seeing, I don't think it's going to necessarily change how people buy cars in aggregate, but on the edges, you're really seeing a lot of transformation. And dealerships, 20 years ago, 10 years ago, when I first went to Flagship, the position of most dealers was they're not going to change how they sell. They saw what was going on with the digital side as too small and too much on the edges, where now every large dealer group has a digital team. Every large dealer group is very much focusing on how to create greater automation and self-service, whether it's kiosks, whether it's an automated site, all a Carvana-type model. You're seeing that almost everywhere.
Dave Bertoncini (08:45):
But the one thing I will say is that it doesn't mean that the old way will go away. Television did not displace radio, but it is here permanently. And that's kind of where I am. Maybe that's the dinosaur side of me, I think there will always be changes, but people still want to buy a car from a dealership, it's still a real important transaction. They just want to buy it in a much easier way.
John Michael (09:08):
What would you say excites you most about the auto finance arena at this time?
Dave Bertoncini (09:16):
The change. To me, that's what's fun about any form of business regardless of what industry you're in, is evolving with the business. And the successful companies in any industry are going to be the ones who understand how to evolve and how to change. It doesn't mean you're in constant chaos, but you have to to adjust for where things are going.
Dave Bertoncini (09:39):
And as a credit risk officer, which is where my background really is, how you think of underwriting a consumer and how they select their vehicle and how information is provided. The days of taking photocopies of documents and faxing them in, versus the amount of realtime direct access. I could learn everything about you by you giving me a digital consent on your phone, where it used to be that I'd have to have you provide all the documents and bring them in. Now, literally in seconds, you could just consent. There's back technology solutions that allow me to know pretty much everything about you instantly, and then I can model off that.
Dave Bertoncini (10:16):
And so just the speed by which I can decision. To me, that's fun. It's exciting. It's how do I do that in a way that makes me more competitive than my peers? Those are the things that I think are exciting.
John Michael (10:28):
If you could send out a particular message or one message to the auto finance industry at this time, and you may have already hit on it to some degree, but would there be one centralized message that you're trying to get out?
Dave Bertoncini (10:43):
Well, the one message that I've always wanted to send goes back to '95, '96 when I first got introduced to the sector, and I don't think it's changed. The one fundamental is don't screw it up, because in almost every case, all of the cycles that have taken place, have been the industry hurting itself. It's somebody who is a very large player being overly aggressive, irrational pricing, spending too much at the dealership for what the vehicles are, and then other people chasing.
Dave Bertoncini (11:16):
The consumers get blamed for the credit cycle, the dealers get blamed for credit fraud, but in the end it always ends up lack of discipline with large lenders who are just trying to grow their portfolios too quickly. I think coming out of 2009 and 2010, there's a permanent shift in how lenders will always view the industry. They're much more cautious about the business. We saw that in 2015, 2016, we had a small cycle where we started to see a little bit of a creep back of credit risk, and the industry immediately corrected itself. Large players scaled back, the smaller players raised pricing, and it corrected itself to where 2017 and 2018 were some of the strongest years again.
Dave Bertoncini (11:58):
So I think it's just having that discipline is always... And again, that's true of almost any industry, I'm sure. It's always a matter of companies just behaving well, and when companies don't behave well, bad things happen.
John Michael (12:13):
If you look back over your career, which is quite robust, what would you say is the best piece of counsel that you have been provided over those years, from either a mentor or a friend?
Dave Bertoncini (12:35):
I'd say there's two things that always still stay with me. One is more of the personal advice coming from family, which would be my grandfather, and that's just how you take on and in your attitude towards life. So less of business guidance or in decision making, but more just always work hard, always do your best, always be honest with what you're doing.
Dave Bertoncini (12:58):
I've never been one who, if things don't work out, don't be bitter about it. Just move forward, move on. And if you're comfortable with what you're doing... You know, these things are always easier said and it's that typical parent, "This hurts me worse than you," but I really do believe that as long as I'm comfortable what I'm doing is right, I'll let the chips fall where they will. And that's always stuck with me.
Dave Bertoncini (13:20):
Professionally, I got a piece of advice early on in my days at Capital One, and I'll probably paraphrase this a little bit off, but this is another thing that has constantly stuck with me. And that was somebody who was looking at being recruited in the early days of Capital One to go to a competitive company, and they were going to be the ringer. They were going to be the superstar coming in and the company was putting out all the stops to bring them in. And the gentlemen said, "They were going to pay me a lot more money and it was very flattering, but I looked around the room and I saw I was going to be the superstar amongst a bunch of average people." And he said, "The only reason we're so successful here at Capital One is none of us are average. We're all surrounded by really strong, good people, and that's what makes us all so good."
Dave Bertoncini (14:06):
And the comment was, "I would much rather be average on a star team than be the star of a cruddy team." And it really has, because even when I've interviewed for other roles, I have learned, I don't want to be better than other people in the room. I want to be equal at best, because if I have a great idea, it's not going to do any good if there's nobody around who can help me implement it.
Dave Bertoncini (14:27):
And again, I have actually had numerous interviews where I've gone through or I've left and I've said, "That was flattering, but that's not going to make me successful. I would rather work for somebody who I can look up to as a mentor or see the team and be impressed." I've never been fearful of junior people to me being smarter than me at what they do. I've found that they make you better at what you do. And so, that has stuck me everywhere I've gone.
John Michael (14:52):
Sounds a little bit like the New England Patriots. I don't know if you're a football fan or not, but that has been similar to what I would perceive as Bill Belichick's motto there.
Dave Bertoncini (15:05):
I use a lot of sports on different issues, but to me sports are a perfect parallel for business. You know, how a team, the chemistry, the leaders, how you do, I end up using a lot of sports analogies as applicable to business.
John Michael (15:20):
So you mentioned your grandfather there and I'm curious about your grandfather. Was he a role model of yours?
Dave Bertoncini (15:27):
A very strong role model. Immigrant, like so many people of that age. Born in the 1920s, recently passed away at 96, but-
John Michael (15:37):
Dave Bertoncini (15:39):
A person who I came to really get to know very well, especially as an undergrad in college. I lived with my grandparents while I was in school. This was a person with an eighth grade education, never even got a high school diploma. Served in the Navy, then he was a welder, did welding out of his backyard. Never worked for a company outside of his Navy experience. He just had his own business in back, started buying, small pieces of property with spare money. My grandmother made all his clothes.
Dave Bertoncini (16:11):
So they were that typical one that when they walked in, they were the ones when they walked in the dealership, the old stories of none of the salespeople went to them because of, "Who's that poor old guy who's over there?" And he could pay cash for every deal in there. Because he became very successful, and it wasn't because he became financially successful that it made him a mentor for me. It was that discipline and approach. What he taught me was you always work hard. You always apply yourself.
Dave Bertoncini (16:38):
In terms of my college education, how much he valued... He had no understanding of what I was doing, but he so valued what it represented. And I just saw that and it stuck with me so much. That's where I really learned it's much more important to have somebody proud of you then to have somebody saying good things about you, and that has very much stuck with me from a family perspective.
John Michael (16:58):
Oh, very nice. I love that. So talk to me a little bit about your management style? And when you think about managing people and working with other people within your organization, you probably touched on this a little bit already, but what comes to mind for you?
Dave Bertoncini (17:19):
It'd be interesting if my description of my management style is the same as those that I manage. I would love to do an exercise along those sides. It's probably a little bit of a lot of what I've learned in different roles, it probably all started with how I was taught at Capital One. That was my first corporate-type job. But that was 20 years ago and I have had numerous, I've tried to take a little bit of what I liked from being managed in each role and try to say, "Okay, that's what I see that works."
Dave Bertoncini (17:50):
So a lot of it, I'm very direct. I've definitely learned, nobody wants a friend. I'll use the sports analogy. Nobody wants the coach that wants to be their friend and doesn't push them hard, because then they lose the game because the other team is more prepared. The coach can't be abusive and the coach can't go over certain lines, but they want a coach who pushes. So I have learned people want direction. The quarterback doesn't want the coach to say, "I don't know, what do you want to do?" You end up with a delay of game because nobody can make a decision. People want to be told. They want to then, though, be allowed to say, "I disagree with you."
Dave Bertoncini (18:25):
So I think it's being direct, it's being decisive in what you do, but let people have freedom. My approach has always been consensus. I'm in charge, but I want to hear what you have to say, but somebody has to... Consensus is not nobody's in charge, and I think that's where you see a lot of the mistakes. I think you have to let people make mistakes. If you're not making them, it means you're not trying hard enough. The person who makes no mistakes is never a strong player on my team because that means they're probably not pushing themselves. If I give somebody a document to review and they come back and tell me it's great, I just stop giving them documents to review because they added no value to me, and I try to teach that within people.
John Michael (19:08):
What would you say is one thing people may not know about you?
Dave Bertoncini (19:11):
Let's see. From the time I was in high school through my entire college career, my summer job was a whitewater rafting guide in California.
John Michael (19:25):
Dave Bertoncini (19:26):
And I used to lead multi-day trips out in the wild, and on one trip just outside of Yosemite while I was in grad school, so one of my latter years, as we were on an overnight trip in the middle of nowhere on the Merced River, a large rattlesnake came swirling through the sleeping bags of some young kids that were all setting up. So long story short, that's what we had for dinner that night. I got the rattlesnake, I buttered him up, I grilled him out in the sun, put some garlic with him, and along with our steaks and chicken, we all had fresh rattlesnake. Everybody on that trip thought it was the most exciting, fun thing. I was the river guide who slayed the dragon.
John Michael (20:10):
That's fantastic. Did it taste like chicken?
Dave Bertoncini (20:16):
It tasted like butter and garlic.
John Michael (20:19):
Right, I guess if you put enough butter and garlic on anything, it could taste good.
Dave Bertoncini (20:23):
Yup, yup. I'm Italian, at least by name, so anything with butter and garlic is fine by me.
John Michael (20:29):
Did you do anything with the skin, like make a bracelet out of it or something?
Dave Bertoncini (20:34):
It was interesting, the skin was big. I mean, this was probably about an eight to 10 foot rattlesnake, so I gave it to one of the other guides because I was going back to the East Coast. I was in grad school, so it was in the summer. And from what I understand, they had it dried out and they brought it to a boot. I don't know if they ever actually made boots out of it, but that's what he was intending to do is to try to get some custom boots made.
John Michael (20:56):
That's great. Dave, I have thoroughly enjoyed our time together. If people want to get in touch with you somehow, some way, do you have a suggestion for that?
Dave Bertoncini (21:08):
Well, I'm on LinkedIn, I stay pretty active with it. I'm not actually, even though I'm doing this right now, I am not real active with posting and sharing and doing those types of things. There's a balance and I've found you have to be a little bit cautious with offering your opinion too broadly. But I do use LinkedIn very actively, that's probably the one social media site. Otherwise, I'd give you my email address but I don't think I want to be doing things like that.
John Michael (21:42):
I completely understand. Once again, we spell your last name for those who may be listening, as Dave B as in Baker, E-R-T as in Tom, O-N as in Nancy, C-I-N as in Nancy, I. It's kind of a tough one, but you should be the only one out there on LinkedIn I bet
Dave Bertoncini (22:00):
There's a few, which have surprised me. Again, the wonders of the worldwide social media is you learn there's always a few out there.
John Michael (22:07):
That's right. All right, if anybody wants to contact me, I'm at John, J-O-H-N, dot Michael, M-I-C-H-A-E-L, at Conduent, C-O-N as in Nancy, D-U-E-N-T, dot com. I'm also on LinkedIn. I'm John Michael with Conduent. So Dave, once again, I sure appreciate it. Any parting thoughts that you want to leave with the people before we sign off?
Dave Bertoncini (22:32):
I'd say I was a little hesitant to do this, but this was a lot of fun. I think it's a great experience. So if you guys get a call from John, I think you should take him up on it. I think this could be something I'm doing more of in the future, this was enjoyable. I appreciate you reaching out.
John Michael (22:49):
That's great, Dave. Yes, this is your first podcast, right?
Dave Bertoncini (22:52):
John Michael (22:53):
And I've got a feeling it's going to be one of many to come in your future. Thank you so much again, Dave. You take care now, all right?
Dave Bertoncini (23:00):
All right, much appreciated. Thank you.
John Michael (23:01):