How Plenti is getting ahead in the $30 billion dollar market for automotive finance, with CEO Daniel Foggo
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The company saw loan growth rise by 270 per cent in what is a $30 billion addressable market.
Automotive finance is one of the largest lending segments in Australia, and Plenti (ASX:PLT) has the right tools in place to build market share in the years ahead, CEO Daniel Foggo says.
Since listing in 2020, Plenti has come into the new year with strong momentum, where it exceeded the $1bn mark in cumulative lending during the December quarter.
The company ran a loan book of more than $500m as at December 31, with revenues of more than $50m. And across its three major verticals, automotive finance is PLT’s fastest growing segment with annual growth of more than 270 per cent.
Foggo caught up with Stockhead recently to discuss the company’s opportunity in automotive lending, amid a number of structural changes taking place in the sector.
For starters, he highlighted the size of the addressable market where the company has already gained significant traction.
“The first observation I’d make is that it’s a large market,” he says.
“There’s well over $30bn of automotive finance provided every year in Australia. That’s a significant multiple of the BNPL market and much larger than the credit card market.”
Of the more than 4m car sales in Australia each year, between 80-90 per cent are completed using vehicle finance.
And historically, it’s largely been the domain of big players such as the major banks, which has made it difficult for equity investors to get direct exposure. But that’s changing now.
Appraising the current state of the industry, Foggo noted that Westpac is in the process of selling its automotive loan book while ANZ has already exited the market.
“Banks are departing from direct participation, and what they’re looking to do instead is fund businesses like ours as we pick up market share,” Foggo said.
On March 31, Plenti announced that it had increased the size of its automotive lending warehouse facility from $275 million to $350 million.
In turn, the sector is now undergoing significant “digital disruption” as consumer attitudes change, Foggo said.
Customers now expect “a fully digital experience from application through to settlement”.
“Banks aren’t really set up to do that. Whereas a platform like Plenti was built directly to provide that end-to-end tech that customers need,” he said.
“So they (the banks) aren’t exiting entirely, but they’re moving away from direct participation with customer and focusing more on their core strengths, which is providing capital.”
In that context, the race for market share in one of Australia’s major lending segments is on.
And that’s where Plenti has a key advantage with its vertically integrated tech platform which is run by an almost 50-strong development team.
“The first thing is that we own our own technology, so we’re able to custom design it to fit the modern needs of auto finance based on data insights and consumer feedback,” Foggo said.
That advantage is playing out in real time, with the company now executing on a fast turnaround to incorporate lending to commercial clients as well as retail customers.
As a gauge of how technology is disrupting the sector, Foggo noted that commercial car loans still require physical signatures.
Plenti’s offering will be the “first digital settlement process” in the market, he said.
And with direct ownership of its tech IP, the company has been able to “launch that commercial product quickly”.
“In our automotive division we’re decisioning loan applications in 30 minutes at the moment, which is quite exceptional when you look at approval times across the sector,” Foggo said.
The rapid growth opportunities in an addressable market that generates north of $30bn in annual funding, Foggo said Plenti is now focused on getting the balance right as it scales up for growth.
“If you look at the (recent increase) in our funding base, it’s reflective of the size of the market opportunity and the fact our loan originations are growing at over 200 per cent annualised,” he said.
“So the plan was to upsize and the look to do a term securitisation deal later in the year, which should lower our cost of funding further.”
“If you have scale and you’ve been in the market long enough, you can really drive margin growth by reducing your cost of funding.”
And as the automotive lending market continues to go digital, Plenti has the integrated tech platform and funding base to capitalise.
“I think what we’ll see over time is tech platforms build real scale in automotive finance as other players pull back”, Foggo said.
This article was developed in collaboration with Plenti, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.