Wednesday, April 21, 2021

Black Book forecasting an annual depreciation rate of 5% for used vehicles in 2021

LAWRNECEVILLE, Ga.—Black Book, in a joint report with Fitch Ratings, is forecasting an annual depreciation rate of 5% for used vehicles in 2021 as the effects of the pandemic continue to be felt.

The forecast comes after a record-low depreciation rate in 2020 at 2.0%.

Report Highlights:

Other forecasts from Black Book include:
  • Manufacturing shutdowns impacted new sales, and this, coupled with the government stimulus payments and added benefits, led to an uptick in demand of used inventory
  • On the other hand, lack of repossessions and delayed lease returns created used inventory shortages
  • Full-size trucks and luxury segments in 2020 outperformed depreciation expectations, with full-size trucks appreciating 8.7%. Additionally, the premium luxury car segment depreciated a mere 8.1%, compared to 2019’s 25.9%
  • Fitch said it believes auto loan and lease ABS (auto ABS) asset performance will be supported by strong used vehicle values containing loss severity, and resulting in positive asset recovery and residual value (RV) performance
  • Fitch Auto ABS Rating Outlooks are stable for 2021 consistent with 2020, and reflect expected stable asset performance, transaction structural protections, and Fitch’s conservative establishment of transaction base case loss proxies
  • Prime auto ABS asset performance demonstrated considerable resiliency in 2020, and both frequency and severity continue to contain loss levels

2020 Depreciation Trends

The annual depreciation rate on two-to-six-year-old vehicles fell by only 2% in 2020, a sharp contrast to the 16.8% annual depreciation in 2019, according to the forecast. Strength in the market was felt largely in Q3, due to the federal stimulus benefits and constrained new inventory levels.

In addition, Black Book and Fitch said moratoriums on repossessions and delayed lease returns kept the available used supply low and further fueled the appreciation of used vehicles.
The report stated the Compact Car segment fell sharply in the fall amid low fuel prices and increased new inventory levels, depreciating 10.6% in 2020. Full-size trucks and SUVs remained strong as continuing inventory shortages put a premium on used units.
The Black Book Used Vehicle Retention Index decreased 0.8% from 115.4 in January 2019 to 114.5 in January 2020. The Index began 2020 strong, but the effects of the pandemic began to be felt by the end of March 2020. Throughout the summer months, the Index climbed to a record 130.08 points before stabilizing and finishing the year at 128.8 points, up 13.7% compared to December 2019, according to the company.

A Look Ahead at 2021 Trends

According to Black Book and Fitch, as the economy continues to recover from the COVID-induced recession, wholesale and retail prices are expected to be strong in 2021 with projected annual depreciation of just 5%. The forecast predicts this will leave wholesale prices at the end of 2021 well above pre-COVID levels.

“Used inventory levels will remain tight throughout this year, contributing to the strength of the used market. New vehicle production and sales will return to some normality later this year, and we expect the wholesale market to return to typical seasonal depreciation in Q4,” Black Book said.

Tuesday, April 20, 2021

Open banking is the system of allowing access and control of consumer banking and financial accounts through third-party applications.

MIAMI–A “significant misunderstanding” over what open banking is all about is hampering its adoption, according to a new study of 2,000 global consumers by Mambu, a banking and financial services platform.

The Census wide survey, commissioned by Mambu, found that more than half (52%) of consumers have never heard of open banking and 61% have never used it, in spite of 80% of respondents using one or more mobile finance apps.

Open banking is the system of allowing access and control of consumer banking and financial accounts through third-party applications. 

“The research reveals the majority of customers don’t understand what open banking is, how it works and what it means for them,” said Elliott Limb, Mambu’s chief customer officer. “But it also reveals they do care about receiving better financial services that support their lifestyles – smart banking. If banks address this need and lack of understanding, it will help banks build customer loyalty and provide genuinely innovative, differentiating, revenue-generating services.”

The Big Disconnect

Mambu noted that open banking has witnessed an increase in adoption globally as a result of the COVID-19 pandemic, and the research indicates a “marked change” in attitude and priorities as a result of the crisis.

According to the survey, 52% said they wanted more control over their finances, while at the same time, 40% said the pandemic had changed their attitudes to privacy and 24% to data sharing.

Another boost came from the 41% who said they have had more time for research, Mambu reported.

  • The survey also found respondents saying:
  • I have needed to take more control of my finances (52%)
  • I have had the time to do my own research and understand it better (41%)
  • My attitude to privacy has changed since the pandemic (40%)
  • I’m less worried about sharing data (24%)
  • I have had more time to set it up (40%)
Existing Concerns Remain

The survey also found, however, existing concerns remain, with 48% of consumers claiming they are “scared” to use open banking and 53% still believing that open banking is a dangerous use of data sharing.

Mambu reported almost half of respondents claim that their banks did provide reassurance on the safety of open banking or provide information on what the numerous benefits are, with another 24% stating that, while it was explained, it could have been done in a better way.

“Banks must accept that open banking is still not a fully comprehended phenomenon so this is the starting point,” said Dmitrii Barbasura, CEO and Co-Founder, Salt Edge, a Mambu partner, in a statement. “We believe they need to invest time and effort in educating customers about the new possibilities they get access to, and also inform them about their rights and the high safety level covered by open banking.”

Change the Record

According to Mambu, demonstrating the opportunity for open banking, the survey revealed that 57% said they would be more likely to use it if their bank had more successfully implemented and promoted it.

When exploring further what consumers want from open banking, the survey shows that nearly half of respondents want instant digital money transfers; more than a third want aggregated bank balances at a glance; a third want tips on better money management and a quarter want money-saving suggestions for their bills.

What Consumers Like
  • The survey found respondents liked various aspects of open banking, including:
  • Instantly transfer money between different accounts (48%)
  • See different account balances together at a glance (38%)
  • Help boost my savings automatically calculating spending patterns and moving spare money into savings or investments (36%)
  • Receive helpful hints about better money management (34%)
  • Receive one overall monthly bank statement (34%)
  • Allow access to banking data to receive automatic suggestions about money saving on bills and insurance (26%)

level the playing field between unregulated fintechs and credit unions.

WASHINGTON–With both credit union trade groups pressing Congress to bring fintechs under the same regulatory umbrella as other financial institutions, one of the key questions to be asking is what happens when things go wrong, according to NAFCU.

Credit union trade groups have called on Congress to ensure a “level playing field” between unregulated fintechs and credit unions. A number of fintechs have in the last year seen strong user growth into the millions of customers. Congress held a hearing on the issue last week.

“What we saw from the hearing is there are still a lot of questions,” said NAFCU EVP and General Counsel Carrie Hunt. “We are going to see more hearings on this issue. I think, ultimately, there is going to be a lot of disagreement as to what that regulation should look like. There is agreement that traditional financial providers can find value in partners, including fintechs, which can innovate quickly. It’s when they go one step further that begs the question around safety and soundness. We think credit unions provide the best option for consumers cradle to grave. These apps to move cash around quickly have a very finite purpose. The consumer really likes them until there is a problem, such as fraud, and then they end up going back to their credit unions. This is about a fair playing field.”

Regulatory Rollbacks’

Separately, the Biden Administration continues to roll back a number of Trump Administration rules and regulations, most recently around fair housing

Hunt said NAFCU is watching the moves being made by the Biden Administration, as it strongly supports a “deregulatory agenda.”

“If there is re-regulation, we want it to be necessary regulation,” said Hunt. “That’s how we view these rollbacks. We strongly support fair housing. Generally, it’s not the intent of regulation we have an issue with, its regulatory burden and whether it’s necessary to achieve those goals. Generally, there are other ways to achieve those goals.”