By combining elements of several payment systems, Metavante Technologies Inc. has developed a customized auto loan processing platform for the El Segundo, Calif., servicer National Payment Network Inc.
The hybrid platform, which the two companies call CustomPay, draws on the Milwaukee vendor's automated clearing house, prepaid account, and bill payment capabilities, and NPN's account management and loan acceleration services.
Executives of both companies said they are considering offering CustomPay to servicers in other businesses, such as mortgages and consumer finance.
Jeff Lewis, the president of the Metavante ePayments Solutions division, said the account management service, which auto dealers offer to consumers as a way to have payments deducted automatically from a checking account, could help borrowers avoid falling behind on their loans.
"What NPN is doing is truly a benefit to the consumer," Mr. Lewis said in an interview last week. "We're helping the consumer be more disciplined and keep on schedule with those payments."
NPN, founded in 2001, specializes in loan acceleration programs. Its main service uses the ACH system to debit borrowers' accounts on their paydays, often on the Friday of every other week. Because that generates 26 withdrawals a year, the company makes the equivalent of 13 monthly payments to lenders.
However, many lenders' systems are designed only to handle payments once a month, according to Jason Typrin, NPN's executive vice president.
By collecting payments biweekly and executing them monthly, NPN makes sure lenders are "still getting payments in a way that makes sense to them," Mr. Typrin said. "Once every six months the lender is going to receive a larger payment, which includes a payment to principal."
NPN has worked with Metavante for three years and has been processing all its work on the CustomPay platform since the start of 2008, he said. "Our program doesn't affect the terms of the loan, only the method of payment."
Under its loan acceleration program, NPN ends up holding borrowers' payments for up to six months before sending the money to the lender. Previously these funds were commingled in a pooled account, but under CustomPay, each borrower's money is held in a separate, prepaid Metavante account.
Mr. Typrin said NPN offers its accelerated payment program through 2,000 dealers of new and used vehicles, primarily in the Northeast, the South, and the Midwest. It has enrolled 100,000 borrowers and has processed more than $3 billion of consumer payments, he said.
As auto prices have risen and payment schedules have stretched out — loan durations now average more than 60 months — buyers are in a negative equity position longer than they would be with a shorter-term loan, which makes loan acceleration more attractive to dealers seeking trade-in business, he said.
Mr. Lewis said the prepaid accounts that hold the funds provide a low-cost, efficient way for NPN to maintain accounts for each borrower.
"We also open up new markets where this solution can be applied, to new business needs out there," he said. "That's pretty compelling."
NPN initially tried to market its loan acceleration program to mortgage companies, but it found greater acceptance in the automotive market, Mr. Typrin said. It may revisit the mortgage market with CustomPay.
"There's no reason this program would not work through the mortgage channel" or in retail lines such as electronics or home furnishings, he said. It could also be useful for providers of medical procedures such as laser eye surgery "or any channel where you have a propensity for a consumer to finance a purchase."