Santander launches digital banking in the U.S. to reduce auto loan costs

Santander, a financial institution headquartered in Spain, has launched Openbank in the U.S., a move that could unlock up to $30 billion in vehicle loans, according to U.S. CEO Tim Wennes. This expansion allows Santander to serve consumers nationwide for the first time, beyond its existing 409-branch network.

Key details:

• Santander’s business model for the national expansion includes what the company touts as a high yielding savings product for consumers, as well as an “intuitive, secure, and seamless customer experience.”

• The initiative also aligns with Santander’s strategy to reduce reliance on wholesale funding for its auto-related loans. 

• Currently, more than $30 billion of these loans are wholesale funded, which carries higher costs. By drawing deposits directly through Openbank, Santander aims to lower funding expenses and enhance profitability in its $60 billion U.S. auto loan portfolio.

Why it matters: The launch of Openbank comes at a challenging time for both lenders and borrowers. Higher interest rates and inflation have made financing more expensive, and many consumers are waiting on the sidelines to make big purchases. A recent Santander survey found that:

• More than half of middle-income consumers surveyed said they have delayed purchasing a vehicle in the past year due to cost.

• More than four in 10 are considering purchasing a new vehicle in the coming 12 months.

• 30% of those surveyed said they are likely to take out an auto loan if the interest rates come down in response to the rate cuts by the Federal Reserve.

Big picture: By launching Openbank, Santander is positioning itself to fund auto loans more efficiently and capture future demand as consumers look for affordable auto financing options. With rising costs keeping many buyers out of the game, Santander’s ability to offer competitive rates through direct deposit funding could be key to expanding its share in the challenging U.S. auto lending market.

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