Payment Friction Risks $12.3B in Auto Loan Revenues
By Tom Kula
VP, Paymentus
The terms of an auto loan may win the borrower, but the billing and payment experience is the one thing that can either drive lifetime value from the relationship or cause churn and payment delays. The difference in outcomes rests with the approach. When addressed as solely a way to collect payments, the experience becomes a point of friction.
When addressed through the lens of Service Commerce, the experience becomes a relationship builder—delivering the full benefits of more on-time payments, greater borrower satisfaction, and increased lifetime value.
New data from our recently released 2026 Service Commerce Performance Gap report, created in collaboration with PYMNTS Intelligence, shows just what’s at stake for auto lenders, credit unions, and banks still prioritizing traditional loan servicing defined by payments collected rather than relationships built.
How Billing & Payment Friction Risks $12.3B in Auto Loan Revenues
The report makes clear that traditional loan servicing that focuses heavily on operational throughput (bill presentment and payment processing) instead of the borrower experience invites payment delays and churn.
Auto Loan Snapshot
Now that we know what is at stake, we need to know why more than one fifth of all borrowers delay payments each month.
The most obvious answer is that many lenders have a blind spot when it comes to the friction impacting borrowers. While only 5% of lenders claim their servicing falls below ideal, borrowers report friction at two-to-three times that rate. The most common friction points within the billing and payment experience are clunky authentication experiences, non-transparent delays, lack of payment timing flexibility, and confusing bills and statements.
Self-service is another gap uncovered within the report. 77% of service providers offer extensions and 70% allow due-date adjustments. The catch is that these features are overwhelmingly gated behind a call to customer support. Only 15% of providers offer payment extensions via digital self-service. This setup causes unnecessary friction for stressed borrowers who would much rather address their potentially sensitive needs without speaking to a live person.
Why Gen Z Is an Auto Lenders Biggest Challenge To Solve
While baby boomers serve as an anchor of stability, Gen Z (Zoomers) serve as the most likely demographic to delay payment due to billing issues and disputes. Given their status as digital natives, it’s not surprising that their expectations would be higher than any other generation. The challenge is that these borrowers also hold the longest lifetime value, making it essential to meet their needs to secure long-lasting loyalty.
Report data shows the challenge at hand:
- Gen Z rates loan servicing 13 points lower than baby boomers
- More than 50% of Gen Z auto borrowers find the payment process frustrating
- 39% purposefully delay payments when facing billing issues or disputes(!)
Bad experiences also result in churn. 13% of auto loan borrowers switch providers due to poor experiences, with the younger, more financially strained borrowers leading the exit.
How Service Commerce Smooths Billing & Payment Friction
Unlike retail commerce, where the purchase is the relationship, Service Commerce is defined by a service provider’s commitment to optimizing the end-to-end billing and payment experience.
Service commerce is the recurring, billing-anchored commercial relationship between a service provider and its borrowers: the bills, payments, communications and support interactions that recur across cycles.
As the most frequent and guaranteed touchpoint, the billing and payment experience has the unparalleled ability to enhance relationships through expanded capabilities that make it easier to manage and pay bills, self-serve account needs, and create much-needed flexibility. By removing common frictions such as authentication issues, limited payment options, and confusing statements, auto lenders have the ability to streamline the payment process and add value at every touchpoint.
Additionally, 58% of consumers judge a lender’s overall quality by the servicing experience; only 5% of lenders view billing as a loyalty driver. The opportunity is here, it just needs to be recognized and captured. Forward-thinking auto lenders must view billing and payments as a business and loyalty driver, rather than simply a way to collect payments. Only Service Commerce can bridge that gap and and deliver the lifetime value necessary for long-term success.
Ready to eliminate the hidden frictions within your billing and payment experience? Visit our Auto Finance Lending page to see how Paymentus can help you retain borrowers and drive lifetime value. Access your copy of The 2026 Service Commerce Performance Gap report today. Featuring insights from more than 2,500 consumers and 240 billing and payment decision-makers, you’ll gain an unparalleled view of the hidden friction driving customer dissatisfaction—and how Service Commerce can fix it.