Partnering With a Fintech to Diversify in Challenging Times

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You're listening to Leaders and Lending from
Upstart, a podcast dedicated to helping consumer

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lenders grow their programs and improve their
product offerings. Each week, here decision

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makers in the finance industry offer insights
into the future of the lending industry,

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best practices around digital transformation, and
more. Let's get into the show.

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Welcome to Leaders in Lending. I'm
your host Jeff Keltner. This week,

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I'm bringing you a conversation between Julie
Thurlow, the president CEO of Running Cooperative

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Bank and Upstart to own ed Walters. This was recent webinar, but we

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thought it was worthwhile as content for
the podcast as well. Julian ed talk

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about overview of the current economic landscape, how to deliver differentiated, personalized lending

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experiences to meet the expectations of modern
customers, best practices for integrating fintech partnerships

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into a community banks lending strategy,
and really focusing on expanding access to credit.

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I'm going to use those partners to
better serve your customers, to serve

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more customers, and how do we
think about managing those effectively in the current

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environment. So I hope you enjoyed
this conversation with Ed and most specifically Julie

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Thurlow from Writing Cooperate Bank. I'm
Mike Krakowski. I'm the moderator for today's

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program. We're very pleased that you
could spend some time with us, take

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some time out of your busy day
to learn more about our topic, partnering

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with a fintech to diversify and serve
customers in turbulent economic times. Before we

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go any further, I do want
to take a moment to thank and acknowledge

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Upstart for sponsoring today's program. We
appreciate their support. Today, we're fortunate

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to have with us three expert speakers
who are going to engage in a fireside

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chat of sorts, talking about the
key issues here, as well as answering

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questions from our audience at the back
end of our program. As well our

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speakers, they include Julie Thurrow,
President and CEO of Reading Cooperative Bank.

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Julie Thurlow is the president and CEO
at Reading and she is responsible for the

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bank strategic direction and management. Julie
also serves as president of the RCB Charitable

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Foundation and as vice chair of the
American Banking Association. She's a past chair

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of the ABA's Core Platform Council,
and she currently serves as a member of

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the Government Relations, Administrative Committee and
Membership Council. Jolly joined today by Phil

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Bryant, Executive Vice President and Chief
Banking Officer at Reading Cooperative Bank. Prior

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to joining RCB, Bill spent five
years as president and CEO of The Cooperative

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Bank and was the EVP and Chief
Lending Officer at Georgetown Bank. Over the

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course of his extensive lending career,
Full has served as Senior Vice president of

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Retail and Lending at Metro Credit Union, Senior Vice president and Small Business State

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Manager at TD Bank, vice President
of Retail Banking at Metro West Bank,

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and Vice President Business Development Officer at
Citizens Bank. Finally, we're pleased to

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have with us Ed Walters. Ed
is Vice President of account Management for Lending

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Partnerships at Upstart. He is over
twenty five years of financial experience of financial

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services and management consulting experience, and
it has held various leadership roles, driving

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consumer lending growth and establishing fintech partnerships, building pmos to support bank transformations and

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acquisitions, improving business resiliency, and
leading technology development. It's all among Julie

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Phil and Ed. They have a
lot of ground to cover, but they

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have a lot of great ideas.
So I'm going to turn the program over

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to our host here and that is
Ed Walters at Upstart. ED. The

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floor is now yours. Great.
Thank you Mike in Too American Banker for

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hosting us today. So we'll plan
for about thirty minutes of content and then

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we'll leave fifteen minutes for you and
a Today it is Mike said, it's

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it's gonna be a fireside chat,
So we want this to be interactive.

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So as we're aving dialogue and asking
questions is if you have questions through OUTE,

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please add them in the chat and
we're applicable. We'll try to answer

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them within the flow. But again
we'll leave time at the end. Julie,

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Phil and I really appreciate you just
taking the time out of your day

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to be with us, and we
hope that you find our discussion valuable and

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relatable to the environment that we're all
operating in today. So when I begin

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these, when I do these conversations, these fireside chats, what I'd like

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to do first is for the audiences
give them an overview of our organization.

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So there are two organizations that are
speaking today. So Julie and Phil,

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let me let me ask you guys. Could you go first and let's share

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who is Writing Cooperative Bank, And
let's describe a little bit about the market

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you serve for the audience if you
went mine, sure. So Writing Cooperative

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Bank has been in business since eighteen
eighty six. We're a mutual organization and

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for the last ten to fifteen years, we've been thinking differently or probably the

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same about our markets. We actually
were founded for the working man, and

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we have really focused ourselves on a
couple of gateway cities that are in our

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market area, identifying where there is
need and using a human centered design approach

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to hear from the customer what their
challenges are. And their challenge is access

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to credit and even banking. When
there are check hashers on every corner in

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these communities, clearly folks don't have
access to the full array of financial services

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that are other markets benefit from.
So we've really been focused and identified the

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underserved customer, and that's when we
started working with you, folks. And

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just to add that, I think
that as a community bank, pretty much

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all community banks they have that focus
on exceptional customer service. But we really

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tried to take a look at what
are the needs, what is the competition

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like out there today? How can
we how can we combine tremendous or great

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technology along with customer service to create
no those efficiencies that you can get from

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technology. And we are yeah,
we are willing to embrace technology and use

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technology to improve the consumer outcome.
Great, Well, thank you guys for

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taking a little bit to give the
audience an overview. Let me take just

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a couple of slides and promise this
This is the extent of our slide presentation

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today and it's really just going to
be about the dialogue. But let me

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talk about just Upstart for a moment. So Upstart is a leading artificial intelligence

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learning marketplace really that's designed to improve
access to affordable credit while reducing the risk

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and cost of learning for our learning
partners. And so what does that mean?

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And so, so the thing about
Start is we're this, we're a

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marketplace that in ables our lending partners
to acquire new customers that align with the

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bank's risk appetite, which is which
is very important. And what it does

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is we're able to provide our lending
partners a means to diversify and expand their

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learning portfolios by growing with asset classes
such as personal and auto loans, and

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in particular or personal loans are attractive
right now to our learning partners because they

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accomplish two things. They're a high
yield and they're short duration asset, which

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is which is really important in a
very volatile environment with with with a rate

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environment. And then you talk about
providing access to credit and be able to

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approve more borrowers. And so how
we're able to do that is through upstarts

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AI credit decisioning model. So we
use over a thousand data points and advanced

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a machine learning algorithms really to find
the credit whether credit worthy borrowers that fit

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into a bank's risk cappatite right,
So really the bank themselves defines that that

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that credit policy, and the upstart
model is able to fit borrowers into that

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fine borrows that meet that expectation,
and all of it is delivered in a

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fully modern, all digital experience,
which which really is is what the consumers

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is expecting today. So let me
explain the last size really okay, like

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how does that? How does that
work? And so banks can partner with

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Upstart really on two fronts. There's
there's the Upstart referral network and then also

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within a bank's digital infrastructure sometimes referred
to as as our white label solution,

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and there's two asset classes currently that
Upstart supports, So there's there's a personal

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loan as well as they're the auto
loans. So now the referral network,

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what that does is it allows our
bank partners to subscribe to our marketplace and

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really they define on a monthly basis
what's the desired volume U target that they'd

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like to get, as well as
kind of the core underwriting criteria and economic

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criteria. And then so then as
borrowers are coming into upstart dot com,

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as we're driving kind of as a
national marketing effort, those borrowers are the

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match to a single lender that is
providing them the best rate based upon the

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capital that's available of where they meet
that lending partner's criteria. So it's really

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matching up a benefit to the consumer
and a benefit to the lenning partner right

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making that connection, and then that
borrower becomes a customer of the bank,

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so it's originating on that bank's paper
and it's it's becoming a customer, and

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so it's really an effective tool for
driving growth all within a bank's economic and

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restolerances. Now, the white label
solution that is something that's integrated within a

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banks fully branded experience within a banks
kind of a digital website, and so

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it's really what that intent is for
is to serve kind of existing clients or

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any prospects that are coming to your
website, are coming into your branches.

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And with the upstart program, banks
have the flexibility to either leverage one or

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both of those solutions. It really
depends on what your business need is,

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what are you trying to accomplish.
Reading, for example, actually uses both

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and we'll be able to talk a
little bit about that today. So before

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we go into the discussion, I
think everyone's acknowledging that the learning environment has

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changed. Right a lot of the
past eighteen months, banks are monitoring the

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macro impact on their customers. We're
going through a rising rate environment. But

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what hasn't changed is that consumer still
has expectations for digital improved digital experiences and

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lending needs exist. And so what's
critical right now is for a bank is

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how do you provide that digital experience
and support those lending needs, but really

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be confident that you're originating loans within
the risk tolerance right with with just a

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lot of moving pieces. So what
we like to do is is before we

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start getting to some of our questions, let's get to know you a little

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bit, and let's start with two
polling questions. So let me pull up

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our first polling questions. So this
is the the audience participation would be great.

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So the first question we have is
what is the sediment in your organization

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right now? I'm consumer personal ending. This gives us a chance to get

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a sense of or do you have
do you offer personal loans today? Did

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you offer how is how is that
change your your perspective over the over the

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past year. Okay, I'll give
it just a couple more seconds. We're

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getting just one more second, all
right. I was I always you know,

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I was either go too fast or
I or I U I take too

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much time. But well I think
we've got enough. Let's switch this one.

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Okay, So interesting, pretty pretty
even distribution kind of across the categories.

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Any anything here that surprises um,
any of my my fellow panels kind

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of what you would expect. So
I actually I'm not surprised, especially at

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the very first first question. Um, when I think about our markets,

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Um, most people use their credit
card to day instead of getting a personal

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loan, even though a personal loan
is probably easier for them. Or what

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about by now pay later? Um? So what is actually replacing the consumer

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loan? I'm about it, but
um, I also think about it.

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What's what's in the consumer's best interest? Um? And we can talk about

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that more later. Yeah, no, it's great. Yeah, I'm not

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surprised. So the next is is
about the digital approach. So what is

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your organization's digital approach to consumer personal
ending? Get a sense of you know,

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our consumer is still required to come
to your to a branch to close

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or have you built a digital experience
and and that digital experience have you have

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you built on your own or have
you looked to partner with a with a

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fintech to to provide that experience?
Let me pause here for a moment.

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Okay, one more second. All
right, let's go to the answers.

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Okay, so so interesting. Almost
almost fifty percent still required to come into

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a branch. Yeah, what any
any reaction there? Uh? Really infilled?

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Well, I think this is a
great opportunity for you to talk about

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up start. Yeah. Well good, that's what we were too, so

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it's not surprising at all. Not
surprising. Yeah, well great, So

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let's let's actually here. Let me
do this, let me I'm gonna just

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um, let me just move to
this slide because really I'm doing more slides,

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but I'll just leave this up so
you guys can get everyone and see

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more of our faces, which is
really what people want to say. Um,

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all right, so let's let's jump
into the really the first question.

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So I had the audience kind of
give us their feedback. Um, could

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you talk a little bit about reading
as far as what are your goals?

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Is it relates to kind of consumer
lending and both you can relate to personal

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but just overall consumer lenning. How
do you look at it from from your

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business goals? So maybe I'll talk
about it from more of a macro perspective.

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Community banks have been losing the personal
loan business that we've lost the auto

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loan business. Um, we're quickly
losing the mortgage business. Just because everything

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has become more and more automated.
Consumers have their credit card access to so

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many other options. As far as
credit is concerned. So the reason why

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we looked at the ability to automate
is and of course regulators right now are

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very concerned about equable access to credit
and financing. However, the consumer loan

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is probably the most expensive to originate
as it relates to the return that you're

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actually going to achieve. So unless
it's automated, it is actually costing you

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more than you're actually going to make
an interest on that short term loan and

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small dollar loan for the bank.
But it is what people need. So

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I mentioned earlier that we've actually opened
a couple of branches in Gateway cities and

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what we heard loud and clear as
people want credit. They recognize that if

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they want to be successful financially,
they need to use credit so that they

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can leverage and get the things that
they need so that they can actually achieve

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the next goals and take that additional
job, et cetera. So how do

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you actually get money into people's hands, but do it in a profitable way.

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It has to be through automation and
in fact consumers and you know it's

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the thing that happens with your kids, right they turn eighteen, they want

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a loan, They come to you
to cosign because they can't get a loan

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on their own because they don't have
a credit score. But you can't get

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a credit score without having a loan. It's a chicken or egg scenario.

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So just hearing from the folks on
the ground, why you know, what

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are your aspirations and what are your
challenges you with your banking relationship. Access

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to credit is a huge friction point, so solving for that and that's really

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what we liked about upstarts. Your
willingness to provide better access to borrowing that's

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not just driven off the credit score, helping us serve existing customers but also

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new customers. And even the fact
that you your model does adjust to the

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current economic condition and we're still in
control of what the rate is, what

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market we're lending into. We're not
a large institution where I mentioned a mutual,

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so we can only leverage our capital
so much, so we can actually

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set the expectations and on what size
of a portfolio we want in making sure

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that we deliver for our consumers first, No, that's thanking, So but

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I will say this just want to
add something to it, is that I

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grew up in consumer lending even though
when you look at my resume, I've

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been kind of all over the lending
world and I grew up there, and

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I also spent some time at a
credit union, and I couldn't understand credit

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unions seem to do just a great
job with auto lending and consumer lending and

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they figure it out. And why
community banks don't play there, I never

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quite got. But certainly having a
way to automate that. There's a cost

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of doing it. There's a cost
of collections, there's a cost of servicing.

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So trying to solve for those problems
was our biggest issue, but self

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solvable. So we just you just
had to find the right partner to do

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it. Oh great, thanks for
your contexts there. So let's talk a

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little bit about the consumer. You
and you you talked a little bit about

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about habits and in different products that
that that the consumer is is looking at

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or have available. So is you
look at your business are you are you

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seeing like spending habit changes with your
with your with your customers today or or

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even seeing the needs adjust, say
over the over the past um, you

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know, twelve to eighteen months.
Um. So I would say so during

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the pandemic, we actually saw that
consumers had a build up of cash.

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UM, they weren't actually looking for
a tremendous amount of credit. Well,

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if you can't go anywhere, and
you can't go out to dinner and so

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this but UM and UM and we
offered skip payments for mortgages, so UM

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people did have have access access funds
in their account. Are we are seeing

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those UM draw down UM and UM. We haven't yet seen UM in increasing

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delinquencies, but we hear from from
other areas that there are increases in credit

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card usage and by now pay lay
later, we're seeing a fair number of

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that payments are moving outside of the
banking system with benmo and balances are external.

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UM. Any consumers have changed their
behaviors for an expectation of immediate satisfaction

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and so being able to get anything
on your mobile device and to be able

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to act when you need to and
get access to the things that you need.

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I think that's important to consumers.
UM. I mean I grew up

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with layaway, not me myself.
Might remember my mom, that's how she

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saved for Christmas. We still offer
Christmas clubs. But on the other side

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of the house, UM, there
seems to be more of a lean towards

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um, more more predatory payday loans, and and I am concerned about the

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whole buy now, pay later when
consumers don't necessarily have a hundred percent control

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over their account anymore. I do
like a personal loan because it is a

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way to level out monthly payments,
to be able to plan and prepare um

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so that the consumer is more in
control, whereas right now it seems like

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the payment companies are in control.
And just to add to that, yes,

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we are seeing I see you read
about it in the Wall Street Journal

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and you you're losing it here with
some of our portfolio. Is that your

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credit is being used more, most
of its variable rate credit cards, as

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to we mentioned, So now people
are turning to what can I fix that

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out for three, three, seven
years whatever that may be at a better

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rate than they're getting it with the
credit card company. So we are seeing

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that credit consolidation starting to happen now
as well well. Alone the interest rates

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already eight percent. So yeah,
when you when you saw, as you

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mentioned it right during during COVID,
just spending habits. Really we're dictated because

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they're just books. Weren't able to
spend right, and and then there was

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just this kind of this build up
and and I think there's is a lot

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of is a lot of bank and
creating union executives I talked to, you

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know, talking about now you're you're
you're seeing you're seeing that, You're seeing

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the usage go up, You're seeing
people are out there taking vacations. There

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there, there are all these things
that was kind of uh, you know,

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penned up for for a number of
years. Now is is kind of

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it's kind of coming back and at
different stages that it did different cycles.

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So um, definitely interesting times that
we're in over these uh these these past

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couple of years. So that then
the leads me kind of my next question

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is as is the is the environment
is is changing? And you talked a

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little bit about, you know,
consumer expectations. We live in this this

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this Amazon world where you know,
I want it now and speed, So

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how do you see the need for
data and more automation and and and and

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just the digital experience really kind of
impact your approach. You're is you're looking

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at seeing those components is almost almost
table stakes, I think in some cases

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of of getting into some of these
areas. So if the consumer loan is

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your first loan product or your first
experience with term financing. The small dollar

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consumer loan is hard to justify.
I've alluded to it earlier. It takes

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the same amount of work as a
home echoy loan, but there's no collateral

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underneath it, which makes it very
expensive for the consumer but also expensive to

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originate higher risks presumably higher default rates. So you need to make sure make

278
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sure that this is a prime customer
that you're lending to, one that's not

279
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going to default because there's nothing backing
it and it all gets written off of

280
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the payments don't get made. So
scaling a product and building a portfolio that

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provides the return, it can't be
ten loans and then you lose on one.

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It needs to be a lot of
loans that actually drive down the cost.

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But those whole host of loans requires
that you have a department that actually

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can collect on the loans, that
can process the loans, that can book

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the loans. It just is an
expensive expensive to scale at the community bank

286
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level. And to add what you
said about table staying, I think from

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my perspective is if we couldn't do
this quickly, we couldn't do it easily

288
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app based and be able to get
funding to them in a relatively short period

289
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of times, that I didn't want
to do it at all, because that's

290
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what the experience is with larger institutions
that they have across the country. Right,

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So that was really kind of a
no starter for us. If we

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couldn't do that, then it just
wasn't worth going down the road. Well,

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and that leads us to kind of
the next question. I mean on

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just hey, you have expectations of
how you want to deliver solutions, and

295
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it actually it bodes us. Someone
asked a question about evaluating partnership. So

296
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thank you for who asked the question, because you let into my question number

297
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four is really can you talk about
your approach to partnerships? And so I

298
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think a lot of people join these
these types of calls to hear from other

299
00:24:00.440 --> 00:24:06.960
bank executives on how did you approach
looking at fintech partnerships? How how you

300
00:24:06.960 --> 00:24:10.240
know? What were the things that
you are evaluating and the processes that you

301
00:24:10.319 --> 00:24:14.200
go through As folks are thinking about, you know, how do I how

302
00:24:14.200 --> 00:24:22.400
do I do this in my organization? So for the fintech that are actually

303
00:24:22.400 --> 00:24:25.720
looking at trying to figure out how
to make the connection with the bank.

304
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It is UM. Sometimes it is
just you know, fortuitous conversations that that

305
00:24:30.440 --> 00:24:34.519
just happened. UM. We are
looking for fintech that provide a service that

306
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our customers are looking for, UM
and not some obscure, unrelatable service.

307
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It has to be within the banking
bandwidth, UM and UM and for us,

308
00:24:45.240 --> 00:24:48.119
it has to align with our organizational
values. So it has to be

309
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providing something that is right for the
customer. It is not taking advantage of

310
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the customer. It's fair, it's
transparent, UM and UM. And we

311
00:24:55.640 --> 00:24:59.119
have to be mindful of our bandwidth. So UM, we're not going to

312
00:24:59.160 --> 00:25:02.160
be doing ten product it's every single
year. UM. We have to be

313
00:25:02.240 --> 00:25:06.240
very intentional about which ones we select. Is itself contained? Is it easy

314
00:25:06.240 --> 00:25:11.240
to stand up UM and UM and
Canada achieve our objectives and not just be

315
00:25:11.559 --> 00:25:18.559
a one off. Yeah. And
the support is also helping. That support

316
00:25:18.640 --> 00:25:22.759
from from the the fintech itself in
that we don't know how to stand up

317
00:25:22.799 --> 00:25:26.240
something like this. It's foreign to
us. We need a lot of handholding

318
00:25:26.680 --> 00:25:30.599
in the process to be able to
say, okay, here's here's some other

319
00:25:30.599 --> 00:25:33.559
people to talk to you that I've
gone through it. Here's what other institutions

320
00:25:33.640 --> 00:25:38.240
are doing. Now, um,
here's you know, this is how you

321
00:25:38.279 --> 00:25:42.559
got to deal with your auditors when
they come in because duly mentioned earlier a

322
00:25:42.559 --> 00:25:47.559
lot of appliance around consumer lending.
So there's really a we need a lot

323
00:25:47.559 --> 00:25:51.880
of handholding from the from the fintech, from the partner to help us get

324
00:25:51.880 --> 00:25:56.400
through that process. But it doesn't
just end after we've stood this up right

325
00:25:56.440 --> 00:26:00.200
now, it's going to be let's
let's look at this ongoing is is it

326
00:26:00.279 --> 00:26:03.160
performing the way we want to do? We need to make tweets with it

327
00:26:03.799 --> 00:26:06.480
because again this is our first time
going down this road, so we need

328
00:26:06.519 --> 00:26:07.960
all that help we can get.
So you got to make sure that when

329
00:26:07.960 --> 00:26:12.559
you're talking to somebody else, if
you're getting references, that you're digging deep

330
00:26:12.599 --> 00:26:17.400
into that support, not just in
the beginning but after they close and after

331
00:26:17.480 --> 00:26:22.559
they stand up the product. Well
our chap point we also and to that

332
00:26:22.599 --> 00:26:26.440
point, we also need to know
that we're not betting the bank on something

333
00:26:26.680 --> 00:26:30.160
that could actually harm the institutions.
So the reporting that you actually provide,

334
00:26:30.160 --> 00:26:33.359
I know, fail goos throughout a
monthly basis and reports out the performance of

335
00:26:33.440 --> 00:26:38.799
portfolio. We can make tweaks to
it. We understand the impacts and the

336
00:26:38.960 --> 00:26:44.400
fact that you do monitor the outcomes
on an ongoing basis, so there aren't

337
00:26:44.440 --> 00:26:48.400
any surprises for us as an institution. So again going back to an evaluation,

338
00:26:48.559 --> 00:26:52.519
whatever we're doing, it is additive
to the customer and it is not

339
00:26:53.319 --> 00:27:00.880
doesn't create any adverse risk to the
financial institution. Well, and can you

340
00:27:00.039 --> 00:27:07.160
end that's some volutary on like the
process that you have so when you do

341
00:27:07.240 --> 00:27:12.559
you have a standard approval process,
so to get a fintech approved in your

342
00:27:12.640 --> 00:27:15.720
organization, Um, can you can? I got to describe that that the

343
00:27:15.839 --> 00:27:22.200
steps and there is there certain committees
or how what what step did you have

344
00:27:22.319 --> 00:27:29.000
to go through to say approve our
partnership? Well, say, first of

345
00:27:29.079 --> 00:27:30.839
it was doing a lot of due
diligence and someone the one we had to

346
00:27:30.880 --> 00:27:34.240
go do that. Uh, there's
a lot of due diligence you had to

347
00:27:34.359 --> 00:27:37.119
you know, to talk about what
the benefits were. And it's with anything

348
00:27:37.160 --> 00:27:41.680
you've dually said it right before,
which is it's gonna be hard to get

349
00:27:41.480 --> 00:27:45.839
someone's attention at a bank if you
are from the fintech world, because there's

350
00:27:45.880 --> 00:27:48.319
got to be that perceived need from
us first and which is which starts with

351
00:27:48.400 --> 00:27:52.759
our customers. But it really was
doing a lot of homework on it,

352
00:27:53.119 --> 00:27:56.480
checking the references. Like I said, before, making sure that check the

353
00:27:56.559 --> 00:28:03.640
boxes. I had a very clear
idea of what this process should look like,

354
00:28:03.759 --> 00:28:04.920
what we did not want to do. We did not want to build

355
00:28:04.960 --> 00:28:10.119
a department, you know we wanted
to have We didn't want to put extra

356
00:28:10.400 --> 00:28:14.559
stress on our on our loan servicing
department, So we really tried to have

357
00:28:14.680 --> 00:28:17.839
it be as turnkey as possible to
do everything it needed for us and at

358
00:28:17.839 --> 00:28:21.960
the end of the day we get
a net return UM. So it is

359
00:28:22.079 --> 00:28:25.640
making it easy, but we do
the due diligence. We talk about it

360
00:28:25.680 --> 00:28:30.000
at our senior management meeting committees.
In our meetings, we run up by

361
00:28:30.079 --> 00:28:33.680
our Board of directors to say,
this is what we're thinking about doing UM

362
00:28:33.759 --> 00:28:37.319
and here's a breakdown of how this
will all work. So that's it's it's

363
00:28:37.599 --> 00:28:41.880
a little bit informati, but we
do have a vendor review process that that

364
00:28:42.000 --> 00:28:48.160
we do go through UM. But
I think the bandwidth of the organization is

365
00:28:48.279 --> 00:28:52.200
also really important to us. This
cannot be something that we stood up today,

366
00:28:52.759 --> 00:28:56.920
UM, and it's an MVP UM
that tomorrow is UM didn't make sense

367
00:28:57.119 --> 00:29:02.480
or it didn't stand the test,
so that UM that that we have to

368
00:29:02.559 --> 00:29:06.039
do it all over again. So
UM that is I think the challenge from

369
00:29:06.079 --> 00:29:10.759
an innovation perspective is UM, a
fintech wants to make their first bank partnership,

370
00:29:10.920 --> 00:29:14.400
but the bank needs to make sure
that the fintech actually has UM the

371
00:29:15.200 --> 00:29:17.880
glide path in front of them that
is going to be there in the future.

372
00:29:18.599 --> 00:29:22.599
Because UM, once this product is
offered and there's an expectation from our

373
00:29:22.640 --> 00:29:26.279
consumer that it's there and available to
them, we can't just pull it from

374
00:29:26.279 --> 00:29:32.599
the menu. Well, I think
that's a great This is not when we

375
00:29:32.839 --> 00:29:37.880
look at success and I've had the
opportunity of being being sitting in your chairs,

376
00:29:38.279 --> 00:29:41.960
uh you know, in the in
the in the banking world, making

377
00:29:41.039 --> 00:29:45.279
the decisions and then now on now
on the partner side. UM. You

378
00:29:45.319 --> 00:29:49.920
know, we look at these partnerships
of successes in one month, one quarter,

379
00:29:51.519 --> 00:29:53.480
you know to two quarters. Right, You're you're you're building when you

380
00:29:53.559 --> 00:29:57.480
get in a relationship like this and
we're we're integrating, we're integrating our two

381
00:29:57.640 --> 00:30:03.039
organizations together. Right to serve the
needs of the community and the consumers that

382
00:30:03.119 --> 00:30:06.480
you you know that you're serving.
Um, you have to think about it,

383
00:30:06.640 --> 00:30:10.599
is we want to be celebrating two
years, four years, five years,

384
00:30:10.680 --> 00:30:14.640
ten years, right of of of
successful kind of partnership together and is

385
00:30:14.839 --> 00:30:18.240
there is there the right alignment right
with the values of the organizations? Are

386
00:30:18.319 --> 00:30:22.200
we are we both kind of heading
in the right direction of of how we're

387
00:30:22.279 --> 00:30:26.079
trying to consuh serve the consumer.
So it's it's, it's, it's that's

388
00:30:26.079 --> 00:30:26.799
great to hear of kind of how
you guys, you know, how you

389
00:30:26.880 --> 00:30:30.799
guys were thinking about it, and
and and it leads me to kind of

390
00:30:30.839 --> 00:30:33.039
this follow up and you you've you
talked a little bit about it, but

391
00:30:33.160 --> 00:30:37.359
just pull a little more threads because
I think it's it's it's it's a good

392
00:30:37.440 --> 00:30:44.000
one of just selecting the relationship right
that that doesn't end it right there,

393
00:30:44.079 --> 00:30:47.400
there's hey, there's there's there's high
fives of right, we've we've made a

394
00:30:47.480 --> 00:30:51.559
decision when you've selected a partner.
But then there's there's the ongoing management,

395
00:30:51.880 --> 00:30:59.200
right, So there's there's making you're
continuously working to oversee and and and manage

396
00:30:59.319 --> 00:31:03.440
this this real relationship and to continue
to evaluate is it still meeting the expectations,

397
00:31:04.039 --> 00:31:07.079
the expectations of why did you get
in this business in the first place,

398
00:31:07.160 --> 00:31:11.599
as well as evaluating that are your
business goals still aligned? So can

399
00:31:11.640 --> 00:31:17.079
you talk about I think how you
are just I'll say that continuing monitoring of

400
00:31:17.279 --> 00:31:22.640
partnerships to just make sure they stay
aligned with your expectations. Yeah, you

401
00:31:22.720 --> 00:31:26.960
know, and your poll question a
little earlier, you had something like twenty

402
00:31:26.000 --> 00:31:32.519
five percent of the audience say that
they're concerned about the current environment and that's

403
00:31:32.559 --> 00:31:36.000
why they're not doing consumer lending.
And I know certainly was a real concern

404
00:31:36.039 --> 00:31:38.599
because we were going into this process
while things were starting to go down,

405
00:31:38.720 --> 00:31:41.319
Rachel going up, issues were starting
to happen, and that was a big

406
00:31:41.400 --> 00:31:45.960
question for us. But we get
through a dashboard and I get KPIs on

407
00:31:47.039 --> 00:31:49.079
a monthly basis, but I can
go in anytime like they did before this

408
00:31:49.200 --> 00:31:52.279
call and looked at the KPIs to
see, Okay, what do we have

409
00:31:52.359 --> 00:31:57.160
for delinquency, what's our volume,
what's our average rate yield? All those

410
00:31:57.400 --> 00:32:00.759
types of things, And I know
we all also have ongoing calls. We

411
00:32:00.839 --> 00:32:05.319
did one six eight weeks ago we
talked about, hey, you could be

412
00:32:05.359 --> 00:32:08.960
getting more yield fill for reading Cooperative
Bank if we do some tweaking and still

413
00:32:09.000 --> 00:32:13.039
get the type of volume that you're
looking for. So that was a proactive

414
00:32:13.039 --> 00:32:16.000
approach which I appreciated from up Start
to come up to me and say there's

415
00:32:16.039 --> 00:32:20.240
opportunity here, because what bank doesn't
want to get more yield, right?

416
00:32:20.720 --> 00:32:22.799
So we work that out. I
think we moved our yield up from a

417
00:32:22.920 --> 00:32:28.160
net of all expenses of a five
percent yield to to a seven percent yield,

418
00:32:28.160 --> 00:32:30.599
which is not bad in this environment. So we also get a slew

419
00:32:30.640 --> 00:32:34.920
of reports that I can look out
on a daily basis to figure out what

420
00:32:35.039 --> 00:32:38.599
loans of command and if anyone are
looking for extensions or modification. So we

421
00:32:38.680 --> 00:32:43.160
can really pick and choose and look
at this and break it down at a

422
00:32:43.319 --> 00:32:46.559
very micro level, which gives me
comfort. I know, it gives truly

423
00:32:46.599 --> 00:32:51.519
comfort to have that information, you
know. I think the other piece that

424
00:32:51.599 --> 00:33:00.039
I like is the option of actually
just originating a portfolio and also using a

425
00:33:00.119 --> 00:33:06.119
white label standpoint and going to market
with individual products, maybe um marketed in

426
00:33:06.200 --> 00:33:10.400
a different way depending on what the
usage toward the appetite might be. Based

427
00:33:10.480 --> 00:33:15.200
on the consumer group that you're marketing
too, so um having that ability to

428
00:33:15.359 --> 00:33:21.240
also launch other products in addition to
making tweaks to the existing based on what

429
00:33:21.319 --> 00:33:24.759
you're actually seeing. I also like
the fact that you're constantly evaluating what data

430
00:33:24.880 --> 00:33:29.359
is out there in the marketplace because
times changed. Right now, we know

431
00:33:29.480 --> 00:33:34.160
that consumers belts are tightening, rates
are rising, costs are rising, and

432
00:33:34.400 --> 00:33:38.079
making sure that we're always operating in
a current environment, not on historic data.

433
00:33:39.680 --> 00:33:46.440
Yeah, and your model and mention
that your model adjusts and adjust for

434
00:33:46.519 --> 00:33:53.200
it's a learning model to incorporate an
account for delinquencies that are happening now based

435
00:33:53.240 --> 00:34:00.799
upon past approvals. And so because
the model learns your it's it's current that

436
00:34:00.839 --> 00:34:04.720
it's ongoing and it's up to date
as learning and making adjustments on the fly.

437
00:34:05.839 --> 00:34:07.920
Yeah. And I think one of
the things I can I can add

438
00:34:07.000 --> 00:34:13.559
to that is the advantage of of
a of a of a partnership like upstart

439
00:34:14.480 --> 00:34:21.159
to to our learning partners is the
scale, meaning that you're benefiting of what

440
00:34:21.320 --> 00:34:25.199
the model is learning, not just
from what you're originating, but you're you're

441
00:34:25.280 --> 00:34:32.159
getting the whole um bandwidth of all
the loans that we've originated on the platform.

442
00:34:32.599 --> 00:34:37.440
So now you start competing almost with
the same data as you know what

443
00:34:37.559 --> 00:34:42.880
we'll say, starting to compete with
the trillionaire banks of the amount of data

444
00:34:43.000 --> 00:34:46.599
that they're processing. Um, all
of our learning partners are getting similar scale

445
00:34:47.039 --> 00:34:52.159
because of just all the capital that's
that's it's coming together. And so you're

446
00:34:52.199 --> 00:34:57.360
right, the model is continuously looking
at and you're benefiting from loans, other

447
00:34:57.519 --> 00:35:00.920
lenning partners are originating and the in
the repayment events because the models absorbing all

448
00:35:01.000 --> 00:35:07.440
of that to build a very broad
uh um sense. There was a question

449
00:35:07.519 --> 00:35:09.519
here. I'll go back to the
when you're talking about the diligence. Is

450
00:35:09.599 --> 00:35:16.239
someone's asking when you were like looking
for partnerships, Um, like, how

451
00:35:16.280 --> 00:35:22.119
did you go to identify who was
who was available in the marketplace? Was

452
00:35:22.199 --> 00:35:24.800
it was? It? Was it
conferences you went to? Was it sites

453
00:35:24.880 --> 00:35:28.639
that you went to to do your
research? Kind of like how did you

454
00:35:29.280 --> 00:35:31.599
how did you build I'll say,
your short list of Hey, these are

455
00:35:31.719 --> 00:35:36.920
some of the companies we should talk
to For the answer to the first part,

456
00:35:37.599 --> 00:35:44.880
yes, that's good, it's true. I mean the conferences and U

457
00:35:45.000 --> 00:35:47.119
and colleagues. Um, we ended
up having a list of I think ten

458
00:35:47.760 --> 00:35:52.039
companies that we looked at in total
UM and in fact, the first time

459
00:35:52.079 --> 00:35:54.639
we looked at Upstart at writing,
we actually loved your model, loved what

460
00:35:54.679 --> 00:36:00.039
you were doing UM, but it
was very early on UM in UM and

461
00:36:00.280 --> 00:36:06.360
up starts UM tenure, and so
we ended up coming back a little bit

462
00:36:06.480 --> 00:36:09.760
later when we were ready and we
could get comfortable. So there's a lot

463
00:36:09.800 --> 00:36:14.280
of vendor due diligence finding out who
the other institutions that are writing, looking

464
00:36:14.320 --> 00:36:19.320
at the behaviors that are actually happening. And then just again as I mentioned

465
00:36:19.599 --> 00:36:22.880
it, because I know there's a
few FinTechs that are actually on this call

466
00:36:22.039 --> 00:36:28.199
is UM. It might not be
you, it might be us when when

467
00:36:28.280 --> 00:36:31.239
we actually don't engage with the fintech
because sometimes our bandwidth is what it is.

468
00:36:31.639 --> 00:36:35.280
You have turner over in your organization, you need to bring on even

469
00:36:35.320 --> 00:36:38.119
the right leader or maybe you don't
have the innovation appetite in your area of

470
00:36:38.239 --> 00:36:44.159
the bank at that point in time, and bringing on the right chief banking

471
00:36:44.199 --> 00:36:50.679
officer that actually has an appetite for
more innovation might actually be the right spot.

472
00:36:51.199 --> 00:36:54.199
Or it might be as I said, the institution that actually needs to

473
00:36:54.360 --> 00:37:04.400
learn how to be more innovative.
Let me let me ask about UM stakeholders,

474
00:37:04.480 --> 00:37:07.760
because this is something that that I
see, UM now, it's it's

475
00:37:07.840 --> 00:37:13.079
it's it's awesome, you know,
having having the CEO so engaged that that's

476
00:37:13.119 --> 00:37:16.639
a that's a that's a that's a
pretty important stakeholder for FILL to have working

477
00:37:16.719 --> 00:37:21.199
so closely. But but can you
guys talk a little bit about you is

478
00:37:21.239 --> 00:37:25.199
your organization and is people are looking
at these partnerships, UM, the kind

479
00:37:25.239 --> 00:37:30.480
of the stakeholder committee of folks that
you need to um make sure stay engaged

480
00:37:30.960 --> 00:37:35.440
uh with you know, during the
selection process and then not that they have

481
00:37:35.519 --> 00:37:38.159
to be involved on a day to
day basis, but on that that you're

482
00:37:38.239 --> 00:37:44.639
keeping I'll say involved, whether it's
it's quarterly or or or monthly on various

483
00:37:44.679 --> 00:37:49.000
reviews and what are some of the
tactics that you're using to keep your your

484
00:37:49.039 --> 00:37:55.199
extended stakeholders engaged. So I'd start
with saying that when we first started,

485
00:37:55.280 --> 00:38:00.159
we had a lot of stakeholders.
UM. Even though up Start Manager is

486
00:38:00.199 --> 00:38:02.199
the bulk of the program for it's
getting it up and running, making sure

487
00:38:02.280 --> 00:38:07.280
that the fund transfers happened, we
had accounting involved. We had it involved.

488
00:38:07.760 --> 00:38:14.679
UM. We had just hired a
new UM UM what they call it.

489
00:38:14.840 --> 00:38:22.199
They not a product manager, but
uh, there's project manager Trever.

490
00:38:22.360 --> 00:38:27.800
Thank you, project manager who kept
us all on track because there were a

491
00:38:27.880 --> 00:38:32.199
lot of moving pieces and you folks
were moving pretty quickly and you kept us

492
00:38:32.239 --> 00:38:36.079
on track. And so we had
all those you happen to meet on a

493
00:38:36.159 --> 00:38:39.119
regular basis in the beginning on a
weekly basis, make sure you're hitting all

494
00:38:39.159 --> 00:38:44.119
your road your your stops in the
road, and making sure you're you're you're

495
00:38:44.199 --> 00:38:45.360
on track. And so that was
a big part of it. Getting the

496
00:38:45.440 --> 00:38:49.239
board is involved, you know,
having those reports to the board as we

497
00:38:49.519 --> 00:38:53.920
start getting to launch and what we're
hoping to do and here's the the KPIs

498
00:38:53.960 --> 00:39:00.039
we're looking to attain UM and then
having to keep them informed on a on

499
00:39:00.079 --> 00:39:04.320
a quarterly basis. We just started
doing this because this relatively new program for

500
00:39:04.480 --> 00:39:07.920
us is showing them the kbis,
here's your growth, here's the delinquacy that

501
00:39:07.960 --> 00:39:12.480
we're seeing. UM, here's here's
you know, a lack of delinquency that

502
00:39:12.519 --> 00:39:16.039
we're seeing. So we keep them
involved with quarterly reporting there as well and

503
00:39:16.199 --> 00:39:21.639
tying that back to what UM what
we presumed UM at the very beginning when

504
00:39:21.679 --> 00:39:23.920
we actually um went to the board
for approval of the product. So this

505
00:39:24.079 --> 00:39:27.639
is the return we're respecting. This
is a return we're getting. UM.

506
00:39:27.719 --> 00:39:30.800
This is what we anticipated the delinquency
we're rate to be and here it is

507
00:39:30.199 --> 00:39:35.039
at this you know, and just
you know, confirming um that what we

508
00:39:35.159 --> 00:39:38.840
expected to happen, UM and UM
and setting that threshold for how much you're

509
00:39:38.880 --> 00:39:44.000
going to originate per month and then
seeing that the things that you expected to

510
00:39:44.119 --> 00:39:47.280
happen did happen UM is the thing
that gives you the competence to continue to

511
00:39:47.360 --> 00:39:52.039
move forward UM. And it is
truly a partnership. Yeah. And I

512
00:39:52.360 --> 00:39:57.119
what's good for them to remember is
when you when you launch a product,

513
00:39:57.239 --> 00:40:01.519
particularly say say personal loan, that
that say a bank may not be offering

514
00:40:01.599 --> 00:40:05.679
today or is offering very small.
You may think, oh, this is

515
00:40:05.800 --> 00:40:08.719
this is a this is a small
product in our in our total asset class.

516
00:40:09.440 --> 00:40:13.719
I don't need all the stakeholders.
And I think that's where some folks

517
00:40:13.960 --> 00:40:17.159
sometimes I see, UM get get
up side down we're because then they end

518
00:40:17.239 --> 00:40:23.360
up maybe having more challenges throughout their
program because not getting the right in people

519
00:40:24.039 --> 00:40:28.559
engaged at the very beginning and they
don't have to be involved in at all

520
00:40:28.599 --> 00:40:30.719
the time. And I think Bill, as you talked about, you start

521
00:40:30.800 --> 00:40:32.920
with you cast a good net,
You get the right people there that are

522
00:40:32.920 --> 00:40:36.760
helping make a decision, and then
you determine who's got to be part of

523
00:40:36.840 --> 00:40:42.159
it to run the day to day
and then keep those those those ancillary stakeholders

524
00:40:42.239 --> 00:40:45.800
updated on a regular basis so that
just they're seeing that the program is growing,

525
00:40:45.880 --> 00:40:50.840
it's being managed, its being oversight
because then you know that comes back

526
00:40:50.920 --> 00:40:55.880
to the regulators and as you're as
you're presenting the regulators about partnerships, you're

527
00:40:55.920 --> 00:41:00.199
able to describe, Hey, here's
how the organization is stay engaged. So

528
00:41:00.679 --> 00:41:07.159
let's actually when you're talking about our
existing portfolio, we were writing very few

529
00:41:07.239 --> 00:41:10.000
consumer loans, and we were writing
them that eighteen percent interest rate, So

530
00:41:10.119 --> 00:41:14.480
the only person that took them is
a person that was desperate. And so

531
00:41:14.800 --> 00:41:19.199
we actually understood that we had losses
in that portfolio because we were providing these

532
00:41:19.280 --> 00:41:22.039
high rate loans to people that were
desperate, because they clearly they would have

533
00:41:22.119 --> 00:41:27.840
used their credit card if they could, so in this situation, we're instead

534
00:41:27.920 --> 00:41:31.000
writing loans to people that are using
personal loans for a purpose and they're paying

535
00:41:31.079 --> 00:41:37.840
them back and so we have better
performance of the portfolio, but the consumers

536
00:41:37.840 --> 00:41:44.559
also getting a better experience because the
rate is more beneficial to them. Great,

537
00:41:45.440 --> 00:41:51.960
So you mentioned a little bit about
the partnership that you use both the

538
00:41:52.280 --> 00:41:57.119
earn you have to start referral network
for new new customers as well as you

539
00:41:57.400 --> 00:42:01.599
use the white label to stand alone
know of your website for your your your

540
00:42:01.639 --> 00:42:06.760
existing customer base. So can you
talked a little bit about the decision of

541
00:42:07.000 --> 00:42:10.320
it, like how are you,
how are you looking and and leveraging both

542
00:42:10.400 --> 00:42:15.920
products and and the perspective to kind
of kind of leverage both versus one or

543
00:42:15.920 --> 00:42:21.440
the other. Well, I think
that we we wanted to have something to

544
00:42:21.519 --> 00:42:25.400
offer to our customers um because as
Julie mentioned, we didn't really have anything

545
00:42:25.920 --> 00:42:30.159
in the consumer lending area. We
priced it at such a point where it

546
00:42:30.280 --> 00:42:32.920
really wasn't competitive, and so we
want to be able to have a link

547
00:42:32.960 --> 00:42:37.639
on our website where we hite label
this it looks like our product. It

548
00:42:37.760 --> 00:42:39.800
shows up with the reading logo on
it when you go into the app,

549
00:42:40.159 --> 00:42:45.480
when you click through and experience for
the customer that it seems like us,

550
00:42:45.760 --> 00:42:50.719
it seems like reading. They can
get approved and seconds um they get their

551
00:42:50.760 --> 00:42:53.079
money next day. And so it's
a really good experience and we wanted that,

552
00:42:53.199 --> 00:42:55.320
but we didn't think there was going
to be enough volume there. But

553
00:42:55.400 --> 00:43:00.239
we did want that customer experience,
and so we also did the market place

554
00:43:00.280 --> 00:43:04.360
so that we would be able to
UM define an area that we wanted to

555
00:43:04.440 --> 00:43:08.599
do business in and then UM I'll
start with market would market in that area,

556
00:43:08.679 --> 00:43:13.199
and if loans came up that fit
our criteria, our credit criteria which

557
00:43:13.239 --> 00:43:16.039
we developed from the beginning, then
we would get those loans. So you

558
00:43:16.079 --> 00:43:19.440
know, at the end of the
day, we do we do about a

559
00:43:19.480 --> 00:43:22.320
million dollars a month only because that's
our choice. That's the limit. That's

560
00:43:22.360 --> 00:43:24.440
how much we want to do.
UM. We could certainly do more if

561
00:43:24.800 --> 00:43:30.000
maybe Yeah, I think actually you
answered you answered one of the one of

562
00:43:30.039 --> 00:43:35.079
the questions. I think someone was
asking the volume that you're looking to do

563
00:43:35.239 --> 00:43:37.519
on an on an annual basis,
And then I think the other question I

564
00:43:37.599 --> 00:43:43.400
saw was UM, and it kind
of feeds into about the controls UM.

565
00:43:43.800 --> 00:43:47.039
So when we talk about your your
footprint here, UM, when you think

566
00:43:47.079 --> 00:43:52.000
about the controls you have to manage
the program, and so that you know

567
00:43:52.119 --> 00:43:54.880
what what you're able to define,
what changes you're able to make to ensure

568
00:43:55.440 --> 00:43:59.880
um that that the program's staying within
your your risk tolerance. Can you can

569
00:43:59.920 --> 00:44:02.840
you talk about that and even talked
a little bit about the controls on from

570
00:44:02.880 --> 00:44:08.440
a from a footprint standpoint. Sure. So you know, when we started

571
00:44:08.480 --> 00:44:10.719
the setup of the program, one
of the first things we do we had

572
00:44:10.760 --> 00:44:13.920
a worksheet and say, okay,
what are we willing to do. Do

573
00:44:14.000 --> 00:44:16.320
you want to if they if they
have a bankruptcy? Is it an automatic

574
00:44:16.440 --> 00:44:21.000
note? What's your bottom line credit
score that you're willing to accept, what's

575
00:44:21.000 --> 00:44:23.920
your bottom line debt to income that
you're willing to have. So there's controls,

576
00:44:23.920 --> 00:44:28.519
there's a number of questions we go
through to determine just how deep and

577
00:44:29.039 --> 00:44:32.400
how much risk we want to take. And so we put that in place

578
00:44:32.480 --> 00:44:37.000
and then let's start works within that. You guys come in and you tell

579
00:44:37.079 --> 00:44:40.559
us be based upon based upon the
controls you have in place in the market

580
00:44:40.599 --> 00:44:45.800
you define which we define as Massachusetts
in southern New Hampshire because we're in the

581
00:44:45.880 --> 00:44:50.880
northern, we're between you know,
New Hampshire and Boston, and so within

582
00:44:51.000 --> 00:44:53.320
that they'll say, well, there's
a based upon card volume, there is

583
00:44:53.360 --> 00:45:00.480
a nine million dollars a month market
opportunity, and so we can and the

584
00:45:00.599 --> 00:45:06.239
tighter we make that criteria, the
smaller that market opportunity would become for us.

585
00:45:06.960 --> 00:45:10.159
So we determined once we hit a
million dollars, stop stop for us,

586
00:45:10.360 --> 00:45:14.960
stop doing it, stop marketing us. And the way it's worked,

587
00:45:15.000 --> 00:45:17.360
and I appreciate it's done this way, is that it's not a million dollars

588
00:45:17.440 --> 00:45:22.480
in the first five days. It's
spread out basically evenly over the course of

589
00:45:22.519 --> 00:45:27.360
a month that we slowly work up
to a million dollars. And I think

590
00:45:27.400 --> 00:45:30.559
we have something like that seven or
eight million dollars portfolio Nopp from what was

591
00:45:30.599 --> 00:45:37.199
probably a two hundred and fifty thousand
dollars portfolio. And I think I'll add

592
00:45:37.239 --> 00:45:40.920
to I think there was another question
about, you know, does does the

593
00:45:42.280 --> 00:45:45.679
does the does a borrower one hundred
percent? You know, I'll get the

594
00:45:46.000 --> 00:45:51.199
get the lowest rate and and and
the and the answer is is the borrower

595
00:45:51.239 --> 00:45:54.480
gets the lowest rate based upon the
capital that's available. And so that's kind

596
00:45:54.519 --> 00:45:59.440
of what what what Phil had shared
is you know, Phil happens to have

597
00:45:59.519 --> 00:46:04.039
the lowest on the platform. All
of Phil's capital just doesn't get used up

598
00:46:04.280 --> 00:46:08.599
at at you know, at midnight
or twelve or one am on June first,

599
00:46:08.840 --> 00:46:12.559
right, So so this is it
is it is. It is smoothed

600
00:46:12.679 --> 00:46:16.800
out throughout the month so that the
lender can be paced and that also we're

601
00:46:17.039 --> 00:46:22.280
we're ensuring that that the best rates
are available as as as much as possible

602
00:46:22.360 --> 00:46:25.800
throughout the month for for for all
the concert company of the program. So

603
00:46:25.800 --> 00:46:30.039
hopefully that answered the the the question
that we had in the in the chat

604
00:46:30.800 --> 00:46:35.840
um. So let's talk a little
about you know, if you're if you're

605
00:46:36.159 --> 00:46:39.400
we saw that fifty percent of the
folks aren't doing personal lending today and it

606
00:46:39.480 --> 00:46:43.679
may not have a partnership today,
So a lot of those folks are probably

607
00:46:43.719 --> 00:46:47.320
considering is now a good time to
get into a fintech partnership or not?

608
00:46:47.559 --> 00:46:51.920
Like, how how would you why
would you think now would be a good

609
00:46:52.000 --> 00:46:54.199
time or not? But too,
why would you think it would be a

610
00:46:54.239 --> 00:47:00.480
good time to to move forward and
think about a partnership? Well, you

611
00:47:00.599 --> 00:47:06.199
just heard from Phil, how how
we've made our decision that will enter in

612
00:47:06.400 --> 00:47:09.679
and we'll do it slowly in a
methodical way so that we're constantly investing and

613
00:47:09.800 --> 00:47:14.239
so they're short term loans. They
will pay off in short time. So

614
00:47:14.840 --> 00:47:19.239
just like we UM, we lived
through cycles. UM. But I would

615
00:47:19.239 --> 00:47:23.280
actually say right now the consumer is
going to have more demand um than they

616
00:47:23.360 --> 00:47:27.400
did during the pandemic. UM.
During the pandemic, they were flushed with

617
00:47:27.480 --> 00:47:30.559
cash. They didn't have an appetite
or the trips for the travel for for

618
00:47:30.719 --> 00:47:35.519
other things. So I think there
will be more appetite at this moment.

619
00:47:36.079 --> 00:47:40.840
But I also think the fact that
the market constantly adjusts to the credit conditions

620
00:47:40.880 --> 00:47:47.760
that are there also UM mean that
that a late well ladle plan will actually

621
00:47:47.880 --> 00:47:58.440
mitigate risks. Right. I think
everyone's finding it's a tough market to hire

622
00:47:58.519 --> 00:48:01.920
people, and so you can find
an end end solution where you're not having

623
00:48:01.960 --> 00:48:07.840
to add staff and replace staff as
they leave. UM, it makes it

624
00:48:07.960 --> 00:48:12.800
much easier for us to manage.
So the short answer your question, is

625
00:48:12.800 --> 00:48:16.199
it a good time to to partner
with a fintech? Definitely, particularly if

626
00:48:16.679 --> 00:48:22.320
you can streamline a process, make
it very efficient and U and not have

627
00:48:22.519 --> 00:48:28.320
to deal with those ongoing issues with
m with staff and employees and building an

628
00:48:28.360 --> 00:48:30.960
apartment that may walk out a new
apportions may walk out a new a period

629
00:48:30.960 --> 00:48:35.719
of time. So certainly from that
perspective, it's it's key as well well.

630
00:48:35.800 --> 00:48:39.199
And I think we're if we look
at what our goal is as an

631
00:48:39.280 --> 00:48:45.519
organization is you know, we're a
technology company that that we feel we do

632
00:48:46.360 --> 00:48:52.440
what we do really well, right
is enabling access to credit and really helping

633
00:48:52.519 --> 00:48:58.960
define true risk and writing does what
you do really well as far as is

634
00:48:59.119 --> 00:49:01.719
you know, being a fine fancial
institution be able to be able to serve

635
00:49:01.800 --> 00:49:07.239
the needs of your community. And
I think that partnership then allows us to

636
00:49:07.360 --> 00:49:12.559
bring the expertise from both our organizations
into your right work. Phil. It's

637
00:49:13.159 --> 00:49:17.599
you know, many organizations don't don't
have the capacity to take on all these

638
00:49:17.719 --> 00:49:22.360
other abilities, right, all these
other tasks, and so how do you

639
00:49:22.639 --> 00:49:25.039
how do you focus on what you
do really well and then you find partnerships

640
00:49:25.039 --> 00:49:30.920
with folks that align with that with
your goals and then together really provide those

641
00:49:30.960 --> 00:49:36.079
services that your consumers will well.
I think that's one of the things that

642
00:49:36.199 --> 00:49:40.199
we liked about Upstart as compared to
competitors, is the fact that you are

643
00:49:40.280 --> 00:49:46.679
intentionally trying to get credit into more
hands by recognizing that there are other values

644
00:49:46.719 --> 00:49:52.519
behind credit beyond credit score to determine
some whether or not somebody has the attributes

645
00:49:52.559 --> 00:49:57.119
to pay a personal loan or an
auto loan on a timely basis, and

646
00:49:57.360 --> 00:50:00.880
the fact that you have opened that
up further recognizing them with a six eighty

647
00:50:00.960 --> 00:50:06.519
credit score. UM, there are
a lot more people are are UM that

648
00:50:06.800 --> 00:50:10.159
actually qualify or there are a lot
less people that are going to default on

649
00:50:10.239 --> 00:50:14.559
the loan. UM and being able
to figure out who the eighty percent are

650
00:50:14.599 --> 00:50:19.400
that will ever default and make sure
we give broader access into the community.

651
00:50:19.559 --> 00:50:24.119
So UM, that alignment with what
your organizational values end, even what you're

652
00:50:24.159 --> 00:50:28.159
doing with them more than Fair initiative, I think is to be commended.

653
00:50:29.440 --> 00:50:31.119
No, thank you, thanks for
bringing that up. And maybe I just

654
00:50:31.239 --> 00:50:36.239
had a comment on that for for
folks and aren't familiar is you know we're

655
00:50:36.559 --> 00:50:39.639
we're part of this more than Fair
And if anyone's interested in in googling it,

656
00:50:39.719 --> 00:50:45.960
it's it's it's just the website is
more than Fair dot com and it's

657
00:50:45.119 --> 00:50:52.440
it's really it's a community of organizations
UM both made up of technology organizations our

658
00:50:52.519 --> 00:51:00.559
bank partners, m other consumer advocacy
groups that are all dedicated to improving access

659
00:51:00.639 --> 00:51:06.679
to you know, affordable credit and
inclusive learning and and really the the idea

660
00:51:06.840 --> 00:51:09.960
is is that a lot of us
all are trying to solve this problem,

661
00:51:10.440 --> 00:51:15.159
and so how do we kind of
scale our our interest together as far as

662
00:51:15.199 --> 00:51:20.559
everyone's trying to solve this And so
it really makes it a much stronger i'll

663
00:51:20.599 --> 00:51:25.559
say, advocacy for creating change um
um, working with regulators, all these

664
00:51:25.599 --> 00:51:30.440
types of things, of all these
partners together, so not just an upstart

665
00:51:30.519 --> 00:51:32.840
thing, but all of these groups, all of our our learning partners like

666
00:51:34.079 --> 00:51:37.199
yourselves that are that are advocates,
advocates and participants of it. Of really

667
00:51:37.719 --> 00:51:43.719
how do we enable more in our
communities to get access? And so the

668
00:51:43.960 --> 00:51:49.039
final question I have and we've got
some time um left for for some additional

669
00:51:49.119 --> 00:51:52.119
Q and A that I've seen the
in the in the boxes, But so

670
00:51:52.480 --> 00:51:55.440
what's next, Like what what are
you looking forward to? What's what's exciting

671
00:51:55.559 --> 00:52:00.519
you over the next uh, you
know, twelve to twenty four months at

672
00:52:00.559 --> 00:52:07.920
reading so um, so we're looking
forward to tailoring more products. So first

673
00:52:07.960 --> 00:52:12.960
of all, we actually need to
and that's our next step is figuring out

674
00:52:13.000 --> 00:52:15.280
the new customers that are coming to
us through this product and figuring out how

675
00:52:15.639 --> 00:52:21.599
we can turn them into Reading depositors, turn them into expanded relationships at Reading

676
00:52:21.639 --> 00:52:28.119
Cooperative Bank. So that's that's the
first thing, further automation of our processes

677
00:52:28.320 --> 00:52:32.519
again figuring out what the customer needs
next UM and continuing our digital transformation.

678
00:52:32.679 --> 00:52:37.239
We actually mentioned before, we're now
in two gateway cities in Massachusetts. There

679
00:52:37.440 --> 00:52:42.679
those two cities provide us about two
hundred thousand more consumers UM, and so

680
00:52:43.000 --> 00:52:46.599
having this product on our menu and
available to those consumers allows us to meet

681
00:52:46.639 --> 00:52:51.760
consumer needs in these in these broader
markets. So we're excited what the future

682
00:52:51.840 --> 00:52:58.920
has for us and for YouTube.
And also one way that we can do

683
00:52:59.000 --> 00:53:01.159
a similar type product what you have
in the small business world. We can

684
00:53:01.199 --> 00:53:04.880
figure that one out that would be
nice, and that's something we're looking at

685
00:53:05.320 --> 00:53:08.239
certainly, and I think Julie alluded
to it earlier. There's we have certain

686
00:53:08.280 --> 00:53:12.840
ideas and how we can take this
product, take takeoff, start and maybe

687
00:53:12.880 --> 00:53:16.440
be able to to slice it and
dice it to be more direct marketing towards

688
00:53:16.920 --> 00:53:22.840
certain groups out there versus just having
it as a consumer loan created and package

689
00:53:22.880 --> 00:53:28.719
it differently. So we're looking forward
to doing that as well. Well.

690
00:53:28.960 --> 00:53:32.559
We uh we we welcome the creativity
in the in the idea generation and see

691
00:53:32.639 --> 00:53:37.400
what you know, what what what
the future head holds. So let me

692
00:53:37.639 --> 00:53:39.679
We've got a little bit of time
for questions, and there's there's there's kind

693
00:53:39.719 --> 00:53:44.960
of kind of like I think there's
a there's a couple of questions that maybe

694
00:53:44.960 --> 00:53:47.519
we can answer together. And I'll
start off and then have you guys add

695
00:53:47.599 --> 00:53:52.440
is there's there's been a number of
questions about like model, model governance,

696
00:53:52.840 --> 00:53:57.400
UM getting comfortable with with using a
third party model in the in the queue

697
00:53:57.440 --> 00:54:00.000
and and I'll start with so one
of the things that that upstart does is,

698
00:54:00.719 --> 00:54:07.159
I mean we have we have our
own internal UM risk management organization and

699
00:54:07.400 --> 00:54:10.159
and and and risk disciplines. We
have model we have model governance team,

700
00:54:10.480 --> 00:54:15.320
and then we actually use a third
party on top of our own internal testing,

701
00:54:15.400 --> 00:54:20.519
but we use a third party to
do model validation and model testing and

702
00:54:20.800 --> 00:54:24.039
and those types of things are data
and information that then we provide back to

703
00:54:24.800 --> 00:54:30.199
our lending partners as well as you
know, other model oversight docs and and

704
00:54:30.679 --> 00:54:37.280
other information that that we can share
as part of our own oversight. But

705
00:54:37.400 --> 00:54:40.880
then it feeds into what the what
the lending partner has available in their own

706
00:54:42.159 --> 00:54:45.880
kind of model oversight. And then
when they're talking to the to the regulators,

707
00:54:45.400 --> 00:54:49.920
could you guys talk a little bit
about just as you know, using

708
00:54:50.320 --> 00:54:53.360
a third party with a UM,
you know, with with a with a

709
00:54:53.440 --> 00:54:58.800
model, just what you did to
get comfortable and the kind of the the

710
00:54:58.920 --> 00:55:02.719
oversight there. Well, I can
tell you well, first we talked to

711
00:55:02.760 --> 00:55:07.599
a lot of several of your customers
and did reference checks on that. But

712
00:55:08.000 --> 00:55:15.000
most importantly, shortly after starting the
program, we had our external internal auditor

713
00:55:15.039 --> 00:55:19.719
I guess, do a review of
the program. And there was a lot

714
00:55:19.760 --> 00:55:22.679
of questions and it's certainly the one
I want to say she was challenging at

715
00:55:22.760 --> 00:55:27.559
first was they have all the questions, you have all the answers. So

716
00:55:28.159 --> 00:55:30.079
what was what worked out really nice
is we found and I wish I knew

717
00:55:30.119 --> 00:55:35.719
her name, woman who works for
you, who had all the answers,

718
00:55:35.840 --> 00:55:40.079
and she get on the phone directly
with the person who is doing the review

719
00:55:40.199 --> 00:55:46.039
from our auditing company, and you
they got all their answers. They really

720
00:55:46.079 --> 00:55:49.719
didn't find anything the couple of things. I think, you know, maybe

721
00:55:49.760 --> 00:55:52.280
I sent you a while back that
we're just had to do with the signing.

722
00:55:52.440 --> 00:55:57.159
That was just a matter of opinion, but it was nice. We

723
00:55:57.440 --> 00:56:00.880
did that intentionally because we wanted to
make sure even though we had a good

724
00:56:00.000 --> 00:56:04.920
couple level going in with partnership,
we wanted to make sure that our auditors

725
00:56:04.960 --> 00:56:07.199
looked at it and that they were
good with it as well. So we

726
00:56:07.320 --> 00:56:12.480
passed that audit. It just happened
to me forty five days ago. Well,

727
00:56:12.480 --> 00:56:16.440
and I think Upstart also did a
lot of legwork as well, making

728
00:56:16.519 --> 00:56:22.599
sure that they went to the regulatory
bodies and went over their model, and

729
00:56:22.679 --> 00:56:25.360
you were pretty transparent about that,
and I think your willingness to be transparent

730
00:56:25.440 --> 00:56:31.320
with regulators and with US goes a
long way to having access to that data.

731
00:56:31.360 --> 00:56:36.639
Someone else also had a question about
APIs that this is not an API

732
00:56:37.199 --> 00:56:43.559
enabled products that connects to our core
and so that also is what makes it

733
00:56:43.719 --> 00:56:47.800
easier to stand up for us as
n F buy no great. Well,

734
00:56:47.800 --> 00:56:52.159
I know, coming up to the
top of the hour, and I try

735
00:56:52.199 --> 00:56:55.000
to answer as many questions throughout the
dialogue, and I know there's many we

736
00:56:55.079 --> 00:57:00.159
still didn't get a chance to get
to. So if folks have further questions

737
00:57:00.239 --> 00:57:04.599
that we weren't able to get to, UH, please reach out. There's

738
00:57:04.639 --> 00:57:09.519
some some contact information as well as
is my email address. Ed Walters at

739
00:57:09.599 --> 00:57:13.880
upstart dot com. We've been more
than happy to uh to have follow ups,

740
00:57:14.119 --> 00:57:19.280
um if there's if there's something we
didn't answer, and one before I

741
00:57:19.360 --> 00:57:22.679
turn it back to to Mike.
Just you know, thanking u uh,

742
00:57:23.000 --> 00:57:28.840
Julian Phil for the engaging dialogue.
UM, an hour goes by quick when

743
00:57:29.000 --> 00:57:32.119
when you're when we're when you're having
fun, So I really appreciate the time

744
00:57:32.239 --> 00:57:37.920
and I feel hopefully folks learned a
lot today from from talking with with three

745
00:57:37.960 --> 00:57:40.039
of us. So Mike back to
you, Okay, Thanks Ed, and

746
00:57:40.119 --> 00:57:45.559
thanks to Julie and Phil or your
insights and for being so generous with your

747
00:57:45.639 --> 00:57:52.440
ideas and recommendations. So on behalf
of American Banker as well as Upstart and

748
00:57:52.559 --> 00:57:55.920
your presenters, thank you all for
joining us, ladies and gentlemen. Upstart

749
00:57:57.039 --> 00:58:00.360
partners with banks and credit unions to
help grow their concer sumer loan portfolios and

750
00:58:00.440 --> 00:58:07.079
deliver a modern all digital lending experience. As the average consumer becomes more digitally

751
00:58:07.159 --> 00:58:10.719
savvy, it only makes sense that
their bank does too. Upstarts AI lending

752
00:58:10.760 --> 00:58:17.480
platform uses sophisticated machine learning models to
more accurately identify risk and approve more applicants

753
00:58:17.519 --> 00:58:23.239
than traditional credit models. With fraud
rates near zero, upstarts All digital experience

754
00:58:23.320 --> 00:58:29.880
reduces manual processing for banks and offers
a simple and convenient experience for consumers.

755
00:58:30.400 --> 00:58:35.079
Whether you're looking to grow and enhance
your existing personal and auto lenning programs or

756
00:58:35.239 --> 00:58:38.840
you're just getting started, Upstart can
help. Upstart offers an end to end

757
00:58:38.920 --> 00:58:44.039
solution that can help you find more
credit worthy borrowers within your risk profile.

758
00:58:44.360 --> 00:58:49.480
With all digital underwriting, onboarding,
loan closing, and servicing, It's all

759
00:58:49.599 --> 00:58:53.559
possible with Upstart in your quarter.
Learn more about finding new borrowers, enhancing

760
00:58:53.639 --> 00:58:59.119
your credit decisioning process, and growing
your business by visiting upstart dot com,

761
00:58:59.280 --> 00:59:04.639
Slash four or dash banks that's upstart
dot com, slash forward dash Banks.

762
00:59:05.280 --> 00:59:08.159
You've been listening to Leaders and Lending
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763
00:59:08.159 --> 00:59:13.559
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764
00:59:13.639 --> 00:59:15.760
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765
00:59:15.800 --> 00:59:19.719
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