Achieving fintech partner excellence in an era of increasing change
“We’re living in a world where the rate of change and the amount of things we can’t see is only going to increase,” said Michael Lock, SVP of Lending Partnerships at Upstart last month at NAFCU Lending.
Lock emphasized that a combination of geopolitical upheaval, bank failures and all-time-high interest rates and prices indicate that as events become more difficult to predict, staying ahead of the curve with technology can ensure credit unions remain on the front foot.
Leveraging AI for enhanced lending
“[Upstart] is overlaying machine learning and AI over various data sources, and if we do this right, we can cope with the massive rate of change,” Lock said. He highlighted four key advantages to partnering with the right AI partner:
- Higher returns at lower losses: One of the main advantages of using AI to underwrite is that AI allows credit unions to price loans more accurately, contributing to higher profitability. In fact, Upstart’s net annualized returns are 42 percent higher than industry average for borrowers with a 660 FICO score and above.
- Regulatory support: Unlike banks, credit union regulators, such as Kyle Hauptman and Rodney Hood, from the National Credit Union Administration (NCUA) have shared that partnering with fintechs should be a strategic imperative. “Fintech is no longer a luxury but a strategic imperative for credit unions to remain relevant, attract younger generations of members and promote financial inclusion,” Hood said.
- More inclusive lending: Lock shared that AI lending platforms enable credit unions to lend to a wider audience, including economically disadvantaged individuals. Statistics show that Upstart’s AI lending model approves 40 percent more black and Hispanic borrowers with 28.8 percent of Upstart-powered loans going to low-to-moderate income (LMI) communities. This aligns with credit unions' mission to serve their communities and support economic inclusivity.
- Speed: Furthermore, AI lending processes are incredibly fast, with 88 percent of Upstart’s loans approved without human intervention.