Latest / Leaders in Lending / Capturing Prime Members in 2025 and Beyond

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Capturing Prime Members in 2025 and Beyond · Leaders in Lending

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  Speaker 1: Hi, I'm Barry Roach, host of Leaders in Lending, brought
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  Speaker 1: to you by Upstart. The following is a conversation originally
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  Speaker 1: aired on an America's Credit Union webinar late in twenty
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  Speaker 1: twenty four, titled Capturing Prime Members in twenty twenty five
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  Speaker 1: and Beyond. I chatted with Michelle Gapner, the vice president
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  Speaker 1: of Consumer Lending and proc Strategy at Vantage West, a
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  Speaker 1: three billion asset credit union base in Tucson, Arizona. Michelle
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  Speaker 1: and I discussed balancing loan growth with limited liquidity, growing
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  Speaker 1: prime members, and working to expand those relationships. Thanks for listening,
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  Speaker 1: and I hope you enjoy it.
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  Speaker 2: All right, everybody, let's get started. Hello and welcome to
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  Speaker 2: America's Credit Union's webinar Capturing Prime Members in twenty twenty
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  Speaker 2: four and beyond. My name is Adam Right, and I'm
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  Speaker 2: a manager of online learning Products at America's Credit Unions.
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  Speaker 2: If you haven't already, feel free to download today's presentation handouts.
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  Speaker 2: You'll find them available under the resource tab and you're
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  Speaker 2: zoom tuomar. As a quick reminder, please keep yourself muted
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  Speaker 2: during today's presentation. If you have questions during the presentation,
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  Speaker 2: please enter it up in the chat. We'll be taking
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  Speaker 2: questions at the end. We are happy to have Michelle
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  Speaker 2: Wepner and Barry Roach sharing their expertise with us today.
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  Speaker 2: Michelle is the VP of Consumer Lending and Product Strategy
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  Speaker 2: Advantage West Credit Union. With over twenty years in financial
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  Speaker 2: services experience, Michelle has accumulated an extensive track record of
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  Speaker 2: taking on the challenge and responsibility for high profile product marketing,
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  Speaker 2: strategy and lending issues. Barry is a senior account manager
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  Speaker 2: at Upstart with over thirty years of experience in the
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  Speaker 2: financial services industry. Arry has proven leadership of large, multifaceted
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  Speaker 2: teams of financial professionals which delivered above market financial results. Previously,
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  Speaker 2: as President and CEO of Water and Power Community Credit
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  Speaker 2: Union in Los Angeles, Berry led the organization to achieve
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  Speaker 2: significant asset growth and improvement and financial strength while improving
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  Speaker 2: all aspects of the digital experience. Without further ado, I
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  Speaker 2: will turn things over to you. Thank you Michelle and
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  Speaker 2: Berry for.
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  Speaker 1: Joining us today. Thank you, Adam, slide please and next
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  Speaker 1: slide please. Hi Michelle, nice to see you. Please take
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  Speaker 1: it away and then we'll get into the discussion for today.
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  Speaker 3: Thank you all right, Thank you Berry. Thank you, Adam,
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  Speaker 3: thanks for having me.
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  Speaker 4: Hello everyone. As Adam said, I'm.
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  Speaker 3: Michelle Gafner, the vice president of Consumer Lending and Product
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  Speaker 3: Strategy from Vantage West Credit Union. So Vantage West Credit
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  Speaker 3: Union is based in Tucson, Arizona. We have military roots
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  Speaker 3: as we serve the Tucson airmen and their families back
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  Speaker 3: in the fifties, and now we have evolved to a
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  Speaker 3: state chartered credit union known as Vantage West with just
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  Speaker 3: under two hundred thousand members. We're three billion in assets,
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  Speaker 3: and we've got eighteen branch locations across Tucson and the
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  Speaker 3: Phoenix area.
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  Speaker 1: Great. Thank you, Michelle, and thanks for joining us today.
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  Speaker 1: Just for the audience. Vanjewest has been a valued partner
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  Speaker 1: of Upstart for the past couple of years. Michelle and
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  Speaker 1: I work very closer together. We speak if not, if
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  Speaker 1: not monthly, I mean usually once a week or so.
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  Speaker 1: There's a reason for Michelle and I to get together.
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  Speaker 1: What we're talking about today is really about capturing prime
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  Speaker 1: members in twenty twenty five and beyond, and I think
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  Speaker 1: the experience with Vanage West, they've already captured a whole
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  Speaker 1: bunch of prime members since they came on as Upstart
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  Speaker 1: partners back in later twenty twenty two. So since that happened, Michelle,
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  Speaker 1: let's just talk a little bit about when you started
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  Speaker 1: partnering with US, economic conditions evolved quite a bit. I mean,
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  Speaker 1: we were at that point just coming out of sort
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  Speaker 1: of COVID restrictions and stimulus and this ramp of deposits
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  Speaker 1: and lots of liquidity to sort all of a sudden,
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  Speaker 1: liquidity somewhat seized roughly six months after that, and so
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  Speaker 1: you know, where you maybe had some higher loan growth
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  Speaker 1: projections in later twenty two, that kind of quickly shifted.
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  Speaker 1: So maybe suare a little bit about about how you
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  Speaker 1: were adjusting not just the yepstart program, but you know,
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  Speaker 1: all your loan growth goals from when liquidy kind of
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  Speaker 1: got a little tighter and then as it started to
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  Speaker 1: come back, because we have certainly seen in the past year,
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  Speaker 1: how how deposits have come back a little bit as well.
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  Speaker 4: Yeah.
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  Speaker 3: Absolutely, Well, to say it's been an interesting lending environment
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  Speaker 3: the last few years would be an understatement, and it
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  Speaker 3: certainly has been since we started partnering, Barry. I think
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  Speaker 3: in the fall of twenty twenty two. I think we've
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  Speaker 3: had what ten or so rate hikes since then, and
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  Speaker 3: least as you mentioned, yeah, we had some liquidity constraints,
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  Speaker 3: as I'm sure many watching and listening did as well.
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  Speaker 3: We had to intentionally slow down our lending, which is
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  Speaker 3: always a hard message as you know, a lender and
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  Speaker 3: an originator to tell our teams we've got to slow
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  Speaker 3: it down. But thankfully we've been able to turn it
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  Speaker 3: back on. And you know, with the Upstart partnership, we
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  Speaker 3: went with the slow and grow strategy. So we started
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  Speaker 3: in our market, Arizona, with you know, originating a few
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  Speaker 3: million a month and then testing it out, you know,
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  Speaker 3: to see how it worked, how did it work for us,
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  Speaker 3: how did it work for our members, what was the feedback,
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  Speaker 3: And then we steadily, you know, started ramping up volume,
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  Speaker 3: you know, both because one getting our feet wet with
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  Speaker 3: the program, but two, as you mentioned, the changing environment.
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  Speaker 3: And then from there we started to expand markets. And
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  Speaker 3: I think one of the things I love so much
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  Speaker 3: about this program are the levers that we can control,
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  Speaker 3: and you know, being a control freak, I want to
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  Speaker 3: be able to do that.
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  Speaker 4: So whether it's adjusting our net return or.
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  Speaker 3: Our expected loss rate, our volume, our max loan size,
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  Speaker 3: that's The great thing about this program is the customizable
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  Speaker 3: of flexibility.
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  Speaker 1: Great and so the partnership that you have internally, because
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  Speaker 1: I know you and the lending group you always have
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  Speaker 1: those aggressive goals, right, I mean, you're you're always trying
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  Speaker 1: to put more money on the street. You're trying to
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  Speaker 1: find ways of not just this isn't just a financial
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  Speaker 1: thing with show You're not just trying to sort of
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  Speaker 1: grow the balance sheet. You're actually trying to help those
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  Speaker 1: members that you have with their next purchase need or
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  Speaker 1: wherever the case may be. But talk a little bit
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  Speaker 1: about that partnership, like, like how that's sort of the
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  Speaker 1: catalyst for you to be able to realize and recognize
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  Speaker 1: these great loan growth goals you have. You also need
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  Speaker 1: to have the support of the risk side of the
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  Speaker 1: business and the finance side of the business. So maybe
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  Speaker 1: talk a little bit about about how and you and
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  Speaker 1: the rest of the lending folks have been able to
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  Speaker 1: sort of make sure everyone's served riding on the same
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  Speaker 1: tracks as the train.
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  Speaker 4: Yeah.
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  Speaker 3: I think one of the things we learned through this
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  Speaker 3: partnership specifically was the importance of bringing on your key
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  Speaker 3: partners across the credit union early and often.
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  Speaker 4: To get comfortable with it. You know, I think everyone involved.
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  Speaker 3: In community lending would love it if there were endless
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  Speaker 3: volume potential within their geographic footprint, but unfortunately that's not
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  Speaker 3: the reality.
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  Speaker 4: And so we took the approach.
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  Speaker 3: Of expanding beyond Arizona so that we have the funds
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  Speaker 3: to do more within our community. And I think that
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  Speaker 3: was a big challenge for some folks internally to adjust to.
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  Speaker 3: You know, we're a local credit union, why would we
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  Speaker 3: be partnering with this fintech? Why would we be going
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  Speaker 3: to other markets? But it was really helping to tell
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  Speaker 3: the story that we could better serve our community if
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  Speaker 3: we have those dollars to do so. And so sometimes
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  Speaker 3: you have to go outside to get those dollars.
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  Speaker 1: So growth beyond the traditional branch footprint or feel amageably
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  Speaker 1: you have as a catalyst to be able to make
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  Speaker 1: those investment at the revenue, to make the investments to
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  Speaker 1: get a better value proposition for those that are sort
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  Speaker 1: of inside. So there's many ways of doing it right,
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  Speaker 1: but I think you guys have kind of figured out
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  Speaker 1: a really good formula for it. So I know you've
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  Speaker 1: got other fintech partnerships, not just Upstart you know, for
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  Speaker 1: several as well. And I do know that there's a
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  Speaker 1: bit of an evolution with you and your world. I mean,
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  Speaker 1: you were traditionally you're a lender, right and have been
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  Speaker 1: a lender for a lot of your career, and now
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  Speaker 1: it's like, okay, Michelle, you're doing such a great job
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  Speaker 1: with lending. We usually look after deposits now, which is
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  Speaker 1: you know, really almost flipping the hat a little bit.
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  Speaker 1: But I would think a similar sort of an approach
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  Speaker 1: or or a similar sort of guide guidance in terms
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  Speaker 1: of how you would try and find those new positive
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  Speaker 1: opportunities to help you with those those lending opportunities. So
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  Speaker 1: maybe tell the audience a little bit about that evolution
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  Speaker 1: within Vantaged West and kind of how you've seen sort
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  Speaker 1: of similarities I guess in your approach as you're looking
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  Speaker 1: at getting deposits as well.
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  Speaker 3: Yeah, well, you know, we're broadly speaking, fintech is a
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  Speaker 3: critical part of our growth strategy Advantage West. So while
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  Speaker 3: you all were one of our first partners, we've since
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  Speaker 3: added other partners for auto refinancing, loan decisioning, improving our
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  Speaker 3: digital experience, and so you know, now with deposits, we're
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  Speaker 3: we're really focusing on how we grow that we have
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  Speaker 3: advantage West. What's called our rally cry, and it's where
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  Speaker 3: everyone focuses on one strategic priority across the Credit Union. Yes,
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  Speaker 3: everyone has a day job and other things they're responsible for,
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  Speaker 3: but the rally cry is the one thing that we
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  Speaker 3: get everyone to rally around and really focus on.
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  Speaker 4: And that right now for the next six to nine
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  Speaker 4: months is deposits.
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  Speaker 3: So we're looking at a whole bunch of things between
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  Speaker 3: a refresh of our deposit products to a new digital
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  Speaker 3: account opening solution, digital engagement tools.
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  Speaker 4: So that is a.
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  Speaker 3: Huge focus for us, and of course, as you know,
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  Speaker 3: that allows us on the other side of the house
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  Speaker 3: to keep originating.
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  Speaker 1: Absolutely. Yeah, So I love the idea of a rally cry.
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  Speaker 1: I can't say that the creditings that that that I ran,
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  Speaker 1: we kind of had. We didn't call it a rally cry,
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  Speaker 1: but we tried to do a similar sort of thing,
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  Speaker 1: like what is what is the one topic or the
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  Speaker 1: one focus on our business that we can all rally around.
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  Speaker 1: And and maybe that's a in an indirect way, start
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  Speaker 1: answering the last question about how do you get everyone
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  Speaker 1: on the same page. The finance folks, the risk folks,
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  Speaker 1: and so on and so forth. Right, So just the
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  Speaker 1: it's maybe it's a little too early, sort I share
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  Speaker 1: some successes with that, Michelle, But you know you've talked
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  Speaker 1: about sort of some product development and redevelopment and so on.
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  Speaker 1: You know, what, what are the projections for this? And
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  Speaker 1: and I know this is not just a six to
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  Speaker 1: nine month thing, because I'm assuming that you're building something
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  Speaker 1: that you think we'll have some sustainability going forward into
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  Speaker 1: twenty six and beyond from there.
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  Speaker 3: Yeah, well, we're pretty early in this rally cry. This
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  Speaker 3: is our second one since we've gone to this strategy.
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  Speaker 3: So our first one was around reducing operational expense, and
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  Speaker 3: at first it was a little confusing to people, but
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  Speaker 3: then it just became this idea of when I have
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  Speaker 3: to make a trade off of where to invest my
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  Speaker 3: time or my resources, you'll.
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  Speaker 4: Lean into the rally cry.
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  Speaker 3: And so that rally cry was so successful we were
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  Speaker 3: able to get our op X down substantially that we said, okay,
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  Speaker 3: let's try it again.
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  Speaker 4: What's the next big focus? And so now it's deposit.
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  Speaker 3: So don't have any early I guess metrics or anything
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  Speaker 3: to share just yet. But you know, come back in
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  Speaker 3: a few months, and I'm sure we will, but I
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  Speaker 3: will say that it's done a great job of unifying
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  Speaker 3: everyone across the Credit Union and focusing on one specific
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  Speaker 3: thing perfect.
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  Speaker 2: Yeah.
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  Speaker 1: So, and it's unfair maybe to ask for sort of
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  Speaker 1: those metrics now with this new rale cry. But I'm
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  Speaker 1: glad you brought up with the operating expanse because it's
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  Speaker 1: something that we all say we keep an eye on.
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  Speaker 1: But you'd be surprised when you start to look under
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  Speaker 1: the couch cushions and see all those revenue leakage opportunity
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  Speaker 1: or or or other expanses that just you know, sort
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  Speaker 1: of have always been persisting within the Credit Union. Yeah,
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  Speaker 1: but quick opportunities, right, so that's kind of a fueling
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  Speaker 1: I guess some of the other investment and growth opportunities
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  Speaker 1: that you're trying to do. Absolutely all right, let's talk
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  Speaker 1: a little bit then. You know about one of the
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  Speaker 1: key aspects of the partnership that you've had with Upstart.
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  Speaker 1: It's not just finding new borers, but you've also got
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  Speaker 1: a bunch of brand new members, right, so starting in
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  Speaker 1: Arizona within your traditional field and membership now sort of
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  Speaker 1: expanding beyond, So thousands of new members have also sort
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  Speaker 1: of come in to the crediting. Can you describe a
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  Speaker 1: little bit maybe around how you've been treating those new
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  Speaker 1: member opportunities, like what's been sort of working to leverage
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  Speaker 1: to get that next product service or is there a
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  Speaker 1: way that you've been sort of segmenting these new members
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  Speaker 1: coming in that's been particularly successful for you and the team.
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  Speaker 3: Yeah, so we've added I think over seven thousand not
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  Speaker 3: new members so the Credit Union as a result of
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  Speaker 3: this program, folks that we likely wouldn't have reached otherwise.
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  Speaker 3: And the performance has been excellent, over ninety seven percent
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  Speaker 3: er in repayment, and we've definitely seen a shift in
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  Speaker 3: the profile since we've added the Prime program. But yeah,
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  Speaker 3: we have three target segments at Vantage WES. One is
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  Speaker 3: what we call our Prosperous Arizonans, so there are fifty
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  Speaker 3: five plus super prime borrowers. And it's interesting as I
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  Speaker 3: was thinking about our segments and the programs that upstart offers,
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  Speaker 3: there's an absolute alignment. So the Prime program serves those
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  Speaker 3: prosperous Arizonas. And then we have our middle market, which
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  Speaker 3: is forty five to fifty four AB credit. So you know,
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  Speaker 3: prime borrower and those folks align nicely with the traditional program.
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  Speaker 3: And then lastly we have our aspiring so younger borrower,
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  Speaker 3: maybe new to credit range of folks in the credit spectrum.
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  Speaker 3: And as a CDFI designated credit union, we're always looking
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  Speaker 3: for ways to extend credit to the low and moderate
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  Speaker 3: income borrower. And as you know, we've been in talks
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  Speaker 3: about the LMI Load to Moderate Income program and so
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  Speaker 3: that would help us attract those borrowers and be able
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  Speaker 3: to lend deeper and invest in that group.
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  Speaker 1: Yeah, I mean, it's take advantage of those programs that
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  Speaker 1: are available for you with cdf I. The reason for
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  Speaker 1: cdf I is is very altruistic. One is to try
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  Speaker 1: and and sort of lift up those folks that are
• 15:09
  Speaker 1: in low and moderate income areas, either through education or
• 15:13
  Speaker 1: through UH financial literacy or just simply meeting their product
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  Speaker 1: and service need where they are and hopefully sort of
• 15:22
  Speaker 1: get them into a more prosperous surve financial situation. So
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  Speaker 1: there's that aspect of it, but also, I mean financially,
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  Speaker 1: there's some great benefits and some great grants that can
• 15:33
  Speaker 1: kind of come with that. CDFI programs evolved a little
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  Speaker 1: bit here. It used to be I think a little
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  Speaker 1: easier back when when I looked at you know, six
• 15:42
  Speaker 1: seven years ago at my credit union to be able
• 15:44
  Speaker 1: to to qualify. It's a little more difficult now. But
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  Speaker 1: are you finding that that with sort of organically within Arizona,
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  Speaker 1: that that you've had some successes with sort of breaking
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  Speaker 1: in through those those low moderate income areas we have.
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  Speaker 3: Yeah, and that's you know, the bread and butter too
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  Speaker 3: of who we serve, and so that of course will
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  Speaker 3: continue to be a focus. And you know, you mentioned
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  Speaker 3: the difficulty with with CDFI, and of course we're finding
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  Speaker 3: that too. But we've since launched a very successful program
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  Speaker 3: on financial wellness. So it's a very robust program that
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  Speaker 3: a lot of our branch folks have been trained on
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  Speaker 3: to educate members. So you know, it's our goal to
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  Speaker 3: turn borrowers into savers, savers into investors. And so that's
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  Speaker 3: kind of you know, the stepping stone of that program.
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  Speaker 1: Right and and really fits in with your segmentation strategy
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  Speaker 1: because you're likely looking to sort of migrate some of
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  Speaker 1: these members through different segments right as they become more
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  Speaker 1: prosperous and so on, and you know, today's load and
• 16:56
  Speaker 1: model at income and maybe that younger demographic they're tomorrow's homeowners.
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  Speaker 1: You know, I live in southern California. It's really hard
• 17:03
  Speaker 1: to break in as a first time home buyer in
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  Speaker 1: Southern California. It might be a little easier in Tucson
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  Speaker 1: and in some of the lower moderate income areas across
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  Speaker 1: the country. But maybe talk a little bit about your
• 17:15
  Speaker 1: approach that way for first time home buyers, given that
• 17:19
  Speaker 1: you know, the price, the entry prices has gone up
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  Speaker 1: from when we're five years ago where we were looking
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  Speaker 1: at you know, three and four percent thirty year mortgages
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  Speaker 1: and now that price is a little higher right now.
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  Speaker 1: So house Fans West are started managing through through all
• 17:34
  Speaker 1: of that right now.
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  Speaker 3: Yeah, so my pre in the mortgage group, they've done
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  Speaker 3: an excellent job of addressing that.
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  Speaker 4: We know, affordability is a huge problem. So there's they're
• 17:44
  Speaker 4: offering some first time buyer programs.
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  Speaker 3: They also have launched a forty year mortgage, so they're Yeah,
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  Speaker 3: so they're really trying to address this problem that we
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  Speaker 3: know as nationwide it but it is a pretty big
• 17:58
  Speaker 3: problem in the Tucson air Yeah, so that team has
• 18:00
  Speaker 3: been working feverishly to create new products and services for
• 18:05
  Speaker 3: our members to be able to address it because we
• 18:08
  Speaker 3: were hearing it a lot from challeng.
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  Speaker 1: I love that you've created a non QM product right
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  Speaker 1: that is definitely needed there and is specifically addressing those
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  Speaker 1: that cohort that that's trying to address. So kudos to
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  Speaker 1: the Vantage West team for thinking sort of outside the
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  Speaker 1: box on that and for having the support again across
• 18:29
  Speaker 1: the organization and your board directors to be able to
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  Speaker 1: sort of take on those sorts of things. That's great, Michelle.
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  Speaker 1: Any other sort of early results on expanding relationships with
• 18:42
  Speaker 1: it's been pretty early on the Prime program. So ups
• 18:46
  Speaker 1: are just introduced in July, and just for the audience,
• 18:49
  Speaker 1: it's basically Upstart wants to make sure that we are
• 18:54
  Speaker 1: providing loan solutions for all Americans, not just for those
• 18:58
  Speaker 1: who the traditional credit scoring system may have loss in
• 19:02
  Speaker 1: some way throughout their financial history, but really trying to
• 19:06
  Speaker 1: attract Prime members with really good products at a really
• 19:10
  Speaker 1: good price that's that's attractive to them and advanced. It
• 19:14
  Speaker 1: has been a partner on this Prime program now for
• 19:16
  Speaker 1: three or four months. I mean it's really changed through
• 19:19
  Speaker 1: the borrower and member profile for you in some respects.
• 19:23
  Speaker 1: How is that feeling with your segmentation strategy then.
• 19:27
  Speaker 3: Yeah, well, as I was saying, it fits with you know,
• 19:31
  Speaker 3: all there's offerings. Each program that upstart has fits with
• 19:36
  Speaker 3: each of those segments nicely. And so you know, we
• 19:40
  Speaker 3: started with the traditional program, of course, and the performance
• 19:43
  Speaker 3: was excellent, and we want to lend deeper where we can,
• 19:49
  Speaker 3: and as I mentioned, part of our strategy is to
• 19:52
  Speaker 3: be able to lean into certain borrowers so that we
• 19:56
  Speaker 3: can go deeper elsewhere and the prime programs us to
• 19:59
  Speaker 3: do that. But yeah, we have seen a shift in
• 20:02
  Speaker 3: the mix since launching that. So of course higher scores right,
• 20:08
  Speaker 3: lower expected loss rate. So it'll be interesting to see
• 20:12
  Speaker 3: how how those two programs play together, and then if
• 20:15
  Speaker 3: we also introduce the LMI program.
• 20:19
  Speaker 4: But yeah, we've been it's early, but of course we've
• 20:22
  Speaker 4: been with how it's performed so far.
• 20:24
  Speaker 1: And are you thinking maybe a different sort of marketing
• 20:27
  Speaker 1: treatment to depending on where the border is coming from,
• 20:30
  Speaker 1: So start of looking within Arizona and maybe maybe outside
• 20:32
  Speaker 1: of Arizona, LM I might have its own sort of approach.
• 20:36
  Speaker 1: These prime borders may have a different approach than those
• 20:39
  Speaker 1: that may be in sort of a lower risk here
• 20:42
  Speaker 1: or higher risk here. I guess this case, maybe you know,
• 20:45
  Speaker 1: maybe talk a little bit with your marketing team because
• 20:47
  Speaker 1: you've got to work pretty closely with them on making
• 20:49
  Speaker 1: sure that that those opportunities are kind of met with
• 20:54
  Speaker 1: I think a relevant product or service outreach to them.
• 20:58
  Speaker 4: Yeah.
• 20:59
  Speaker 3: Absolutely, and you know that's one of the things.
• 21:03
  Speaker 4: Admittedly that we were so focused on.
• 21:06
  Speaker 3: Growing and optimizing the program that we've not been as
• 21:10
  Speaker 3: intentional with the cross selling and the onboarding, but it
• 21:15
  Speaker 3: is a huge focus for us in twenty twenty five.
• 21:18
  Speaker 3: And actually we're probably about a month away from launching
• 21:23
  Speaker 3: an offer specifically to those that come in through the
• 21:27
  Speaker 3: Upstart Journey, a very rich checking offer because now they're
• 21:30
  Speaker 3: part of our fold.
• 21:32
  Speaker 4: We want to you know, welcome them.
• 21:34
  Speaker 3: Into the member base and you know, hopefully they give
• 21:37
  Speaker 3: us a try for other products and services. But yeah,
• 21:41
  Speaker 3: I think, you know, with the different programs and our
• 21:45
  Speaker 3: slow and grow strategy, we're going to continue to look
• 21:48
  Speaker 3: to expand other markets. You know, we we were very
• 21:54
  Speaker 3: strategic about how we did that. We did states kind
• 21:57
  Speaker 3: of bordering Arizona, as you know, we were very very
• 22:01
  Speaker 3: careful around that and We'll continue to expand, but again
• 22:06
  Speaker 3: monitoring and making sure that we're serving our targets. I've
• 22:11
  Speaker 3: been reinvesting it back into the Tucson community.
• 22:15
  Speaker 1: Right, And the checking relationship is still the anchor product, Michelle. Right,
• 22:19
  Speaker 1: with all the evolution we've had in financial services, banks
• 22:23
  Speaker 1: and credit unions, free checking fifteen twenty years ago that
• 22:27
  Speaker 1: was kind of the big thing. It is still the
• 22:30
  Speaker 1: anchor product that I think most most financial consumers signify as, Hey,
• 22:36
  Speaker 1: my main financial institution is where my checking account is.
• 22:39
  Speaker 1: And maybe it's less relevant now that that checking account
• 22:43
  Speaker 1: was opened at a branch a mile from my house.
• 22:47
  Speaker 1: Because with an advantage West, you've got a pretty rich
• 22:50
  Speaker 1: digital platform, right, Like I can be in southern California
• 22:54
  Speaker 1: and I can totally engage with your folks and pretty
• 22:58
  Speaker 1: much get anything I need in the digital or even
• 23:02
  Speaker 1: over the phone. So it's with checking, it's not just
• 23:07
  Speaker 1: with those new Upstart borders within Arizona. You're also kind
• 23:11
  Speaker 1: of looking outside of the stafe borders as well.
• 23:14
  Speaker 4: Right, absolutely, Yeah.
• 23:16
  Speaker 1: Yeah, that's good. One thing with Upstart. So for the audience,
• 23:23
  Speaker 1: So I worked at a credit union that was also
• 23:26
  Speaker 1: an Upstar partner. We had expander field of membership to
• 23:30
  Speaker 1: new county and southern California counties are pretty big, there's
• 23:33
  Speaker 1: a big population in them, and so the one that
• 23:36
  Speaker 1: we expanded to had about two million people in it.
• 23:39
  Speaker 1: And we actually use upstart to as one of our
• 23:42
  Speaker 1: first outreaches into that county so that we're able to
• 23:45
  Speaker 1: find a brand new Borowers brand and became brand new
• 23:48
  Speaker 1: members in that county. So really with sort of zero
• 23:50
  Speaker 1: marketing spend for that particular project, we had successful in
• 23:55
  Speaker 1: bringing in hundreds of new more borders and new members
• 23:58
  Speaker 1: in that county pretty quick. And then the marketing team
• 24:01
  Speaker 1: we're like, this is great, we can ab test different
• 24:04
  Speaker 1: ways of different approaches for them. We didn't have as
• 24:09
  Speaker 1: I think as as precise a segmentation program as you have,
• 24:13
  Speaker 1: which is probably a good enabler to make that as
• 24:17
  Speaker 1: successful as possible. But yeah, I think cross sell is uh,
• 24:21
  Speaker 1: those cross sell opportunities are so important and that catalyst
• 24:25
  Speaker 1: for growth for you going forward.
• 24:27
  Speaker 4: Yeah.
• 24:27
  Speaker 3: Well, and you know, we see the feedback we get
• 24:30
  Speaker 3: through you know, satisfaction surveys and folks saying this was
• 24:34
  Speaker 3: such an easy experience, it was such a great loan
• 24:37
  Speaker 3: experience that it's it's a great opportunity to serve up
• 24:41
  Speaker 3: something else right when they've had that positive experience.
• 24:45
  Speaker 1: Absolutely good. So looking to have Michelle like, what what
• 24:48
  Speaker 1: excites you about the next phase of the partnership, because
• 24:52
  Speaker 1: you know you've got this this sort of core borrowers
• 24:54
  Speaker 1: and new memories. We've got the prime Now you know,
• 24:57
  Speaker 1: any other sorts of products or or services or solutions
• 25:01
  Speaker 1: that you're focused on here as we roll into twenty five.
• 25:06
  Speaker 3: Yeah, So we just started having kickoff conversations with you
• 25:10
  Speaker 3: all around your helock offering, which is a great way
• 25:14
  Speaker 3: for us to capture borrowers who perhaps bought a home
• 25:17
  Speaker 3: during the housing boom and you know they're locked in
• 25:20
  Speaker 3: at those low rates and want to tap into that equity.
• 25:24
  Speaker 3: We've seen some great growth in our own helock portfolio,
• 25:28
  Speaker 3: but again capturing those that we wouldn't have access to.
• 25:33
  Speaker 4: So we're excited to begin conversations around that.
• 25:37
  Speaker 3: We just launched the recognized Customer program with you all,
• 25:41
  Speaker 3: so if there is advantage west member that's coming into
• 25:44
  Speaker 3: the Upstart platform, they'll now be routed to us, which
• 25:47
  Speaker 3: is great. I participated in your AI certification program.
• 25:54
  Speaker 1: Good, yes, Yeah, which wasn't an easy. I mean, let's
• 25:57
  Speaker 1: be honest, right, that was not an easy pro.
• 25:59
  Speaker 4: Did the long verd and the short version?
• 26:01
  Speaker 1: Yeah, but they were from you like that was university level, right,
• 26:04
  Speaker 1: And still it really was.
• 26:06
  Speaker 4: It was taking me back to stats class, but it was.
• 26:09
  Speaker 3: It was great, and I truly recommend it to anyone
• 26:13
  Speaker 3: not only thinking of partnering with upstart, but anyone just
• 26:16
  Speaker 3: looking to get a better understanding of artificial intelligence and
• 26:19
  Speaker 3: machine learning and the differences and the compliance environment involved.
• 26:24
  Speaker 3: So we've actually started to make that part of people's
• 26:28
  Speaker 3: development plans. Every year, folks that manage WESS have to
• 26:32
  Speaker 3: create a development plan, and because we are partnering so
• 26:35
  Speaker 3: much with fintech, we have suggested some folks take it.
• 26:39
  Speaker 1: That's great, that's good. Yeah, you know, you talk helock.
• 26:42
  Speaker 1: I read something not too long ago that ninety percent
• 26:44
  Speaker 1: of all first mortages in the United States have a
• 26:48
  Speaker 1: rate of five percent or less right now. So people
• 26:51
  Speaker 1: are kind of stuck in their houses because of rate,
• 26:54
  Speaker 1: but they hate their kitchen or they hate their bathroom.
• 26:57
  Speaker 1: And you know, that's that's where I think the heal
• 27:00
  Speaker 1: product kind of makes a lot of sense. Not just
• 27:02
  Speaker 1: upstarts heelock products certainly, but you know, any helock product
• 27:05
  Speaker 1: I think should be really at the forefront as creditings
• 27:08
  Speaker 1: are looking at twenty twenty five, because these are also
• 27:10
  Speaker 1: really really good members for other products and services that
• 27:17
  Speaker 1: you may be able to offer. So so it's good
• 27:20
  Speaker 1: that you have that going on. Well, Michelle, I want
• 27:22
  Speaker 1: to thank you so much for talking into our audience today. Ali,
• 27:27
  Speaker 1: could you pull up the science please. Thank you so.
• 27:29
  Speaker 1: Vange West is really one of upstarts longest tenured and
• 27:32
  Speaker 1: one of our most valued lending partners. But in addition
• 27:35
  Speaker 1: to Vantage West, we partner with many other creditings across
• 27:37
  Speaker 1: the country, helping them deliver high performing and profitable personal
• 27:40
  Speaker 1: loans while also helping with membership growth in their desire
• 27:43
  Speaker 1: geographic market. We have over one hundred lending partners across
• 27:46
  Speaker 1: the country of all assets, sizes and various geographic reach
• 27:50
  Speaker 1: like many of those that are pictured on the previous slide. Now,
• 27:54
  Speaker 1: Michelle and I talked a little bit about how Vanage
• 27:56
  Speaker 1: West has gained. Not only are these high quality performing loans,
• 27:58
  Speaker 1: but very high quality new members. There's a visual of
• 28:01
  Speaker 1: kind of what that new member profile looks like and
• 28:03
  Speaker 1: some of their characteristics, including what we're seeing in early
• 28:06
  Speaker 1: stages in average creditsco over around seven fifty six. So
• 28:10
  Speaker 1: many of our credit unis have had success cross selling
• 28:12
  Speaker 1: to these particular members in these into additional products and services.
• 28:16
  Speaker 1: And it's pretty exciting for us to see this as
• 28:19
  Speaker 1: this is a program that ups are just launched with
• 28:22
  Speaker 1: a few of our trusted lending partners here in July
• 28:24
  Speaker 1: and you three months later, it's it's really really blown
• 28:28
  Speaker 1: up and become one of our primary value propositions that
• 28:31
  Speaker 1: we have to our new lending partners and our existing
• 28:35
  Speaker 1: ones of these new prime borers that are coming through.
• 28:39
  Speaker 1: So if you're entering a new market, upstart can find
• 28:41
  Speaker 1: those borders in that designate geographic area. And these new
• 28:44
  Speaker 1: members generally represent a pretty attractive demographic for building new
• 28:47
  Speaker 1: member relationships. And finally, if you've got any other questions
• 28:51
  Speaker 1: about what we talked about today or anything we missed,
• 28:53
  Speaker 1: please feel free to reach out to Michelle right directly.
• 28:55
  Speaker 1: You can see our contact information there. Michelle and a
• 28:58
  Speaker 1: few others from the Vanaged West team will be attending
• 29:00
  Speaker 1: the ACU Lending Conference in Nashville in just a few
• 29:03
  Speaker 1: short days. Members of the f Start team will also
• 29:05
  Speaker 1: be there we really look forward to. It's actually one
• 29:08
  Speaker 1: of our favorite events of the year because we see
• 29:11
  Speaker 1: a lot of a lot of our lending partners. We
• 29:13
  Speaker 1: also see a lot of prospective lending partners, and there's
• 29:15
  Speaker 1: a lot of questions and a lot of curiosity around, well,
• 29:19
  Speaker 1: how exactly does AI work in lending? Like what's what's sir?
• 29:22
  Speaker 1: Your your secret, sauce your solution with us, and so
• 29:26
  Speaker 1: it gives us an opportunity to really talk to lending
• 29:28
  Speaker 1: professionals across the country about about all the things that
• 29:31
  Speaker 1: we're doing here at upstart. But we would love to
• 29:34
  Speaker 1: meet you in person. If you're coming, please stop by
• 29:37
  Speaker 1: our booth when you're there. And I want to thank
• 29:40
  Speaker 1: everyone who joined us today and thank you to Michelle,
• 29:42
  Speaker 1: and I'll turn it back over to our moderator.
• 29:46
  Speaker 2: All right, folks, Well, if you had any questions and
• 29:48
  Speaker 2: that was your chance, please don't be shy. I see
• 29:51
  Speaker 2: we had a couple here in the chat. The first
• 29:54
  Speaker 2: one we have someone interested in your AI certification program.
• 29:57
  Speaker 2: Is that a free program?
• 29:58
  Speaker 1: Verry, it is. It is a great price. It is free,
• 30:02
  Speaker 1: so you can go to upstart dot com. And while
• 30:06
  Speaker 1: I'm talking, maybe my friend Ally can can help with
• 30:09
  Speaker 1: the exact link for that, but yeah, it is a
• 30:12
  Speaker 1: free course. We actually introduced two different programs here in
• 30:16
  Speaker 1: twenty twenty four, almost AI Certification that Michelle was talking about,
• 30:19
  Speaker 1: which is less about Upstart and more about artificial intelligence
• 30:22
  Speaker 1: as a topic, and it really is sort of college
• 30:25
  Speaker 1: university level but a good understanding of what AI is.
• 30:29
  Speaker 1: There's a lot of I think misunderstanding about AI, and
• 30:32
  Speaker 1: people think that there's some sort of doomsday scenarios and
• 30:35
  Speaker 1: so on around AI. This isn't it at all. This
• 30:37
  Speaker 1: is really just taking for ups models. For example, we
• 30:41
  Speaker 1: use over seventy billion data points to come up with
• 30:47
  Speaker 1: our model projections and forecasts as we go through the
• 30:50
  Speaker 1: underwriting process, as we validate the identity of borders that
• 30:55
  Speaker 1: are coming through Upstart. So it's we're using it because
• 30:59
  Speaker 1: there's just so much only so much capacity that humans
• 31:03
  Speaker 1: have for it, and we know that through machine learning
• 31:05
  Speaker 1: we can get to answers faster and be more precise
• 31:08
  Speaker 1: with it. So that's why we really, I mean, artificial
• 31:12
  Speaker 1: intelligence is really in our DNA, it's in our bones.
• 31:14
  Speaker 1: It's how we got started and really how we believe
• 31:17
  Speaker 1: that that we're going to be just supporting all of
• 31:19
  Speaker 1: our financial partners as we go forward with Upstart, and
• 31:24
  Speaker 1: I'm just looking at what the course is upstart dot
• 31:27
  Speaker 1: Com slash ai hyphen certification. There is also an Upstart
• 31:35
  Speaker 1: Program certification. It's really more for those lending partners that
• 31:39
  Speaker 1: we've just brought on. It's a good overview of what
• 31:41
  Speaker 1: Upstart is and sort of how we connect our business
• 31:45
  Speaker 1: if you are to partner with us, it's that one's
• 31:49
  Speaker 1: a little more consumable. It's about an hour or so,
• 31:53
  Speaker 1: but would highly encourage anyone who's who's interested to check
• 31:56
  Speaker 1: that out as well.
• 31:58
  Speaker 2: Yeah, thank you for sharing that. I think it sounds
• 32:00
  Speaker 2: like incredibly useful certification for lending professionals and I would
• 32:03
  Speaker 2: encourage you all to check it out. Another question I
• 32:06
  Speaker 2: got here from a member, how do you distribute the
• 32:08
  Speaker 2: loanberd between loan types, whether that's auto, mortgage or personal ones.
• 32:17
  Speaker 3: Yeah, so we have goals right for the organization set
• 32:23
  Speaker 3: as part of our plan for the beginning of the year.
• 32:26
  Speaker 3: So that's, you know, from a lending perspective, how we
• 32:30
  Speaker 3: distinguish what we're.
• 32:31
  Speaker 4: Going to focus on for the entire year and.
• 32:34
  Speaker 3: Then specifically the Upstart programs now that we have a
• 32:39
  Speaker 3: couple of them, it comes down to what's happening across
• 32:43
  Speaker 3: the credit union. Do we need to bump up the return?
• 32:47
  Speaker 3: Are we looking for more volume? I would be remiss
• 32:51
  Speaker 3: if I didn't talk about our capital markets team. So
• 32:55
  Speaker 3: we have a small but mighty team that's focused on
• 32:58
  Speaker 3: loan participations. So it's making sure that I'm poisoning my
• 33:02
  Speaker 3: portfolio for them to take it to the secondary market.
• 33:05
  Speaker 3: So those are all things that come into how we
• 33:08
  Speaker 3: distribute and how we look at where we're going to
• 33:10
  Speaker 3: book volume.
• 33:12
  Speaker 1: That's a good point about participation loans. So two years ago, no,
• 33:16
  Speaker 1: I'll go back three years ago. There was such an
• 33:18
  Speaker 1: imbalance between buyers and sellers. There were hardly any loan
• 33:21
  Speaker 1: pools at all, and we were all crying for them,
• 33:23
  Speaker 1: and we're all outbidding each other, which we're just diminishing
• 33:27
  Speaker 1: the margins so much it almost was not worthwhile, although
• 33:31
  Speaker 1: it did boost up that side of the balance sheet.
• 33:33
  Speaker 1: And then it shifted, you know, almost overnight into there
• 33:38
  Speaker 1: were way more buyers and sellers. Where's that now, pardon me,
• 33:44
  Speaker 1: way more sellers than buyers, I should say, is where
• 33:46
  Speaker 1: it shifted. Where do you see that now, Michelle, Yeah, I.
• 33:50
  Speaker 3: Mean, I think the team is finding that there's a
• 33:52
  Speaker 3: bit more of that balance, so they're not struggling as
• 33:56
  Speaker 3: much to find buyers. And then you know, this plast year,
• 34:00
  Speaker 3: we've actually had a really good year of selling participations.
• 34:05
  Speaker 3: So I think that's what they're planning on seeing again
• 34:09
  Speaker 3: in twenty twenty five. We have some lofty goals on
• 34:13
  Speaker 3: that part of the house as well, so hopefully that continues.
• 34:17
  Speaker 1: That's good. I mean, so think about an environment where
• 34:20
  Speaker 1: we have rate reductions. It never really never really happened
• 34:23
  Speaker 1: in twenty four. Hopefully it happens in twenty five. I
• 34:26
  Speaker 1: don't know, the FED drop fifty basis points and then
• 34:29
  Speaker 1: the tenure went up forty basis points, so that kind
• 34:32
  Speaker 1: of didn't make a lot of sense. But let's assume
• 34:34
  Speaker 1: for a second that we do see some rate reductions
• 34:36
  Speaker 1: from the FED in twenty five. I mean, that would
• 34:39
  Speaker 1: tell me that any paper that you put on in
• 34:41
  Speaker 1: twenty four or twenty three is be a little higher
• 34:43
  Speaker 1: yielding and probably a little more attentive for those for
• 34:46
  Speaker 1: those credites that are looking for to build their loan portfolios.
• 34:50
  Speaker 1: So yeah, yeah, good, all right, thank you. Any other questions.
• 34:54
  Speaker 2: Then one more question here from the members. Is there
• 34:57
  Speaker 2: an attention to my great numbers between the segments that
• 35:00
  Speaker 2: you should that your credit union?
• 35:01
  Speaker 4: Michelle, Yeah, we do. Obviously.
• 35:07
  Speaker 3: You know, there's varying degrees of the credit spectrum, so
• 35:11
  Speaker 3: it's you know, trying to move folks up through the
• 35:13
  Speaker 3: credit spectrum and trying to move those folks who are
• 35:16
  Speaker 3: borrowers to savers and savers to investors.
• 35:19
  Speaker 4: So we try to be truly intentional about.
• 35:24
  Speaker 3: Not only where we're booking, but then the journey of
• 35:28
  Speaker 3: the member once they come into our fold and the
• 35:31
  Speaker 3: types of things that we serve them up, whether that's
• 35:34
  Speaker 3: financial wellness or if it's you know, a high yield
• 35:39
  Speaker 3: money market account, right, so depending on where they are
• 35:41
  Speaker 3: today and then trying to you know, evolve and help
• 35:45
  Speaker 3: serve them.
• 35:46
  Speaker 2: We had one more question come in, how does your
• 35:49
  Speaker 2: charge off DQ ratio has been affected in comparison prior
• 35:54
  Speaker 2: to and after a partner upstart?
• 35:57
  Speaker 3: Yeah, so I think like most folks, we're seeing delinquencies
• 36:03
  Speaker 3: in charge.
• 36:03
  Speaker 4: Offs rise not only on our.
• 36:09
  Speaker 3: Regular portfolio a little bit on the upstart, but we're
• 36:13
  Speaker 3: within our tolerance.
• 36:14
  Speaker 4: So we set and annualize.
• 36:17
  Speaker 3: Expected loss ratio with our upstart partners, and then we're
• 36:23
  Speaker 3: constantly monitoring that so if we have to make adjustments,
• 36:26
  Speaker 3: we will, and we do and see a little bit
• 36:31
  Speaker 3: of increase in charge offs in some of our earlier vintages,
• 36:38
  Speaker 3: but again that's like post COVID era where you know,
• 36:43
  Speaker 3: again some of that money dried up, and you know,
• 36:45
  Speaker 3: it's exactly what we saw on our own portfolio too.
• 36:50
  Speaker 1: Yeah, and I'll say thank you Michelle from upstarts perspective.
• 36:54
  Speaker 1: Our lending partners get to choose sort of the risk
• 36:56
  Speaker 1: tolerance that that they're willing to accept, so they can
• 37:00
  Speaker 1: land super deep, they can land super prime, UH, somewhere
• 37:03
  Speaker 1: in between, and we do really have a cross the
• 37:06
  Speaker 1: spectrum UH lenders. Some are looking for volume in are
• 37:10
  Speaker 1: and are comfortable with maybe higher yields and also higher losses.
• 37:15
  Speaker 1: Some are more comfortable with, hey, I really want to
• 37:18
  Speaker 1: limit my losses, but I'm okay accepting the lower return
• 37:22
  Speaker 1: UH for for that sort of more more high quality paper.
• 37:25
  Speaker 1: And again we can accommodate across that entire spectrum, even
• 37:29
  Speaker 1: a blend of it as well. Some are are trying
• 37:31
  Speaker 1: to say, hey, with like super prime, we know that
• 37:34
  Speaker 1: the loss rates really low on that anyhow, But we
• 37:36
  Speaker 1: also acknowledge the returns low because we're trying to get
• 37:39
  Speaker 1: the best possible a PR offer out for those super
• 37:43
  Speaker 1: prime borers. By the same token, you can land a
• 37:46
  Speaker 1: little deeper and on a blended basis. Now you've got
• 37:49
  Speaker 1: a return that's uh, that's more attractive to the finance
• 37:52
  Speaker 1: folks especially as well. So and the loss rate and
• 37:56
  Speaker 1: the loss rate exactly.
• 37:59
  Speaker 2: Well, it looks like that was our last question. So
• 38:01
  Speaker 2: that's going to conclude our weibe and offer today. Thank
• 38:04
  Speaker 2: you Michelle, thank you Verry, and thank you to our
• 38:05
  Speaker 2: audience for joining us. Really appreciate it. If you could
• 38:08
  Speaker 2: please take a moment to fill out the evaluation on
• 38:10
  Speaker 2: your screen. Your feedback will help us to improve the
• 38:13
  Speaker 2: delivery of our programs and is very much appreciated as well. Again,
• 38:16
  Speaker 2: thank you for joining us, and have a great day.
• 38:19
  Speaker 1: Thank you Michelle, thank you Adam.