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How Innovation in Servicing Drives Loyalty · Leaders in Lending

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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,
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decision 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
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week's episode features my conversation with Matt Vivens, the founder and CEO of Canopy.
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I've been looking forward to this conversation because Canopy kind of sits on what
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I think of as the overlooked and underappreciated part of lending, which is the
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servicing side. It's really interesting servicing platform. But I think importantly we dive
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into a couple of things that are really interesting. How servicing is really the
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footprint for cross sell and customer relationship management on an ongoing basis with customers,
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which a really important part with the financial industry business model. We talk about
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how often kinds of products you can offer are limited, and I've seen this
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several times by what you're servicing capabilities can support. So even though you may
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be able to think of an idea a different kind of loan or a different
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kind of payment structure, really have to have the servicing platform to be able
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to support that. And finally, why commercial side servicing could be a little
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harder the consumer and why we've seen some people kind of mess that up because
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the variety of products and different ways as are used. So it's thought a
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really interesting exploration of again an sometimes overlooked part of a learning life cycle,
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the servicing side and all the value that can be created there. So please
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enjoy my conversation with Matt Vivens. Matt, welcome to the podcast and thanks
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for making the time to join us today. Thanks Jeff, really happy to
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be here. I'm excited for this conversation because I feel like a lot of
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the conversations I have about loans also around the origination side. We're talking a
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little bit post origination side today, which you'll be fascinating. But just before
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I get into that, for a little context, can you give people a
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little context on the company I cannady what you guys do, and my standard
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opening question is kind of how we all made our way into the banking industry,
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because I find it that's an interesting story. So maybe you can meld
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those two together and tell us a little bit about you in the company.
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Yeah. Sure. So Canopy is an API first modern lending core. We
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help lenders be better operators through our loan management platform and suite of tools,
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and so that's a little bit of who we are what we do. To
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your point on post origination, that's really all that we focus on. So
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everything from getting approved to taking a loan, all the way through charging,
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all for closing an account. It's about ninety percent of the loans life cycle
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and engagement happens in the world of servicing, but we don't talk a lot
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about it because it's a little bit esoteric. It's not that sexy, I
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guess for some although we're doing a whole podcast on it, so I hope
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there's some people out there that are interested in it and it. You know,
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servicing powers the lending ecosystem, So our platform connects into a lot of
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other integrations from payments to issuer processors to KYC to help operators be better lenders.
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And so when I think about servicing, I'm thinking about any company that
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has to account for its customers making payments needs to service them door, dash
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services, you Uber services you when you have a problem with your ride or
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when you're dealing with financial products. You also need a system of record that
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can handle all the rules and policies that govern those products, and so servicing
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is a very, very big landscape. As for me, I've been in
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fintech for about ten years. I was out in the Bay Area working at
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a couple of small payments startups before moving on to a company called Ernest.
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Ernest competed in the heyday with the SOFI, really one of the first modern
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neo banks back in twenty fourteen twenty fifteen after Simple's acquisition, and I got
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to see firsthand everything from originations to servicing to securitization. My job was to
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help grow originations, so how do you price, underwrite, acquire students.
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Servicing was how do we account for these students making repayments? That was quite
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a nightmare and have some PTSD which helped me found Canopy. And then securitization
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is when we sell the loans into the capital markets, and so we try
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to build everything in house. I would say we were big tech, little
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fin You know, if you think about the two sides of fintech, and
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we didn't need to recreate a lot of the wheel. We didn't need to
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redo it ourselves, and so we try to do everything in house. Obviously,
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there weren't companies like Canopy at the time, so we didn't really have
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another choice. I think it's one of the reasons we prematurely sold the company
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because of the difficulty in getting data accuracy and precision to get the loans into
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the capital markets. And as that acquisition was coming to fruition with a company
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called Naviant, which is the largest student loan servicer, I was recruited through
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some friends at QEED to a company called green Sky in Atlanta, and Nigel
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Morris said to me, this is the most profitable fintech that you've never heard
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of. And he was right because I hadn't heard of green Sky. I
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hadn't been to Atlanta, but it was amazing. They were doing about two
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hundred two hundred fifty IBADA when I joined. I joined to be their head
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of consumer So how do we grow out there at their consumer arm For those
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who don't know, green Sky was really one of the og point of sale
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lenders before anyone said by now pay later, green Sky was the leader in
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that and got to ring the bell in the NASDAC saw them pre imposed IPO,
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and they had the same struggles with servicing as Ernest had, just on
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a much bigger scale, which was that it was very difficult to make small
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line changes within the database because the database was fifteen years old, extremely rigid,
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And so I started Canopy to be a more flexible, fungible option for
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banks and fies to launch more innovative lending products. I love that connection because
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it's it's easy to forget that often the service capabilities end up dictating the terms
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of loans or the way we you know, for revolving credit. The wine
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changes increases or decreases end up being like limited in many ways, like the
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innovation is like we found like people haven't thought of new kinds of loan products,
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Like oh, I can't do that because even though I can originate,
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or having no way to collect money in this or that way, which is
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just a fascinating reality that this kind of back end seemingly simple process, right
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like how much do you owe? Do I collect the payment? Every like
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that doesn't seem like that complicated a part of the business in many ways,
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and yet it ends up limiting the kinds of loans that are made available and
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where they're made available, and how because of the difficulty in changing those services.
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Percent agree. I mean, my slightly spicy hot take is that most
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lending products today are a commodity, right. I mean, as much as
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we wanted to be doing something different with Earnest, a three year loan is
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a three year loan. It's the same that Wells Fargo has, saying the
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Bank of America has now. One of the things we did see at Earnest
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was a lot of students wanted non traditional loan terms two point five years,
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three point one years. Those nuances of personalizing those lending products became very complicated
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on the back end. But if you put yourself in the shoes of you
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know, a consumer in the middle of the country, maybe they only have
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one credit union in their town. It's all they have access to, and
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so if they get denied for three year loan, they're immediately bumped up to
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the next year, five year, seven year old. There's no option,
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there's nothing in between. And it's because that credit union or community bank is
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most likely on Jack Henry and Jack Henry's had a fixed set of rules for
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fifty years and making any type of change would literally blow people's minds because you
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don't know what happens downstream. And so there's the commoditization of lending products.
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That's one thing that we're looking to change. But then if you put yourself
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in the shoes of the operator, imagine you're a call center operator. It's
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not typically a career in the US high churn, so you're manage a call
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center and you're constantly having to retrain people on systems that were built forty years
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ago. Now at green Sky, we had something between ten to fifteen thousand
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phone calls a day come into our call center, and most were basic questions
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what's my payoff amount? How much do I owe? And the call center
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agent would have to jump through screens and PDFs. They looked like a Bloomberg
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terminal. They had three different screens of jumping in between things, and every
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minute they're on the phone, at every second they're on the phone, it's
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increasing their costs to service exactly. So we're open to also, on the
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other outside of the personalization piece, automating a lot of these workflows so that
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simple questions the consumer can just know instead of having the dollar phone number.
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Let me ask this because I'm kind of curious. Are there any innovative terms?
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You talked about financial loan products being kind of commoditized, and I think
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you can argue about like the amount your proof for in the rate, but
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are you really competing at that cost level? Because you're right, the product
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itself the core of like get a thirty six month load or a sixty month
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load. You make monthly payments, it's simple and whatever. Those things are
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kind of like industry norm And you mentioned like terms like two and a half
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years or which is kind of like just the duration of the loan, which
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shockingly can be very hard for surface handle they need to do. It's say,
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I'm just counted a month instead of years. It should be easy just
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change number. But are there other kinds of terms you've seen interesting innovation on?
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For some of your customers were actually saying, Hey, here's a kind
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of product or something other than just the duration of let's say an installment loan
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that can be changed in interesting ways to change the nature of that product in
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some way. Because it's you're right, there's not a lot of innovation on
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that actual like what is the core offering that's be provided front. Yeah,
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so we a canopy. We support pretty much every type of unsecured lending products,
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so from revolving cards, charge cards, debit cards, installment loan,
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buy now, pay later, student loans. And then on the B to
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B side, you have a lot of working capital products, so merchant cash,
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advance in voice factoring. So I'd like to tackle the question in two
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sides. So on the B two C side, there are a lot of
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personalization from our lenders that are looking to extend grace periods or maybe give a
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revolving line of credit that can retroactively put a purchase onto an installment plan.
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Amex has this today called pay a Planet, but it's in their AMX ecosystem.
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We've helped democratize that. So there are a lot of i'd say beneficial
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viewpoints that our lenders are doing to create some differentiation within the B two C
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space. In addition to simple things like changing up interest rates or choosing a
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transaction putting it retroactively on a by now, pay later product very complicated from
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operational process, we help simplify that. They are also trying to answer questions
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for consumers before they happen. So as an example, if you were to
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call into any lender today, any credit card lender, and you said,
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hey, I'm thinking about making this big purchase, what does that due to
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my interest rate? That lender can't answer that question because their system doesn't provide
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that level of transparency. And so that's really what we mean by by better
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operators. We're helping provide more financial literacy to the end consumer, the end
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barrower on the now Again a kind of pause there, because I think there's
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a lot of innovation happening on the B two C side, but generally that
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playbook has been extended. I mean it's it's been You're not really going to
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out innovate capital one in a credit card consumer credit card space. They have
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too much, you know, unique proprietary spending data to do that. On
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the B to B side, I think that it's really a blue ocean.
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I mean, there is so much opportunity. KYB, No, your business
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is still new. Obviously you're not using Piico scores. Cabbage is one of
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the most modern B to B lenders and they're only ten years old before they
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merge with M So we're seeing a lot of unique use cases for working capital
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products that companies like flex Sport, one of our portfolio companies, companies like
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Novo is a small business business lender out of Miami, another one of our
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portfolio companies are really pushing the boundaries in this space. And so I'm excited
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to see where the B to B side of lending goes in the next couple
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of years. Interesting. Yeah, the B to B space will be fascinating.
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So I want to switch a little bit to this um to the I
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think the interesting touch points that you get on the servicing side, because while
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servicing, I think it's thought of its kind of like rot. It's also
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the like to your point, like ninety percent of the life cycle of any
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lending product happens post originations, and so much time and energy is spent thinking
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about how we originate faster and whatever. And yet you know, most financial
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industry companies their business model is built around cross sell. And so it's interesting
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that that that ninety percent of the life cycle of the road is and the
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thing that we spend less time talking about, and yet that's your surface area
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if you're thinking about digital or automated or self service to actually cross sell and
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help people find new and additional part. So I'm curious how you think about
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that, because it's it is this kind of really interesting thing that in some
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ways it's naturally you just got to collect the money, it's an easy part,
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but it is also like that's your touch point every be on a very
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regular basis with your customer for most of the time they interact with you.
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This is how they interact with you, and that's your place to talk to
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them about other ways you can work, which is a pretty valuable piece of
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real estate action. Yeah, I love that you brought that point up.
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I mean, it's really one of the founding principles of canopy. So my
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thesis is that every fintech, every FI out there moves from a monoproduct world
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to a multiproduct world. So banks have been there for a while, which
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extends the LTV of the bar where, but fintech's are still somewhat a one
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trick pony. And I think you know, they're needing to get beyond just
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basic interchange and they have to get into lending to continue to sustain and grow
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into their valuations. And so if you break that down, when I was
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at Earnest, we had multiple products. We had a mortgage product, personal
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loan product, and a student loan product. We wanted to be the universal
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system that could have better data through looking at the other side of the balance
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sheet. So we were one of the first companies to work with Plaid to
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start using that in underwriting and be able to say, oh, this is
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Jeff, he went to this college, here's his repayment data. He's about
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to reach this other milestone in his life. We should instantly approve him for
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a mortgage or instantly approve him for a personal loan. Now, in theory,
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that sounds amazing, but incredibly difficult to do when each of your products
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are in different servicing stacks. This is something that's SOFI is going through right
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now. They have multiple products. They've had that for a long time.
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Each our own different servicing stacks. And so my brothers a SOFI member,
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and so he's been repaying his student loan for some period of time. They
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should know him front and back and understand his risk. But when he goes
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to look at a personal loan, it's a brand new customer. And so
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having one system that has universal data is a major advantage point, and that's
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why it was important for us to be able to support multiple product constructs out
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of the gate. I think that servicing systems and be interested to hear your
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your take from upstart. Servicing systems are a major point of engagement. So
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most of the companies we work with, they want to own that relationship.
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They don't want to offshore that to some random call center the other side of
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the world. They want to be able to answer and engage with their customers
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so that they're not having to reacquire them and they can actually cross sell an
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upsell like you said, but all of that data exists in the servicing layer.
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Yeah, now, I think it's it's a it's a huge point that
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this is scenereio. It's often underinvested, even I think upstarted, we've historically
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kind of servicing has not been as front of mind in terms of place pronovation.
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And yet when you get to the rope cross product and you well,
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how do we like be smarter. I've told financial institutions for years, like,
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if you want to earn a repeat business, you got to give people.
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You should be able to give the best rate and the simplest process to
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your current customers because you know more about them, You have their servicing history,
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you have all the data they used to apply the first time, right,
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And yet so often I mean you your example, I had a mortgage
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with a bank. I said I had a helock to that, and they
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said sure, and they sent me like a blank application that started off with
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like where is your house? Come on, guys, like take advantage of
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what you have to give me something better, because if you don't, I'll
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go ask five other guys who are going to give be the same process you
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can And you've lost your advantage and I why do I Why am I loyal
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to you? You didn't make it when that helock should have been like a
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do you want fries with that? Like you get the mortgage? That should
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just be like, hey, we have a fully under in you. Would
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you like, you know, one hundred thousand dollars heelock to sit on the
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side of that when you're going and it should just be a checkbox. And
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my people were right and it said it's like a five page application, and
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you go, that's that's a totally missed opportunity, probably because the data was
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just like didn't didn't speak right? It couldn't they that pretty knows that they
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should do that, but it didn't. Technically, it couldn't do it.
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All system of records are very rigid, very difficult to extract data to manipulate
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it. They're almost always in a batch process. So everything of Canopy is
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real time. So we're giving our operators up to date, in real time
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access to repayment data, transaction data. It helps banks and lenders of records
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and capital markets log into Canopy and see exactly the risk scores that are coming
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on and make better underwriting decisions. So having access to real time data is
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a major starting point to this, and I think that that's fintech promise,
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right, fintech promises let's create a better customer experience. I think that for
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a while, the first wave of FinTechs were only like a front end marketing
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site, and it's because the technology underneath of it couldn't actually help create better
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experiences. And so I'm excited for the next ten years for exactly that,
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which is, let's be able to utilize data to make instant product offerings,
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reduce friction, and actually create I mean that that's fintech at its best right,
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facilitating better life experiences. The home that you live in the car that
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you drive, in the school that you go to. Let's actually see that
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all the way through by not making people painfully go back through a manual process.
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One just basic table stakes information that the bank or the fintech already knows
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about you. Yeah, and you take it a step further and actually like
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recommend the right product because you know what's going on in my life, give
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me a better rate because you can see my repayment history in a way that's
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not directly at the credit file. Those things are, they're available, they're
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possible. It's it's not really a technical challenge to do them, but it
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is a technical challenge to get a legacy system and get the data in the
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right in the right captability to do that. I'll say, my sofy story
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was even even worse than the one you told, because I mean they I
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got a mortgage to so high. It's not the same way. You couldn't
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get the helot but and you know they'd versus servicing and so all I'd say,
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we know you got a mortgage from us, and this is how much
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it was, but we have no idea what the balance is or where it's
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at, or when your next payment is or what your payments are because click
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here to log into the third party servicing site and I went, and then
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you're making repayments to a company that you don't even know. And so you're
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like, uh, is this is this fraud? Is this a scam?
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I thought? I thought, I'm a Sofi customer. It's like, no,
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no, you're You're like this other bank that you've never heard of,
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Rissing Rights and the whatever, and has a website that looks like Craigslists from
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the nineties. And you know, you go, huh, that's not you
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know, it's fine because I got a good rate, but apparently all I
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got was the rate and I didn't get a better experience. And that's that's
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I was early so Fi customers. I don't want to like put sofa and
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a bucket today and what that experience is, but I do think it speaks
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to what the experiences that are often offered today are and what the opportunity is.
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Because I was, you're ready to have an integrated experience, the opportunity
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to see all my products make a combined payment. You know, can I
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take understand what my total monthly obligations are to the financialst tisue guy, I
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can ye payment dates or split them up, understand how those things interact.
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It's it's a really fascinating area and it is a you know, I think
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it's ripe for really delivering on the promise of you know, better technology and
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financials. Whether it's a ford looking financial institution or a you know, a
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new startup fintech company. Um, there's still a lot of promise left to
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deliver on. Well. I think that the this is where embedded lending gets
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me really excited, because if you have companies that aren't necessarily traditional lenders.
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Obviously, a company like Walmart who bought one finance, or company like John
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Deer does lending nothing runs like a Deer. They lend and rent off of
20:40
their tractors and mowers. Even Peloton's effectively a lender, they just use a
20:45
firm to do it. And so companies can bring this service in house.
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They're already best in class operators and put their customer first, and if they
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layer in financial services as well, that just adds to such a more holistic
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experience with the brand. And so I think that companies that are already doing
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lending that have a bunch of fragmentation. Certainly it's hard to piece all of
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that together. But you have this new green field opportunity of new fintech's new
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fis or great brands I want to bring in financial services in house, and
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they can have a fresh clean plate to start off with a company like Canopy
21:25
that can help them launch multiple products simultaneously that are complementary to what their core
21:30
service already is. I'm curious how you think about that, because it's a
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really fascinating this kind of embedded finance. And let's just take the Peloton example,
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because in many ways, I think people feel like they got a Peloton
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loan. That's what it's for right as my field, but it's really through
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a firm. And how do you see that playing out? Like I don't
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know the Peloton really wants to be the lender, like from a balance sheet
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point of view, in a risk management point of view, and I don't
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know if a firm cares about owning that customer. How do you see that
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playing out between the brands and do they really become lenders in some real way?
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Do they really partner with forward thinking banks and flies? And how do
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those fis think about the kind of customer value they get out of a Peloton
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customer, who's they think of themselves as in a firm customer too, as
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a firm getting a great chance to cross sellers at all. Kind of all
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that brand equity accruing to Peloton, it's to be a fascinating time to see
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how that plays out between these large brands that consumers are going to and the
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partners they're working with on the financing side. It's all I think, it's
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just fascinating curious how you see that kind of playing out where what's your advice
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is to fight fintech or a bank is looking at basically how do I where
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do I fitted as ecosystem and how do I think about what that opportunity looks
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like for me? Well, I think that there's certainly a rebundling services at
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brands and in a raising interest rate environment like today, giving up seven to
22:52
ten percent take rate for your partner, who's actually the BMPL is lost economic
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value you for you as as the brand, and so um there's the financial
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side of this, so like what makes sense for us to bring in house?
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And then I think there's also looking at your core competencies of what do
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you do really well. I mean, are you already servicing your customers?
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I mean are you the one picking up the phone? Are you the one
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um sending out mail? Are you the one that is recommending in Peloton's class
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the case different classes to take, and so you can there's so much there's
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so many great infrastructure companies today. I mean Canopy plays a part of this,
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but companies like alloy On on the KYC side, um, you know,
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companies like Dwala or checkout dot Com on the payment processing side. UM.
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So I think you can really pick and choose a la carte best in
23:45
class infrastructure services fundle these items together and this helps accelerate your ability to launch
23:53
lending products in house. Now again, when you look at your core competencies,
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and this is often conversation that I have not just with brands, but
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banks and FinTechs as well, creating a servicing layer and managing all the rules
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and calculations yourself is a very high bar with not a lot of differentiation for
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you. And so we can Kindopy can come in and accelerate a lot of
24:18
this because you should focus on what you do best. And so I think
24:22
that's like the first principle's question is what does the brand do best, how
24:26
can they extend that related to financial services, and then can they pick and
24:30
choose a few vendors that allow them to bring it in house, which again
24:33
is a win win win. The customer doesn't feel like they're getting passed around
24:36
to two different providers, and the brand captures more economic value than losing.
24:41
I mean, Peloton basically gives up ten percent of every sale to a firm
24:47
at least, and so to me, that's where it's like, it's a
24:49
no brainer to bring it in house. Yeah, it feels unsustainable over time,
24:55
like there's no I don't take a bite back at ten percent. I'll
24:57
like bringing my business at a ten percent discount, Yes, exactly, my
25:02
exacting work. Well, that kind of interesting. It's fascinating. Face.
25:10
Do you see anything. I mean, I wonder if there's anything we learned
25:12
from the auto space where the I mean the manufacturers went into actually game banks
25:18
many instances just to be able to offer that. And I you know,
25:22
when I look at those those companies now, they are trying to bring the
25:26
user experiences together right to say, hey, we want a holistic picture of
25:30
the customer who bought a car from us and an ongoing relationship with that customer
25:33
that something other than the unfortunate thing for a car is like typically your ongoing
25:37
relationships. Only when things break, it's like I bring it back to the
25:40
dealer for servicing, which is like in this case not making payments. It's
25:42
like what it is making payments, but because something on my car isn't working
25:45
the way I wanted it to, or I need some help something you know
25:48
needs fixing, um and so. But they love having the ongoing relationship from
25:53
a financial point of view and kind of the ability to combine the economics of
25:59
the lending. And I wonder if that's a model will see maybe other big
26:02
brands March swords where the actually have their own kind of the original libetted finance,
26:06
if you will it a very very serious way, like they really own
26:08
banks. I mean, I think that that is a really interesting take.
26:14
Um and I think there is some comparisons there. For sure. I don't
26:18
know that a fintech or a brand needs to be the license lender of record
26:26
per se. I mean I think that that's still where you know, we've
26:30
seen the chartered fintech story kind of play out. It's a very very high
26:36
bar creates a massive amount of risk and compliance for the fintech. So I
26:42
don't know that that necessarily will happen, but I do to your point of
26:47
kind of combining the experience, I think matters a lot. I also think
26:51
the product type matters. So in auto for me, like I set up
26:56
autopay and I never think about who on paying. But there are other you
27:02
know, like card based products for an example, have a much higher contact
27:06
ratio, much higher touch point. You know, if your card is declined
27:11
when you're waiting in line at home depot, you're you're getting on the phone,
27:15
and so I mean, if you are calling in with an issue,
27:19
do you really want to pass that down the chain three different times and then
27:25
you finally get someone who is reading from a script and doesn't really care about
27:29
you at all. I mean, it's a horrible experience. So I think
27:33
being a first party servicer, if that is court, if operational excellence and
27:37
execution is part of your brand, DNA and how you run your business,
27:41
then this is just a slight extension from offer financial services. I think it
27:47
makes a ton of sense. Yeah, and it really is that. I
27:52
think You're right that the two things I take away from the conversation of the
27:53
ability to really innovate on what you can offer in the ability to really optimize
27:59
the customer experience, whether that you know, for any kind of touch point.
28:03
But it's it's amazingly true how difficult it is to have even most banks.
28:07
If you dial to go what four loans do I have outstanding? And
28:11
what are my next payments? Like, you may end up in four very
28:14
different UXes because those are four different systems. My credit card balances over here,
28:18
my auto loan balance is over here, my mortgage balance is over there,
28:23
and bringing those together is so powerful in the world where you know customers
28:29
are looking for that integrated, simple experience and it's you have the right data
28:32
layer. I feel like you just gave me a layup. So I gotta
28:36
I gotta talk through this example because that is exactly what we believe in.
28:40
And in the B to B space, it is so painful because you're running
28:44
a small business and you call up a bank and you're typically getting multiple lines
28:48
of credit, so you have one to pay your inventory, maybe one to
28:52
pay your payroll, and one to pay your rent. So now you have
28:56
three different loans, three different account numbers, three different en pays, and
28:59
you're trying to run your dry cleaners or your clothing store, and so you
29:03
call into the bank and say, hey, I'm trying to find what's my
29:06
minimum due and the bank says for which account number? Sir, well,
29:10
I don't know about you, but I don't don't just have my account numbers
29:12
just off the top of my head. So now I'm fumbling through to find
29:15
the account number. We're going back and forth, and before you know it,
29:19
I missed a payment because I thought it was the other you know,
29:22
the working capital product, but it was actually for the rent. And so
29:26
Canopy helps consolidate a lot of that into a single men pay, single payment,
29:30
single due date, single statement, so that both the bar were in
29:33
the operator don't have to handle all of that complexity on the B two C
29:37
side, So not so much as having multiple accounts or loans. But for
29:44
me personally, I have a Capital one credit card and I called it to
29:48
Capital one about a year ago and said I'd like to know my payoff amount.
29:52
They gave me a number, and two months go by and Credit Carma
29:56
dings my credit score and I call up hapit of one furious I thought I
30:00
paid off my account and they said, well, sir, actually it was
30:03
mid cycle and you had some residual interest rate and then you got a late
30:07
fee in a late fee and I was pulling out my hair. Jeff,
30:11
I said, please just tell me how much do I owe today right now
30:15
on May twenty second, you know, whenever it is, and they couldn't
30:21
tell me that information. And so being able to just give transparent, real
30:26
time information that seems like table stakes is challenging for some of the largest issuers
30:32
in the world. So there's a how do we make it a simpler,
30:34
better user experience to consolidate all these loans and accounts under one statement one midday.
30:41
And then there's also the how can I just give people access to information
30:45
when it happens to be mid cycle? Yeah, let me ask you one
30:48
more question before we brought this thing up, because I'm really interested it.
30:52
I don't know how much you guys work with work traditional fis with established products
30:56
and history and migration of data in how you know startups who are kind of
31:00
building from scratch, going hey, this is great. I get a like,
31:03
what is your advice to a financial institution and maybe has some history,
31:07
goes we need to move to an API oriented, real time better system of
31:11
record. But like we got a lot of data, we got a lot
31:14
of people in flight, lots of loans outstanding. That that kind of movement
31:18
from A to B, it's easy to go. Yes, this would be
31:19
a better world. We're hard to be living in it. But I've got
31:22
to, like I gotta move my house with all my stuff, um and
31:26
get from A to B. Are there any best practices or things you've seen
31:30
for companies? You know, institution isn't a little older that say I've got
31:33
I've got some history here. How do I how do I make that transition
31:37
to a better world without without breaking the bank and breaking the institution. That
31:41
feels like a really hard challenge. It's very different than Hey, I'm starting
31:44
a fintech company. I want to have like a better servicing experience and you
31:48
know, um primary record system like I can start for scratch. So what's
31:52
your what's your advice or history with that and what would you teal in stitutions
31:56
are coming? How do I how do I start the process of getting a
31:57
better place. So Cannoby works with several top twenty five issuers on this exact
32:04
problem. And so it's a combination of technology and people. So it takes
32:09
some of our solution architecture team to actually help. So it's not just automated,
32:15
because every bank might have multiple databases that have different naming conventions and so
32:22
we need to normalize all of that and so it is a process of figuring
32:25
that out and we help White Glove handhold these banks through this. It is
32:31
also based on the technology, So our technology from retroactive events can pick and
32:37
choose a time in the past, but you know it could be created three
32:43
years ago, the account could be created three years ago, but make it
32:45
effective today. And so we have a migration mode in our API that rolls
32:52
time forwards and backwards. Time is the thing that is really a sticking point
32:55
with this to make the data migration piece easier after the naming conventions are agreed
33:01
upon through our solution development team. So that's just a little bit of like
33:07
insider baseball, how the process goes down. I would say, if I
33:10
was giving advice to a bank, don't go through a digital transformation effort.
33:15
That's I hear that word often and that typically is a five ten year journey,
33:22
and so you have to start somewhere, you start small, and so
33:23
sometimes Canopy can be a shadow ledger and system of record against one of the
33:30
existing cores and make sure that all the test cases and rules and policies are
33:34
set up, and we pick and choose typically a division within the bank and
33:39
say, by working with Canopy, we're going to show you how we can
33:43
help you acquire more merchants. We're going to show you how we can help
33:46
increase your repayment rate. We're going to show you how we can decrease your
33:51
costs of service through different automations. And we typically run a pilot program side
33:54
by side so it doesn't feel as overwhelming as migrating fifty million cardholders over to
34:01
our system. So it's a little bit of land and expand along with a
34:06
combination of technology and people from Canopy that really make it less painful. I
34:10
mean, that's my view of the world in general, is that if you're
34:14
selling into B to B like we are, like we have to take on
34:15
that pain so that our customers don't have to feel anxious about it, and
34:20
so that that's how we approach it. Yeah, I love the land and
34:23
expand maybe as a sales side version of that, but they kind of like
34:25
start with the test case, prove the technology, work it out, maybe
34:30
run it the shadow background us. I think sometimes it can look it can
34:34
be almost impossible to imagine the whole thing. But I've always found these kind
34:37
of transitions work best when you can launch something, show value, show success.
34:42
They go, you know, versus training, get everybody on board and
34:44
go hey, let's all do the thing. Go ah, let's get one
34:46
guy who loves it. Let's get one groups that's using it and says sees
34:51
the value. And then you go, hey, we've already on forty percent
34:53
of the work for you because it's just set up or through vendor in diligence
34:57
all I selest one, and now we start expanding the value over time.
35:00
It's always easier, I think, to do that when you're when you're seeing
35:02
value eternally as an organization, to say hey, let's let's invest more in
35:07
this technology, this partnership. Whatever. They to start would like, oh
35:10
my god, we've got this huge thing we have to do. And the
35:14
stakeholder. We have a lot of stakeholders, right, so when we sell
35:17
into a bank or a large established lender, there might be five or six
35:22
different individuals that all have different value propositions in their head. The head of
35:27
operations, the GM of lending, the CTO, the CFO, they all
35:31
have different objectives that they're trying to solve for in their orgs, and so
35:37
we need to be flexible of understanding their pain points and really talk through how
35:42
a modern lending core like kind of can can really help accelerate them. But
35:45
this is not for the faint of heart. It's not you know, bottoms
35:50
up self serve. These are complex sales, complex deals. I mean,
35:52
these are systems that touch a lot of other systems, and so we spend
35:57
also a significant amount of time working through inner grations. So making it really
36:00
easy to add on your CRM of choice. We integrate with zendesk, HubSpot
36:06
and Salesforce, or you can use Canopy integrate your payment processor of choice.
36:10
We work with Stripe, Dwala, Repay, dot Com, authorized dot net.
36:15
So really pick and choose and make those integrations easier. Because every lender
36:20
has a different suite of services and tools that they use internally, and so
36:24
we're not going to force you into just one platform. We're going to be
36:29
the core for you, and then we're going to help you navigate all of
36:32
the other products and third parties you need to continue to run your lending program.
36:38
Yeah, one maybe piece of advice I would give to the fis listening
36:44
to this with the fintex is like the fact that it's hard to me makes
36:46
it a competitive advantage if you can do it well, because many people look
36:50
at the hard thing and go, it's too hard, we can't get it
36:52
dot and if you can not trivial, but it puts you in a position
36:58
to actually deliver those customer experiences that differentiates you in the market. And so
37:01
I remember when we were starting up start, my CEO used to look at
37:05
me and say, how hard your sales or whatever? How hard isn't this?
37:09
That's good because that just means it's gonna be that much harder for somebody
37:13
to come on. That's a that's a competitive advantage that you're building through doing
37:16
that hard work. That will take anybody else who wants to copy it like
37:21
just as much time and hard work, and they're starting out behind you,
37:22
chasing you. I think that's a tremendous advantage for the institutions you can figure
37:27
out how to get it done and how to get it moving, so well
37:30
worth the effort in the end, I agree. I mean I think it's
37:32
also why as a starting point so many FinTechs went to debit. I mean
37:37
part of it was marketa galleolithic made it easier, so it became a little
37:40
bit of a self self fulfilling prophecy. We definitely hope to make offering lending
37:46
products simpler as as well and getting to market faster. But um, you
37:52
know, as you look to move beyond just debit and you look to move
37:54
into something that is not just an interchange base, I think it's really important
38:00
to think about the compliance and safety piece to it. So obviously our system
38:04
out of the box is compliant. We help navigate the different geos and laws
38:08
that are part of it. It's thinking about the n barrow or experience.
38:13
How do you replicate Jeff's account in month six? Because it's the edge cases
38:16
that make this really hard. So we have a lot of tooling. We
38:21
have a product called loan Lab that enables our customers to simulate things that have
38:27
not happened yet, so we can show you that they are always true and
38:30
show you what this would do to your portfolio if your delinquency rate went up
38:35
to x as an example, So simulation of time being compliant and really helping
38:42
to navigate all of the different pieces you need to offer a lending program is
38:46
you know what we love But to your point, it's not like something you
38:51
can just turn a switch overnight. Lending is hard. Doing it well at
38:55
scale is very challenging, which is why I mean a lot of the band
39:00
and initsuers continue to maintain the majority of the engagement and assets because of the
39:07
integrations and being entrenched in a lot of these processes. Now, on the
39:13
counterpoint to that, I think a lot of the issuers are thinking about getting
39:16
disintermediated by up and coming FinTechs, you know, companies like after pay,
39:21
Klarna a firm and so how do you merge the knowledge and operational excellence of
39:27
of being a great lender with the technology that can allow you to offer more
39:31
unique and innovative products is really the intersection that Canopy sits in excellent Well,
39:37
mas A been a great conversation. I really I love that we got to
39:39
dive into the ninety percent part of sendation, not just the ten that we
39:45
must talk focusing on I got three questions I ask everybody at the end of
39:49
the podcast. So if you're ready, here we go. Let's do it
39:52
rapid fire. Number one, what's the best piece of career advice you've ever
39:55
gotten? Best piece of career advice? Um, your care is not linear.
40:01
There's ups and downs to it, and so there's peaks and valleys,
40:05
but it's how the trend line goes. And so that means that for me
40:08
as an example, all the rejections like don't take it personally, understand where
40:15
you're going, take it with a grain assault the work to get better and
40:19
persevere, and so I think grit, grit in your career and knowing that
40:22
it's not easy, it's not given to you is some of the best advice
40:25
that I've gotten, something that I try to abide by and tell my kids
40:31
as well. I'm in my son's room because of the audio qualities the best
40:35
here. So um, so yeah, it's a it's a career, it's
40:37
a career advice and a little parental advice as well. Anything that can double
40:42
his career in parental advice is good advice in my book. That's that's a
40:45
double win. Um. Second question, what's the best advice who were gotten
40:49
about the general consumer financial space or consumer lending space in general, that as
40:54
much as people try to out innovate fico, Fico's pretty innovative, but boiling
41:00
things down to a single number is innovative. It's not great, um,
41:05
but you know it's thirty days lagging, but fair Isaac did it did it
41:08
right when he boiled it down to to a single number. And so UM,
41:12
I think there's a lot of people that try to create you know,
41:15
alternative data structures and um, you know, not use fico at all and
41:21
collecting more information we you sa always joke is uh is reverse innovation? So
41:25
uh that that would be my my hot take on the consumer side. That
41:31
is a hot take, especially talking to a guy who works a company that
41:34
used to alternative data. Under right, everybody, we bring you on to
41:38
hear the guests opinion, so we'll find a different time to have a debate.
41:43
Bought. Um Okay. My third question is what's one bull prediction for
41:47
the future. I think that AI is going to continue to advance in financial
41:52
services. Um. You know, obviously how that takes shape and form is
41:58
going to be interesting as if AI is ninety nine point nine percent correct but
42:04
off on that point one percent of the time, it's not good enough financial
42:07
services, you have to be one hundred percent correct all the time. The
42:09
precision and accuracy makes it really really challenging. But can it be. We've
42:14
been using machine learning and automation to make better workflows and predictions to our borrowers
42:21
already, so I think that that trend's going to continue to accelerate. And
42:23
then, as I mentioned, I'm really excited for the future of of B
42:25
to B lending. Oh let me let me ask this. Have you guys
42:30
seen anything on the gen AI because the general AI is interesting because you can
42:34
use it. I mean, my kids use CHATP two. The actually ask
42:37
the questions and won't want the answer to be good, which is maybe not
42:40
the thing it was built to do. Right is more of a writer,
42:43
but if you think of it as a natural language interface, it can understand
42:46
what you're asking and then query and underlying system so the answer is accurate.
42:52
It becomes really interesting right as a way to replace an agent and let's say
42:54
a chat where it has access to a canopy to say, hey, what's
42:59
my balaty goes I know what you want, and I know how to I
43:00
know how to get it, and I can now have like a more natural
43:04
conversation with a Yeah, are you guys looking at things in that space,
43:07
because I think there's a there's a AI as the back office, your point
43:09
machine learning that's actually I think here much more than people appreciate already being done.
43:15
And then there's the jed AI has been more of the front end the
43:17
user experience shifting to this kind of more human like interaction that's not actually a
43:22
human. I'm curious if that's It seems like something that may be coming sooner
43:25
rather than later, to a servicing experiences where you could have a conversation that's
43:29
not powered by at least initially a human BEPI, an AI that's connected to
43:34
internal systems, and I'm curious that that's something you guys are playing with or
43:36
looking at or have any thoughts on that. Yeah, this is a similar
43:39
question too, I received at fintech Nexus a couple weeks ago, and the
43:49
polling suggested half of people said they want it to be a chat bot and
43:53
not talk to humans, and then the reverse was true to the other half
43:57
of people said they want to talk to to a human. So I think
44:00
I think it's UM, it's complicated, it's nuanced. I think for really
44:04
basic things, you know, sending a text message to know what my balance
44:07
is, to be able to make a payment, anything that reduces friction there
44:10
I think is really really helpful, and obviously AI can can play a major
44:15
role in that. I also think in terms of the relationship, sometimes you
44:20
want to be able to talk to somebody and actually ask UM the person a
44:25
question that doesn't feel so distant and cold, and so I think the use
44:30
case matters a lot. But I think all of us could could say that
44:35
we're not in love with any IVR systems and any phone systems, and so
44:38
if this helps to make that just a little bit better than m that's a
44:45
win win for for for everyone. So we are looking at at some of
44:47
it UM, but the the use cases are are nuance based on the product
44:52
type and what people are doing. So I think it's still going to be
44:53
a combo of data automation, AI plus human agent interaction for some time now.
45:01
Excellent, Matt, I appreciate the time based is a great conversation.
45:05
Thanks for joining us. Thanks Jeff Talks to chairs. Upstart partners with banks
45:09
and credit unions to help grow their consumer loan portfolios and deliver a modern all
45:15
digital lending experiments. As the average consumer becomes more digitally savvy, it only
45:20
makes sense that their bank does too. Upstarts AI lending platform uses sophisticated machine
45:25
learning models to more accurately identify risk and approve more applicants than traditional credit models.
45:31
With fraud rates near zero, Upstarts All digital experience reduces manual processing for
45:37
banks and offers a simple and convenient experience for consumers. Whether you're looking to
45:43
grow and enhance your existing personal and auto lenning programs or you're just getting started,
45:47
Upstart can help. Upstart offers an end to end solution that can help
45:52
you find more credit worthy borrowers within your risk profile. With all digital underwriting,
45:58
onboarding, loan closing, and servicing, It's all possible with Upstart in
46:02
your corner. Learn more about finding new borrowers, enhancing your credit decisioning process,
46:07
and growing your business by visiting upstart dot com slash foward dash Banks.
46:13
That's upstart dot com slash foward dash Banks. You've been listening to leaders and
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