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Building a Fintech Partner Ecosystem · 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 Kellner. This
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week's episode features my conversation with Kurt Kreus, the president of Coastal Community Bank.
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Kurt and I cover a lot of topics, starting with his family connections
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to the banking industry and his long tenure there, how he came into banking.
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We dive into some of his beliefs about AI, the future AI,
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the importance of engaging in fintech partnerships for community banks, why they've engaged at
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Coastal and quite a large number of them, how they manage those and kind
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better at managing the fintech relationships and process says, both relationships and due diligence
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processes over time. And we dive a little bit into what brought them to
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build a site in the metaverse, why they think that's important, what they're
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learning from it. It's fascinating. It's probably the first metaverse banking experience I've
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seen, and of course I went in experience after talking to Kurt. We've
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covered a lot of ground, a lot of interesting innovative topics that are off
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people's mind. So I think you all enjoy, so please enjoy this conversation
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with Kurt. Kurt, thanks so much for joining me today. I appreciate
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you making the time and welcome to the podcast. Thanks, Jeff, it's
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great to be here. I'm looking forward to this conversation. We had a
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wide ranging conversation advance, but I kind of like to start with all my
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guests just talking about how you got into the business and how you got to
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where you are. And you've got a little bit more more history in the
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space than the most I talked to, so it's great. Yeah, so
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you just called me old as when I heard but that's okay. No again,
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like we've been involved in this, fit's like a family business for you,
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right, like you came you came by the question honestly, Yeah,
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yeah, I actually I did because my my fault, my dad was a
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banker and a small community bank in New Orleans where I grew up and so
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you know, as a teenager, I think I was about fifteen sixty.
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My first job at a bank was sitting in the back office at his bank,
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running a coincounting machine and stamping mail. And then you know, at
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some point I graduated to to the micro fish machine and the and the proof
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machines. Eventually then I became a teller, and I worked as a teller
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through college and you know, graduated an accounting but despite that, I remember
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I was in college and accounting major, and my dad said to me,
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uh, you know, at one point says his son, whatever you do,
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don't be a banker, you know. And of course that's what a
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fight in my head because I was the rebellious team, you know, with
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that kind of head knocking um relationship with my dad, and it's like so
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in my mind, I remember, you know, oh, I'm going to
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be a banker, and I'll be a better banker than you ever are,
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you know, and so that that's put me on that path. I don't
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think that was his intention, but uh, you know, I got out
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of college, went to work for one of the biggest banks in the country
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at the time through a management training program, in the early eighties and you
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know, so now I've been and you know, if you count that college
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graduation, I've now been doing this for forty years, and which does make
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me old so or at least I have a even at my age. I
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have a ten year old son and he told me, don't worry about it
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dead, you're not old to year sixty five. I said, well,
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that's good to know, so thank you. So I know where the line
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is now, Well, yeah, your son's got to call my sons,
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because my sons are pretty convinced I crossed the line a long time ago.
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Uh, I mean gray hair. They pops in, They go, I
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dad, you look a pretty old man. Okay, right, right,
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right, But it doesn't matter. M I was gonna ask, have you
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ever taken that that that reverse psychology experience and actually tried to apply it in
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the positive with your own kids? I always think about I should tell my
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kid not to do that I want them to do, but I always worry
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acquire on me in the one instance where I wanted to work. You ever
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tried to use that in your favor with the kids? You know, I
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can't think of any time, but because I'm a bit you know, sarcastic,
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right, and so my as my kids grew up there, it's funny
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to watch young minds try to do sarcasm because it doesn't come out of sarcasm,
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it comes out as mean. So so I've tried to kind of temper
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my sarcasm. So so I think I'm kind of stay away from the reverse
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psychology in case I might teach them something that they shouldn't be doing. So
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I kind of temper it. Yeah, I always think about using it with
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my teams, but I go, I don't know, if I tell them
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to do the thing I don't want them to do and then they do it,
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yeah, then no other way do I really had And you know the
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funny thing you so go back to my dad is you know, so I
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got into banking and and his bank actually ended up failing. It went under
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in the early nineties. So some years later, um, and it was
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just a big downturn. He had too much real estate concentration. But but
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you know, I was still earlier in my career and then he just suddenly
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died, So you know, I never got that chance for him to watch
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my career. Um, because when he passed away, unexpectedly it was,
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you know, I was still in my early stages. So yeah, you
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always wonder, you know, what he would think about the twists and turns
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that I've taken, because I've gone from you know, I've been in lending
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for a long time, commercial lending, corporate lending. Then you know,
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went for work for a startup, you know, on the credit side,
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and now you know, I'm I'm working president of a bank that's deep into
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the banking as a service, right and and partnering with FinTechs and some more
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of that technology stuff. And so it's been an interesting path. And you
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know, now when I got to the role, you know, he was
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president CEO of his banking. When I got to that role, it didn't
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feel the same like what he was as a banker, right, I mean,
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everything was face to face. And I remember the first teller job I
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had at his bank. If somebody came up to the tailor window that I
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didn't know to cash a check on the bank, we didn't even have a
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online system dummy terminal that I could check. I had to go to a
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dot matrix print out on a counter behind the teller cages and look up the
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account by hand right, and then match it and see if they had enough
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money as of yesterday's clothes to cash the check. So, you know,
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as far as technology goes, I mean, I've watched all the evolution and
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it's interesting because it's an industry that's always been deeply admitted with technology. But
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you know, now we're a whole different space. Yeah, I want to
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dive into your fintech partnerships, But first the comment you made about it,
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you know, it didn't feel like it like it did when he was in
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that rot, And it always reminds me that there's this there's two elements to
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that. I'm curious your thoughts on. One is the world changes between A
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and B and the nature of the role or the experience is different. But
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I also think there's a particularly for younger employees, more junior employees, all
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say, looking up the chain and you kind of have this perspective of what
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it must be like in that person knows all the answers and how's the confidence
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and does whatever? And then like when you sit in the chair, you
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go, it does not feel sitting in the chair the way I felt that
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it was when I was looking at the person sitting in the chair, it
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feels it feels very different, so that I don't think that's just because the
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world has changed between amb but the experience of sitting in a given role,
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I don't think ever feels like what people think. It feels like, particularly
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younger employees are looking up going hey, it's must be amazing to be there
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to go, and it's a little different than when you actually get there.
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It never feels like what you expect it will. I think at least that's
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been my experience. Yeah, I agree with you one hundred percent. I
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you know, surprised after a while. You know, after I've become see
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you of a bank years ago, and you know, after some time you
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realize, like, gosh, how I am spending my days and it's just
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completely different, right, I mean, just things like dealing with the board
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everybody. You know, if you've ever been in primary contact for boarder directors,
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you know that that's a whole thing in and of itself, right,
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And then people that aren't doing that don't understand that's a job itself managing.
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Right. Um, If you're privately held versus publicly held, and I've I've
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worked in both environments, you know you either have. If you're privately held,
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you have a key stakeholder that's you know, got their own personality to
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do. With your publicly held, you've got the markets to worry about,
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and you know you've more and more of that stuff comes away from just fundamentally
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the job that you did to get there. And I always tell people when
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they when they're at a certain point in their career, when they're making that
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shift between management and leadership, you know, and it's like, um,
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when you turn turn to be a good if you want to be a strong
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leader, you've got to stop doing the work you're doing right to some large
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extent rights if you if you made it for me, I made most of
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my headway was being a credit you know, a person right, a hunter
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scanner finding credit, you know, corporate business threat, then a credit executive,
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and then you know, so on another side of it, and and
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you know, you get to a point where the things, the mechanics that
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you've got you there, things that got you that position, you have to
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let somebody else do. You have to lead them and you have to point
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because as a leader, you've got a set vision, right, remove the
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obstacles and martial resources you know, it's as simple as that me. So
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you know, um, that's the hardest thing because the work is different and
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technology, I think we can see the same thing. Right. It's like
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if you go into work every day and your whole world is spent in your
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inbox and something's wrong with your work, set them with your infrastructure, right,
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you know, So people will feel they'll be buried in keystrokes and things
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all day and they'll go home and they're tired. It's like, oh,
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I worked hard today, but did you move anything forward? Right? And
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if you didn't move anything forward, did you really do what you're getting paid?
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It's a hard question. Yeah. I always tell people if you,
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uh, your inbox is somebody else's task list for you, and you don't
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want to spend too much time accomplishing somebody that's somebody else. That's a whole
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bunch of other people's priorities for what they want you to do. And maybe
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they're the right ones, but it's your job to figure out what the priorities
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for you to do are based on your your responsibilities and goals, and they
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may or may not be. I was gonna say, similar to what I've
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called it, which is the ping pong match, right, you know,
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you just kind of keep itting the ball back and forth, and you know
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somebody's got a got a point to an owner and say you go do this
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right and then report back and hopefully in an automated way, not an email.
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But I feel like we're getting the best career advice adventures. One of
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the things that I've always found is that being willing to be the owner to
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step up and go I'm not gonna ping pong it back or give you an
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opinion or say I don't like that, but say, hey, I will
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take this and own it and finish it and bring you a completed product is
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a really powerful It's risky, right, I mean it feels risky to do
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because there's a you don't know how always that you can manage it. But
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there's a lot of power. And some advice for me to younger people's like,
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if you're willing to take on that, respond to I'm just going to
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take this thing and solve it and manage the back and forth and come up
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to an answer. There's a lot of value created and the people who are
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willing to to grab a hold of things and do that because there's a lot
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of like gould throw my two cents into the into the ether and like let
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it ping pong around and go with other people. But nobody wants to own,
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you know, come into resolution on a question or a debate or or
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a problem, and that's like a lot of power and be willing to do
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that. Yeah, I think you know, when you think of automation and
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for banking and a lot of industries, right, we think we're digitizing,
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right, how do you turn into a digital organization? Right? I think
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the core in the back of it for me is is you know there is
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a deep ownership necessary um when you're doing this, when you're making that transformation,
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which you find is that um that that you know, finger pointing and
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bouncing things back and forth across the wall feels natural because banks kind of the
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vault the devolved probably into deep silos. I mean you look at traditional banking,
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it's very silo. And then when you look at modern frameworks like agile
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and things like that, right, it tries to break all apart. And
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when it works, it's amazing to watch self forming teams and teams coming together
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and people taking ownership and when you know, when people aren't scared when there's
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a safe space to take ownership and fail at it or run into obstacles and
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but but fully informed, and then you have the ability for leaders and then
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you know, help move things along and get it going in the right direction.
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That kind of forward production is amazing to watch when it gets traction and
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it takes just what she said right, And I've been saying this for years,
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or you know, ownership deep ownership. Don't be scared if you have
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people that take ownership career advice, here, you go right, be the
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one that raises a hand to own things. Take that risk, because those
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are the people that leaders pay attention to, not the ones that talk the
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most in the meetings, not the ones that have the fancies for power points,
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but the ones that actually will take a burden, own it and get
13:15
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Lenders. Once again, that's Upstart dot Com Forward slash Lenders. All right,
13:52
let's get back to the show. All right, we've wandered a long
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way. But you mentioned the kind of fintech partnerships, and I think it's
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true that you have more fintech partnerships than you do branches. So you guys
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are on. You talk about banking your service, but talk to me a
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little about the your approach and how you view you know, why you've pursued
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that number of fintech partnerships and how you think about them and managing that.
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Yeah, you know from the coastal bank. Coastal Community Bank comes from a
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very traditional place, right um, And right now we have fourteen branches here,
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um, you know, in the Snowhomage County County area or Seattle and
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very strong community bank I mean really strong, um. But you know,
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as as leaderships saw and the board saw the transition and being up here in
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this tech space probably helped. I mean one of the initial stories that I
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really love is that you know, somewhere around two twenty thirteen, the Microsoft
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Gaming division and came and talked to the leaders here at Coastal. Is that
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you know, we were thinking about offering checking accounts to the to the player,
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right, the customers and the gaming side. UM. And this is
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you know before bass banking as a service was you know a term. And
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so they went down, they went down that pathway and it ended up not
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coming out to be a business model that ended up getting pursued, but it
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was an interesting kind of for it. And in the bank. You know,
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as most community banks, I go to banking conventions, everybody's like,
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we're going to find new revenue. Would being disintermediated all the different threats and
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yeah, you know, slowly but surely consumers of all ages, right are
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assuming more and more products or more and more places, um. And so
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you share the wants going down and so you know, Coastal pivoted to play
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in the space and try it out. Took the fundamentals of operating a good
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community, strong community bank and put those into play and through connections were growing.
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We now have twenty seven active partners UM and they they range from FinTechs
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from early stage all the way to mature brands m and growing and we're still
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growing um and with it, you know, you you've had to kind of
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endure massive change, evolve into it. But really the view of acquiring and
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delivering, So coming from a family that has a community banking background, right,
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UM, I still believe very deeply in community banking. Um. When
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my dad did pass away, suddenly went to his funeral and they're like over
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four hundred people there and asked, you know, one of his friends are
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like, who are all these people? And it's like, well, these
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are people that you know, your dad touched their lives, helped them out
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at some point, you know, through the bank. And that's the lasting
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impact, you know. And I think the opportunity is can you take the
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best of community banking, which is really always fundamentally treated by getting to know
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the customer better and take that digital sphere And I think the way to do
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that through modern technology, you know, things like AI and mL and data
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management and really getting to understand the persona and then taking that very personalized kind
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of approach and delivering it. Well, the problem is if your community bank,
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what budget do you have to create the new models, raise the money
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to go a chore, customers the light and right with the biggest bust the
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size developing your model is acquiring customers for a startup, right, especially if
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you're doing it a digital sphere um And I think so the pathway of joining
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the two has made sense for a long time for me. I know,
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we've gone back and forth in our in our industry about you know, our
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FinTechs and banks competitors, are they partners? They think where everything, you
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know, we're all part of the same ecosystem is moving forward, and we
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just got to decide how to how to play in that ecosystem. So Coastal
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made that decision and has been very successful at it over the lass. What's
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your advice? I mean, I feel like this is an area where lots
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of institutions are trying to build relationships or partnerships, and I often hear from
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from banks and credit unions when I talk to them that there's this challenge.
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There's there's kind of multiple challenges, right, There's like how do I find
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the right partner for what I want? How do I diligence? Especially if
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you know, we'll talk about AI maybe in a minute, but if they're
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doing things that I don't fully understand and like I don't have expertise and understanding
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it. And then there's this third part, which is like I see too
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many agreements. I think that gets signed, and then like how do I
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go actually get how do I go make this thing work and operationalize it and
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get to a rhythm and so walk me through little bit how you how you
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think you guys do that effectively? They're like finding the right partner, you
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know, getting through understanding, not just first round, but like is this
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a good partner in managing those relationships for success or long terms. I see
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a lot of failures at every step along the way when financial institutions try and
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partner with you know, startups or fintech type companies. Yeah, it's an
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evolution, I think, and it's still happening, right, We're still learning
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constantly and as we are going through it. Matter of fact, we were
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just talking internally about, you know, having a refresh on our due diligence
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protocols and kind of because we're there's constantly new topics coming up. Of course,
19:08
the regulators are great at throwing new things on our plate as well,
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and concepts we had and maybe thought about yet or maybe we thought about we
19:15
weren't ready to address. But I think the advice I I get is,
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um, you know, do there's a lot of strong players in there.
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First of all, get online and go go on LinkedIn and social media or
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Twitter where every you know, and and start following some thought leaders and really
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start understanding space better. I mean that's did that years ago. Uh,
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you know, connected and read voraciously and you know, learned as much as
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I could. So don't sit back as a leader part of the leadership team
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and find somebody young on your team. And since you as I said,
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hey, go run with this and bring it back to us, I think
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that's not going to work. The second thing is, you know, understand
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where you are the problem with a lot of community banks, I think when
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it comes to tech right, they have an infrastructure is not ready. Um.
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And so if you're gonna, if you're gonna do it, you can't
20:07
have a glorified kind of it desk with a leader in your back back cup
20:15
ground. And I think you're going to be able to go and start addressing
20:17
all these issues because at some point you're going to be dealing with data and
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data ingestion and data management. UM, if you're going to do it right
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and you need a certain expertise, you don't have to build a whole development
20:29
team. We have, we do, and we will, but you don't
20:32
need that. There's lots of intermediaries that can help you along the way,
20:36
and then you know, get get the good consultants along with you to kind
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of help you, kind of guide you in this. It's it's mature enough
20:42
that there's experts. You have to spend some money, you have to invest
20:45
in it to get there, and then experiment on a small basis until you
20:51
get comfortable. And it's it's hard to give general I do talk to a
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lot of executive leaders of banks. We feel coastal bank, we feel we
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want to grow this ecosystem because we think it creates stability and certainty to this
21:07
world. So we are inviting constantly encouraging other banks to get into space.
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Which seems weird because you think I do have some other leader bank leaders that
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are in the bass space or such. There's like, oh, we're going
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to go in at early and strong and control the market. I'm not sure
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because I think it takes layers and layers of expertise and partnerships to get this
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done. I believe it's a deep and big partnership game. And if you're
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going to do that, you know, um, I believe you need a
21:37
strong ecosystem, which means strong players throughout that can handle all the various things
21:41
that can come up. So, you know, I think we were we're
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in a very you know, infant kind of stage of this. We've got
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a lot of growth to go, um and you know, I welcome a
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lot more people in, but invest in risk and invest in technology, invest
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risk. And the other thing you mentioned that that struck that struck me was
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that you're in the middle of revamping your due diligence protocol. And what occurs
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to me is I think many, for many institutions to end up in the
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perfect is the enemy of the good, Like they're waiting to feel like they
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know what they're doing to get in the game. And I feel like,
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you get in the game and you figure it out, not that you don't
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want to have a plan, but that you know what they say about plan
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no, No plan survives, no battle, plan survives first contact with em
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Like you're gonna have to adapt to the reality. You're gonna learn from doing.
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And so the kind of the best way to get good at it is
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to so I some of the kids, you want to get good at something,
22:33
you got to you gotta do it. You're not gonna start off good
22:34
or having all the answers. And so I think that's a something I heard.
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And what you were saying is that the willingness to get in the game
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before you've got it all figured out and say hey, we're gonna like,
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we're gonna learn, we're gonna do that. We're gonna say, hey,
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this can be better, and we're gonna improve, improve, and kind of
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evolve over time. Yeah, I mean, you gotta and you gotta make
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sure everybody's on board, the leadership, your board, um, and go
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out there and you know, get them this continual improvement a cycle. But
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look, the first modern data platform that I tried to build in twenty our
23:07
team you know, tried to build in twenty sixteen. I guess you know,
23:11
two years later we were ripping it apart and rebuilding it. And that
23:14
means, you know, a million dollar investment. Most of it was you
23:17
know, burnt um. That didn't stop us it probably maybe it should,
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I don't know, But that's this world, right is like we didn't build
23:26
it for the use of cases that we were actually going to end up,
23:27
you know, pursuing UM and it's just a constant thing, and it's it's
23:33
if you don't like change, then you know, retire, go find some
23:38
other place to door. You don't have a choice, right, it's change
23:42
or die at this point. So I wanted to dive into two specific areas
23:48
that you've You've got some experience in the Finthic partnerships, but just in the
23:52
technology, Joe. The first is AI you mentioned ai mL you know,
23:56
I think it's it's maybe next to crypto, the thing that you can't go
24:00
to a financial services event or conference and not have somebody want to talk to
24:03
you about positive negative. Everybody's going to jail who does it? And everybody's
24:07
gonna die who doesn't. And those opinions are all over this place in terms
24:10
of what this is, how do you think about the capabilities of AI it,
24:14
what its opportunities and abilities are to improve the system, Like where do
24:18
you see the biggest advantages for people who can find a way to adopt it?
24:21
Because this has been said over and over again, so that this isn't
24:23
not original thought. A matter of fact, I don't think there's anything help
24:26
here to it's original thought. Right. Everything is a plagiarism, right,
24:29
and that gets to AI, particularly to talk like chat GPT, and people
24:33
you know are criticizing that. But you know, everything in our brains we've
24:37
learned from somewhere, right, and so every thought comes out of a derivative
24:42
of some other somebody else's thoughts for me AI, and you know, so
24:48
this is a statement. It takes you from looking in your review nerror to
24:51
looking ahead, right, that's one of the most important things. And it
24:55
creates that ability to really get more and more progressive and individualized UM outcomes.
25:02
And so I think that, you know, it's amazing because I played around
25:04
with some of this new technology and it's like, um, I got on
25:07
one piece of software not too long, I say, uh, maybe I
25:12
think I typed in, you know, create a seven page power point of
25:18
presentation about how execution is a critical component of innovation. And it was great,
25:26
right, it created I mean the content, the copyright, the pictures
25:30
until I got to the sixth slide and the word execution somehow translated into good
25:37
copy on the last slide, But there was a picture and there was a
25:41
woman sitting in a car behind the wheel of a car who had a bullet
25:44
hole in her head. So it had taken execution right into right a wrong
25:49
place, right wrong. So there's you know, yeah, there's there's a
25:55
lot of crazy things that could come out of AI. But ultimately, um,
26:00
you know, it's it's super what would have taken me hours and hours
26:03
to write. So I'll come in and I'll clean it up right, and
26:06
I'll take out that picture or maybe I'll leave it in and and make fun
26:10
of it, and you admit that it was AI to help me do it,
26:11
But either way, it's it's just leap frog the ability then to do
26:18
something like that, and and so the productivity and it's just like when Google
26:22
came out, right, Uh, we had this debates about what it was
26:26
going to do to education if kids could look up the answer to everything,
26:30
and it was going to display jobs, And here we are, and it's
26:33
like it's a critical part of how we do we live our lives. It
26:38
hasn't really upbended or supplanted, but it's it's you know, fast charges to
26:45
more quality stuff. You know, I'm a Starter fan because I watched the
26:49
episodes as a as a young kid. And you know, but but that
26:55
whole premise of you know, getting into society where you know, you're talking
27:00
to computers and there you know, and even in the later ones you have
27:03
data the android right next to you. That's a world that brings us to
27:07
more quality, puts us points us towards and more quality outcomes and more quality
27:12
work. Um. I embrace it wholeheartedly. But yeah, we have to
27:18
balance it out. UM. You know, there was a congressman or senator,
27:22
I don't know who it was, just yesterday, I think UM read
27:26
a speech created by AI on the floor of the House of the Senate whichever.
27:32
The point was um and and first you know, first time, BUT
27:37
had asked it to to create, you know, a two hundred word speech
27:41
UM and but talked about the premise of, you know, we need to
27:45
think about this before right now we're all anguishing about social media and effect on
27:51
society. UM. And I think that's he's he's got a good point is
27:55
right now is to start to think about Yeah, there's there's there's no pure
28:00
about AI. It has good and bad. So let's really think hard about
28:03
and just put guardrails right about how we approach AI, how we use it,
28:08
because it's going to be a great accelerator and it's already embedded in and
28:11
a lot more things than we even realize, and you know, let's manage
28:17
it well, you know, help it benefit society instead of the harm.
28:22
Yeah, for sure, I'm curious if you have thoughts on the limitation when
28:26
you talk about it at being looking looking ahead as opposed to the review.
28:30
I think it's really interesting, but I also think they're earth. We start
28:33
with this as an AI first company, and we get a lot of questions
28:36
about the macro, and my machine learning guys go you know, forecasting the
28:41
macroeconomic conditions nine months out is a pretty bad use case for mL because there
28:47
aren't that many real variables. Aren't if you think about cycles, there's a
28:51
lot of data points, but there aren't a lot of cycles, and they
28:52
all look a little different, and it's it's a very challenging problem to predict,
28:56
and lots of people have made and lost money trying to make algorithms to
28:59
predict market movement, which is one input into you know what the macro might
29:03
be in nine months. So I'm curious if you think about like, places
29:07
where it's capability to look in the future are really powerful and impression and valuable
29:11
to day in places where you go, hey, I, you know,
29:14
it's like our version of the macro, we go that's just we can measure
29:17
it, But predicting it is really hard, UM and something that maybe we
29:19
think it's not well designed for AI. Let's let's talk about credit for a
29:22
second, because there's a there's an interesting thing that happened during the pandemic and
29:26
it's not PPP, right, but it's somewhat related. UM. So you
29:33
know bank I was at UM has large equipment portfolio, so it's eighteen wheelers
29:37
transportation equipment. You know. Part of the relief Act, the regulators came
29:42
and said, okay, you can offer deferrals to your customers UM, and
29:48
you don't have to count it towards non performing loans on your books. Right,
29:52
So the big penalty I'm performing loan is is what it can do to
29:56
your ratios, you know, et ceter the capital most of things like that.
30:03
So for the first time in my career, the very lads are saying
30:06
you can go ahead and let skip payments all the way. And I think
30:08
it was up to like seven months if I remember correctly, for your customers
30:12
to help them get through this initial pandemic shutdown, and and different banks took
30:19
different approaches. The bank, you know, our executive team got together and
30:22
say, we're all in on this. So here you have truck drivers who
30:26
who you know, they're they're living is dependent upon being able to pick a
30:32
load up every day. Right, economy ground to a halt. We just
30:36
blanket went out and said, all right, everybody that wants one, we're
30:40
going to give them up. If they want to defer payments right now.
30:42
Some banks said, are we're going to make them pay interest and they can
30:47
skip principle, And you know, I'm like, well, if somebody can't
30:49
pick up a load, or if somebody can't go to work, that doesn't
30:53
help, right', you might as well just leave it alone. Right,
30:56
So we full and we allow customers continue to extend them through the whole thing.
31:02
Right, And so we tried to predict out what might happen when we
31:06
went back into repayment and the comedy economy's rolling and everything else. We had
31:11
no tools to do that right readily at our disposal. That's where AI right.
31:18
So what happened though was when we finally stopped offering and to put everybody
31:22
back in the full of payment. So our non performance and our past duos
31:25
never did surge because most I think at one point close to fifty percent of
31:30
our portfolio was on deferral and then it went back into repayment and we expected
31:37
past duos to surge and they didn't. It actually really helped beat this one
31:44
external environmental thing challenge that the industry went through, but we had no data
31:49
to prove it was going to work. But now with AI we could have
31:52
we could have taken we had data points, we could have taken those data
31:56
points, we really could have projected and at least had some models to say,
32:00
you know, what are the factors we think you're going to contribute to
32:04
whether somebody will get back you know, um into that ability to pay kind
32:09
of good model. Right, So those are the kind of things that think
32:14
you know that if we really look at credit. The other thing I think
32:17
about is like, how can we there's origination of credit, then there's there's
32:22
management of credit, right, and and we all focus on originating credit.
32:27
But one of the more interesting parts for me is and particularly we talk about
32:30
like underbanked and and high interest credit and things like that, most of those
32:37
are caused by a mismatch in funding, right, so temporary job loss maybe,
32:43
or a big bill to pay car repair, you know, medical bills
32:47
something like that. So it's and be isolated. Well, how can we
32:52
create a picture around that individual. It's more than finco, more than payment
32:55
performance, which are all historic. Gives us a picture, takes an account
33:01
this thing, and then gives us a probability that that person can return back
33:05
to regular payments once this event resolves itself. Right, you have to build
33:09
a model around somewhat you know, very tight cohorts or individuals m AI you
33:15
know um. And that's where you know you can you can use all kinds
33:21
of inputs. But just imagine if we could instead of passing credit from institution
33:27
institution. A lot of fintech um was born out of refinance, right,
33:31
which basically taking ill constructed credit and and you know, consolidating credit cards into
33:37
a personal term. You know, it's expensive to acquire a customer. What
33:42
if I could have kept that customer by just offering them you know an adjustment,
33:46
right, maybe my credit structure to be variable. Um, that's what
33:51
AI could could start to like tell us, right, can you vary payments?
33:55
Can you very interest rates? If somebody's you know, performing is positive?
34:00
Right? We all we all if you're in credit, uh pool credit
34:06
for a while, you you understand about peak loss loss curves, cohorts.
34:10
Um, you know you stop learning all those points that the truth is right?
34:15
Everybody everybody can You can look at any portfolio you can find at some
34:19
level past the peak loss curve, that mature season part. Everybody would want
34:23
to take that credit because you know you can predict very well what's going to
34:28
happen. Right. Um. But the people that that you know got into
34:32
that credit, well, if they're the best, you know, has their
34:35
interest rate gone down? There's their payment terms gotten better because they are the
34:39
better ort of that whole group. Um. Nothing to just right and eventually
34:45
AI all the rest of this will provide us that ability to do things.
34:50
So I don't know, I love thinking about the what ifs. When I'm
34:52
in a hammock. I won't be around, you know, my career to
34:55
see a lot of come to fruition. But m there's tremendous use cases.
35:00
But yeah, predict the economy over the next twelve months. Bad news,
35:06
very bad. So let me ask you about one more area because I know
35:09
you guys have made some investments in the metaverse, and the metaverse is one
35:12
of these things that I have not really played with, but I'm curious about
35:15
and curious what people see the opportunity. And you guys have actually done some
35:17
stuff in the space, and tell me a little bit about you know,
35:20
what you've been what you've been looking at or doing in the future that you
35:22
see in the metaverse. Yeah, So we we built a world we called
35:28
it's called Coastal World dot com. So you can go in there and take
35:30
a look, and it's basically we've got you know, a dozen plus of
35:35
our fintech partners on there as well as Coastal Bank, and it's gamified world
35:39
that you have your avatar and you move around here. Um. The idea
35:45
for us is, you know, um, a self contained metaverse, but
35:49
also one that can integrate with other metaverse players. And we kind of looked
35:52
at the space and it's like, do we want to go biden real estate
35:55
in the ether? That seem crazy um, we want to take a bank
36:00
branch, and nobody really wants to go to and put a bank branch in
36:04
the in the ether. No idea, um, And so you know our
36:08
idea. And this again goes back to having engaged with like Microsoft's you know,
36:15
an Xbox everything. I mean, one of the interesting comments out of
36:17
that early experience was the biggest cohort of gamers at the time or forty five
36:24
to fifty five year old women play an animal crossing. Right, females play
36:29
an animal cross You would have expected that, right. People people like to
36:34
be engaged. So we have Coastalworld dot com. Um, it's in it's
36:38
not in full launch, but you could you can go play. But even
36:42
without a full launch, you know, we have six to eight hundred users
36:44
a day and an average engagement time where they're active on the site of eight
36:49
minutes. And so we've got their attention for eight minutes. We'll think of
36:52
the what ifs on that, right? Can you um, can you take
36:58
that then and go into financial education? Can you build a PFM a personal
37:02
financial management tool around that that not only takes the transactional data, right,
37:07
it's underneath it comes from your checking account, your card spend and all that.
37:13
It also allows you to like with your with your engagement and then into
37:16
the world you get the kind of direct towards things that you know are part
37:22
of your future. So if if you're engaging with the world and you're out
37:24
there investigating um uh, you know, sending your kids to college or college
37:30
funds, right, that's not in your transactional data necessarily today, but that's
37:35
open aspiration. So if you can start to build an ecosystem, of a
37:38
gated ecosystem where there's where there's data, you know, controls, where you
37:45
can build and use AI to like start to help formulate a real persona around
37:50
the person right where I can start to collect important data points and frames around
37:55
who I am, where I want to go, what I want my financial
37:58
world to be like, and you know all that. Then you can really
38:01
start to leverage those kinds of things in a world where um, you can
38:07
attract more and more people to engage in that eco system, And the possibilities
38:12
are pretty pretty interesting for us. I mean, we're working behind the scenes
38:16
on building some muscle memory in that space, trying to you know, build
38:22
just onboarding for our employees and first of all to see how does it work
38:25
when we start engaging more and more into this world, um, and then
38:30
you know, we'll see what happens with it. Um. There's a lot
38:31
of a lot of fun about it. But underneath it all, you know,
38:37
it does come down to data, data controls, data management, privacy
38:40
security. We believe in the data protocols where you know, you want to
38:45
minimize the amount of data flowing, where tokenize and mask things so that you
38:51
know, can I can I validate somebody's identity without passing their critical personal BII
38:58
across the internet right, and blockchain and all those things give you those capabilities.
39:04
I mean, imagine in a credit world if I could carry around a
39:07
set of important data points about me when I apply for credit, right,
39:12
how much I have it own retirement account? How much have savings? Um?
39:16
You know, do what I have health insurance? So am I properly
39:20
insured on my house? Right? So that I'm ready for disasters? You
39:24
know, all all of these things, And if you can start incorporating those
39:28
in the data models, then FICO becomes what I don't know what FIGHTCO tells
39:32
me anymore, It becomes them probably the least useful data point if you can
39:37
really paint a different picture. Yeah, very interesting. It's certainly that idea
39:43
of being able to carry around the information about you and have some ownership of
39:45
it is really fascinating too, because right now that data exists sort of but
39:50
it's not it's not yours. I mean, it's it's it's very weird that
39:52
both are the data about our financial lives and the data often about our health
39:55
lives are like owned by these entities not by us, and when we go
40:01
into intoity, we kind of like lose stuff that we don't have control over
40:05
it in some way that it feels very very strange in terms of, well,
40:08
how you think about the data about you and your history and what you
40:12
you know, loans you kind of Yeah, I've literally, at least a
40:16
half a dozen times have been in front of a bunch of younger people and
40:22
had to tell them there was a time that if you switched phone companies you
40:25
had to get a new phone then, and they're like, what do you
40:29
mean? You know, Yeah, it's just like if you switched banks,
40:32
um, you know, today you start over right accumulating and the information they're
40:39
going to get from you is the whatever is in your credit score, your
40:44
credit file. M Other than that, it's a big gap, right,
40:49
I mean, just imagine if you start building a portable, self contained kind
40:53
of assessment of your financial health and your financial picture. Well, Kurt,
40:57
we are unfortunately running out of time. Though I've really enjoyed at our conversation.
41:00
I do have three questions I ask everybody at the end, and you
41:02
kind of we kind of stumbled upon it. Answer to the first, I'll
41:07
ask if you want to stick with it against it, which was like,
41:08
what's the best piece of career advice you've ever gotten? We kind of like
41:10
did a little career advice earlier in the conversation. But is there anything else
41:15
you would add to that or you want to want to leave that one stand
41:17
as your career advice? Well, you know, I would say embrace change.
41:22
If you're going to be in the financial services industry, you know,
41:25
the things that got us here aren't going to take us forward as the saying
41:29
goes, and the organizations and the people that can embrace change and be part
41:37
of it and ownership, right we talked about earlier, Right, the people
41:39
would say, Hey, I want to be a part of whatever change it
41:44
is. That's happening in the universe that will get you added fancy power.
41:50
I like it. There's your there's your career advice. My second question is
41:53
what is the best piece of advice you've gotten about the consumer banking or consumer
41:58
lending industry generally? You know, I probably that don't follow the herd.
42:05
The money is to be made right in the stuff that's harder to do right,
42:09
and that again, this relates back to credit scores. Right, if
42:13
you can figure out how to lend successfully between you know, six to twenty
42:17
and seven hundred, you'll make a lot more money than the person that's lending
42:22
only to seven twenty and above. So you know, um, you know,
42:27
the easy things are where people migrate and then everybody fights over those same
42:32
customers. Right, the moneys in consumers be made helping the people that need
42:37
it. Got it? That's great? Don't follow the hurt it's uh,
42:40
it's great advice. The common wisdom is what the stuff everybody knows every does,
42:45
so finding ways to do something different is where the opportunity lies. Last
42:49
question. We've talked about a lot of future areas, but I'm gonna ask
42:52
you for one bold prediction about the future what's a bold, bold prediction you
42:57
got about. I like to think of this is the thing I can invite
42:59
you back and you know, we can have a chat about whether you were
43:01
right or wrong. Um So, so my prediction really falls on something we've
43:07
already talked about, which is this metaverse, right, because I watched I
43:13
watched my kids and look, I don't know how. I really can't define
43:16
it. I'm not that smart, but I watch. You know, here's
43:21
the tech point, right, first time I had Coastal World up my laptop
43:24
at home and my son, who was nine at the time, saw it.
43:29
He immediately reached and grabbed my mouth and said, Dad, you gotta
43:31
change your avatar. You can't go around looking like that and new intuitively how
43:37
to do everything and navigated. He's asked me to try to come and play
43:40
in Minecraft, and I can't even move around, right, He's just just
43:44
followed me, and I was like, I can't. Right. This is
43:46
native to the younger generation, right, And I don't know they're I'd say
43:51
it's metaverse where we're going to be. But this kind of new world where
43:55
you're just kind of everything is a digital and electronic and you and you've got
44:00
a mirrored personality, right, because you start to see even I read something
44:06
the other day, fashion is following the metaverse, and the metaverse and fashion
44:09
are together and watching my you know daughter, my twelve year old daughter,
44:15
her her avatars and the different things she does and her the way she dresses.
44:21
Right, it's the same. And I'm like, so, it's so
44:23
so, you know, I think there's a lot to be said in this
44:27
space. I just don't know what to say about her. I'm not that
44:30
smart, but I think, you know the future, when you look at
44:34
twenty thirty and twenty forty, we're going to be living in a multidimensional kind
44:38
of interplay that's going to be part of how we go about our lives.
44:42
Just like I couldn't leave home with this. It's interesting. I hear what
44:45
you're saying. And I used to have this debate about you know, digital
44:50
goods and why people want to buy digital you know, gonna buy shoes for
44:52
you, like we got to buy real shoes for your feet, but you
44:54
know you don't have to buy shoes for your avata. What are you?
44:57
What are you doing? And you know, when you really break down think
44:59
about it, somebody kind of made the comments me the other day that kind
45:02
of resonate, which is like, you know, people spend a lot of
45:05
money that's not just effective, and it's like not optimize for the most cost
45:09
effective what you buy a watch because you want to make a fascist statement.
45:13
You buy a different piece of clothing or a para of shoes, and you
45:15
buy the cheapest para of shoes. You buy the pair of shoes that you
45:17
want to have, and that say, that's a fascist statement, and like,
45:20
why would you think that when we move to a digital persona where somebody
45:22
of us spend so much more time that you wouldn't similarly like buy the equivalent
45:27
of a nice watch or a nice shirt, or a nice hat or a
45:30
nice whatever, you know, buy a nice car. You don't just buy
45:32
the car that's like the cheapest thing that actually effectively gets you to work.
45:36
People buy the car that they want for whatever reason. And a lot of
45:38
that is about you know, fashion and desire, and that translates to the
45:42
metaverse and you're seeing that really I think I take off or whether that's whatever
45:45
version of metaverse, your digital personality you want to come through it just the
45:49
way you do your personality in real life through the things you own and things
45:52
you wear. So that's not new. I mean I remember being in college
45:57
and being really pissed off because I couldn't afford those shirts with the little yeah
46:01
because that was the standard, right, and that was the status symbol,
46:06
right, and they were they were expensive for the time. Um. And
46:08
that's the same thing about art, right. I mean I have a good
46:12
friend and owns modern, large, modern art gallery and I've asked him and
46:15
he's like, well, I said, why wolst I pay that much money,
46:19
you know? And and he's like this, this is a world that
46:22
exists, and you're questioning and fundamentally like you know, yes you he says.
46:28
My line is, do what really moves you from art? But the
46:31
truth is most of art is soul because it's a status symbol and people want
46:36
that's to own a piece of that status symbol. It's image, you know,
46:39
and we pay for it all the time. So yeah, I don't
46:43
doubt it all right, Kurt. I appreciate your time to this as a
46:45
fascinating conversation. Thanks for making the time and sharing your thoughts of the audience.
46:49
Yeah. Thanks, it's been great. Upstart partners with banks and credit
46:52
unions to help grow their consumer loan portfolios and deliver a modern, all digital
46:58
lending experience. As the average consumer becomes more digitally savvy, it only makes
47:02
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47:08
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