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Evolving the Playbook: Tech, AI, and Customer-Centric Lending · Leaders in Lending

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Speaker 1: You are listening to Leaders in Lending from Upstart, a
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Speaker 1: podcast dedicated to helping consumer lenders grow their programs and
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Speaker 1: improve their product offerings. Each week, here, decision makers in
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Speaker 1: the finance industry offer insights into the future of the
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Speaker 1: lending industry, best practices around digital transformation, and more. Let's
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Speaker 1: get into the show.
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Speaker 2: Welcome to another episode of Leaders in Lending. I'm your
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Speaker 2: host this episode, Matt Snow, joined by HTT Robert, CEO
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Speaker 2: and co founder of loan pro Rett Thanks for joining.
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Speaker 3: Me, Matt, Thanks for having me.
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Speaker 2: Yeah, yeah, good to catch up and I know we're
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Speaker 2: in similar industries. A lot we could cover here. I'm
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Speaker 2: really curious knowing that you were just at Money twenty
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Speaker 2: twenty and maybe give a little bit of an update
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Speaker 2: on what you came away learning from there. What were
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Speaker 2: the topics, what did people care about, and kind of
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Speaker 2: questions you got there.
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Speaker 3: Yeah, it's great event. So last week in Las Vegas
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Speaker 3: was another year of Money twenty time and it was
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Speaker 3: wild as always, right, there's just so many people in town,
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Speaker 3: very very efficient. I brought a little bit of an
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Speaker 3: army of my team down and we held hundreds, plural
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Speaker 3: hundreds of meetings and they were with a lot of
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Speaker 3: great individuals and helped progress many deals and opportunities. So
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Speaker 3: we love that it's a very efficient time to go
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Speaker 3: through and meet with folks, and I think others of
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Speaker 3: view it the same way. There's a couple of themes
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Speaker 3: that came out. Had the opportunity one of the sessions
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Speaker 3: that I was speaking on stage with, and there was
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Speaker 3: other things kind of going around the halls and talking
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Speaker 3: to different people and seeing different themes.
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Speaker 2: But there was a few things.
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Speaker 3: Obviously, there was some talk of AI, and that's to
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Speaker 3: be expected. It was one of the themes of conversation
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Speaker 3: about What was interesting is there was sort of two camps,
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Speaker 3: right There was a camp that AI is under hyped,
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Speaker 3: in a different camp that it's being overhyped. So it's
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Speaker 3: very interesting to see both of that and see what's
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Speaker 3: going to happen with AI. And generally there's consensus on
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Speaker 3: the strategies of employing AI within an organization of how
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Speaker 3: do you do that right? Take over repeatable tasks, so
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Speaker 3: lots of things around regulation, lots of things around some
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Speaker 3: optimization and then sort of move up the value stream.
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Speaker 3: And so we're seeing that there was talk a lot
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Speaker 3: about like evolution of payments. Payments was a big topic
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Speaker 3: as well, in particular as payments have got faster and faster,
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Speaker 3: lots of things around fraud, and the two that we
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Speaker 3: might not expect is there was a considerable amount of
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Speaker 3: conversation about winning the customer. And so in the panel
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Speaker 3: or the discussion that I led, we had a couple
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Speaker 3: of folks come up on stage. We talked about the
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Speaker 3: lending and financial services, the history of how a financial
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Speaker 3: institution gauges and what's the hook to catch the customer.
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Speaker 3: And we've seen a few hooks over the years. They
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Speaker 3: could be like if you get the deposit account, that
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Speaker 3: turns into the relationship builder, and then that brings over
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Speaker 3: the accounts that the various lending products, and that's how
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Speaker 3: it used to be looked at in the past, but
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Speaker 3: it's sort of flipped on its head that now the
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Speaker 3: hooks are looking to be much more bespoke and custom
3:27
Speaker 3: lending products are the hook to get to win the customer,
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Speaker 3: and there's lots of studies that show once you capture
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Speaker 3: them on a unique lending product, then you can increase deposits.
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Speaker 3: So that works for our friends at the various depositories,
3:44
Speaker 3: and another topic about issuing innovation. So I think on
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Speaker 3: a credit card, lots of stuff has happened over the
3:50
Speaker 3: last decade or so on. We could talk to quite
3:53
Speaker 3: a few of them actually on innovation on the acquiring side.
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Speaker 3: Some pretty cool stuff really and one of the big
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Speaker 3: conversation points that we bring to the table at Loan
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Speaker 3: Pro but others we had conversations with as well. The
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Speaker 3: focus that we're doing on issuing innovation and these something
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Speaker 3: we call transaction level credit, this idea of these unique
4:17
Speaker 3: lending products within the credit card itself. So a couple
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Speaker 3: of topics, but it was a great event. We're happy
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Speaker 3: we went great.
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Speaker 2: Sounds like you had a very productive event. I know
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Speaker 2: a lot can happen there. You covered a lot of
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Speaker 2: topics there. I'm not even sure where to go to
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Speaker 2: start from all of those. But you know, we don't
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Speaker 2: usually get through a podcast without talking about AI. You
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Speaker 2: may have been the earliest to mention it, maybe eighty
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Speaker 2: seconds in. And I have heard a lot on the
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Speaker 2: overhype side, But I'm curious on the under hype side,
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Speaker 2: what's the camp there, Like, what's the viewpoint? Are there
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Speaker 2: certain use cases or things where maybe we're not focused
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Speaker 2: enough or not taking advantage of some of this Technology's
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Speaker 2: what's the contrarian view on the underhepe. Yeah, it's a great.
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Speaker 3: Question, you know. So there it's I think everybody's read
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Speaker 3: the ecosystem in a fairly similar way, right, lots of
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Speaker 3: excitement in the earliest days of well, I can't even
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Speaker 3: call them the earliest days. There's been some vocabulary changes
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Speaker 3: of what AI definition is over time as well. But
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Speaker 3: let's go back just a couple of years. Lots of
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Speaker 3: excitement about generative AI in particular, and then it's sort
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Speaker 3: of like HM fizzled for a little bit of maybe
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Speaker 3: it's a little early think of playing with chat, GPT
5:28
Speaker 3: or other tools that you played with. They call it
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Speaker 3: hallucinating where it'll just like make stuff up basically, and
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Speaker 3: so that's kind of dampered some of the excitement. But
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Speaker 3: what I started to see this view and this conversation,
5:45
Speaker 3: multiple conversations I was part of, is think of playing
5:49
Speaker 3: with chat GPT, and it's generally correct on the structure,
5:54
Speaker 3: Like you asked, ask it whatever question, and it gives
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Speaker 3: you a very thoughtful structure back in the answer. Now
6:01
Speaker 3: we're just working on the actual content inside of that structure.
6:05
Speaker 3: But the structure by itself is extremely useful. So you know,
6:09
Speaker 3: give me a template form that blah blah blah, and
6:12
Speaker 3: it gives you one and now you know what should
6:14
Speaker 3: you should answer. And so as long as you're not
6:17
Speaker 3: in a world of like a copy and paste, but
6:20
Speaker 3: if you're operating in a world of like, oh, let
6:22
Speaker 3: me accelerate design. So we've done some really interesting things.
6:25
Speaker 3: Had some conversations about helping our customers using some different
6:29
Speaker 3: tools on writing rules within our platform around compliance, or
6:35
Speaker 3: in helping them build eachtmail templates or maybe even queries
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Speaker 3: into the data sets, and this just speeds things up
6:44
Speaker 3: for them quite a bit. So on the under hyped,
6:46
Speaker 3: which is maybe what you were referring to as what's
6:50
Speaker 3: that talk track, it's usually coming from an organization who
6:56
Speaker 3: keeping some of the conversations anonymous. Yet it's an organization
7:02
Speaker 3: who's already employed it and it was much more successful
7:05
Speaker 3: than they thought. There's some costs takeout, but there's also
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Speaker 3: just a huge amount of efficiencies within how fast they
7:14
Speaker 3: can get provide customer support or how consistent they can
7:18
Speaker 3: provide the right answers. Back to the folks that they're
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Speaker 3: engaging with and we even see some folks using generative
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Speaker 3: AI to start eroting what used to be viewed as
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Speaker 3: a very sticky product like a salesforce and other things.
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Speaker 3: They're using generative AI to actually build some of those
7:35
Speaker 3: tools within their own orgs. So there's a bit of
7:38
Speaker 3: that conversation as well. So it is interesting how it's
7:41
Speaker 3: a barbell, right. It's like, hey, it's way over hyped, like,
7:44
Speaker 3: don't worry about it, it's just a new label for
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Speaker 3: machine learning. And then there's the opposite end of like, no,
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Speaker 3: this is like a game changer and we're not giving
7:54
Speaker 3: it enough attention.
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Speaker 2: I like the way decompose that in the structure and
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Speaker 2: the contents helped me frame where I've seen the successes too,
8:02
Speaker 2: and I think, like I said, the automation efficiencies, those
8:06
Speaker 2: things can be huge wins. I saw maybe it was
8:09
Speaker 2: in Google's earnings or a press release recently they said
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Speaker 2: twenty five or thirty percent of their code is now
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Speaker 2: AI generated or enabled. So those things that speed up
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Speaker 2: the monotonous, more mundane task. I think huge opportunities exist there.
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Speaker 3: And it's particularly interesting and financial services. Financial services have
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Speaker 3: a reputation to be slow to adopt to new technologies,
8:33
Speaker 3: in part because of the increased scrutiny of regulation, and
8:38
Speaker 3: we'll call them layers of regulation for the audience. When
8:42
Speaker 3: I was in elementary school, it's probably for most of us,
8:46
Speaker 3: the way they did classes, the way that they were
8:48
Speaker 3: presented with an overhead projector. Did you have those, Matt, Yeah?
8:53
Speaker 2: Did I remember the marketing though.
8:55
Speaker 3: I actually bought an overhead projector like two years ago
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Speaker 3: at a garage cell for one dollar, and my kids like,
9:00
Speaker 3: what is this thing? I was like, Oh, let's get
9:02
Speaker 3: there at any rate. I like this visual of an
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Speaker 3: overhead projector and then you put the paper on and
9:08
Speaker 3: if you do multiple layers there you get some version
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Speaker 3: of a Venn diagram being projected up on the wall.
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Speaker 3: And I like that visual because we see a lot
9:19
Speaker 3: of the regulations changing, right, and a regulator has they
9:23
Speaker 3: have a consistent objective whether they're trying to achieve, but
9:28
Speaker 3: depending on a whole bunch of factors, including who is
9:32
Speaker 3: the human, is the strategy working or not? Both a
9:35
Speaker 3: proactive and a reactive strategies to what's happening in the marketplaces,
9:40
Speaker 3: the tactics of how they go about and trying to
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Speaker 3: achieve the consistent objective changes, and so that means rules
9:48
Speaker 3: change and they adjust and so forth. And so if
9:51
Speaker 3: you think of the each one, each rule as a
9:53
Speaker 3: different layer of this overhead projector this then gives you
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Speaker 3: like a tapestry of the climate that we're oper reading in.
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Speaker 3: And one of the reasons that financial services have been
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Speaker 3: a little bit slow to adapt of using new technology
10:07
Speaker 3: is because it's sort of like a checkerboard of compliance.
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Speaker 3: There's like all over the place, if that's a geography checkerboard,
10:15
Speaker 3: if it's where your license is at, and so forth,
10:18
Speaker 3: and so it gets complicated. And what we're finding is
10:21
Speaker 3: some opportunities with the generative AI is it can help
10:25
Speaker 3: make sure there's more consistency in how engagements work. And
10:30
Speaker 3: that's a lot of the things that get audited. Think
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Speaker 3: of when an examiner comes into a depository for their
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Speaker 3: annual examination, they want to get a sample set of
10:41
Speaker 3: show me so many of these kinds of things, right,
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Speaker 3: show many loans and deposits, these kinds of transactions, and
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Speaker 3: to show me basically that you're coloring within the lines
10:49
Speaker 3: of the sample set that they select, and having a
10:54
Speaker 3: tool that will always color within the lines is proving
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Speaker 3: to be exceptionally valuable from a compliance side of things,
11:02
Speaker 3: but also from a consistency side. Think of like a
11:06
Speaker 3: favorite fast food restaurant, go to McDonald's, right, one of
11:10
Speaker 3: their keys of success is consistency, and so getting some
11:15
Speaker 3: financial services regularly have a consistency, and that these tools
11:19
Speaker 3: are helping unlock.
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Speaker 2: That, Yeah, I couldn't agree more. I know we could
11:24
Speaker 2: go pretty deep on that side as well. I think
11:26
Speaker 2: you spoke recently with our chief risk officer, Andy Delgado
11:29
Speaker 2: at a conference recently, and I don't know when this
11:32
Speaker 2: will air, but you know we talked earlier. It's it's
11:34
Speaker 2: election day here in the US, so that regulatory environment
11:38
Speaker 2: could get a lot more complex in we don't know
11:42
Speaker 2: in which direction yet still, so maybe we can do
11:44
Speaker 2: a follow up afterwards and see what happens, but it'll
11:48
Speaker 2: be fascinating.
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Speaker 3: Rights. So, I've got a lot of friends, know a
11:51
Speaker 3: ton of folks in the regulatory space, and I think
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Speaker 3: it's important to highlight that the objectives of the regulators
12:02
Speaker 3: seem to be very consistent. They're trying to achieve, but
12:06
Speaker 3: achieve like you know, if it's a certain inflation or
12:10
Speaker 3: to manage what the inflation rate is soundness that safety
12:14
Speaker 3: and soundness like there's like consistency in the objective, but
12:19
Speaker 3: the strategy about how to achieve that objective seems like
12:24
Speaker 3: it's there's a high probability it will change based off
12:27
Speaker 3: of what this regulation or excuse me, based off what
12:29
Speaker 3: happens with the election, because there's two fairly opposing perspectives.
12:37
Speaker 3: If that's going to be things around how a partner
12:40
Speaker 3: make model works, if that's things around like the concentration
12:45
Speaker 3: in big banks versus community banks, if you know, and
12:48
Speaker 3: you can go on and on, but there seems to
12:50
Speaker 3: be some strategy differences about how do you go about
12:55
Speaker 3: achieving an agreed upon objective?
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Speaker 2: Yeah, and I want to use this maybe to pivot
13:00
Speaker 2: back to one of your money twenty twenty topics because
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Speaker 2: with the open banking regulation and perspectives that are coming
13:07
Speaker 2: out now, it's really changed the way I've thought about,
13:10
Speaker 2: you know, winning the customer as you said it, or
13:12
Speaker 2: like what what does it take to win a customer?
13:14
Speaker 2: Especially in financial services? So maybe I don't know, you
13:18
Speaker 2: can use open banking if you want to jump into that,
13:21
Speaker 2: or were there other things when you think about winning
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Speaker 2: the customer, like who differentiates, how do financial services companies
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Speaker 2: win or who's going to be the succeed or twenty
13:29
Speaker 2: thirty forty years now.
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Speaker 3: Is a great question. So Open Banking has done something
13:34
Speaker 3: that's pretty interesting. Obviously, the recent rule final rules, they
13:39
Speaker 3: always call them final, but there seems to be multiple
13:40
Speaker 3: versions of final. So Final Rules of ten thirty three
13:45
Speaker 3: about basically unlocking who owns the consumer data and how
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Speaker 3: portable is that consumer data. And with this portability, it
13:56
Speaker 3: has a timeline based off of the size of the
13:59
Speaker 3: organize of how fast they need to comply with how
14:03
Speaker 3: porous the data will be outside of their system so
14:06
Speaker 3: that it makes the easiest easier to port So I
14:08
Speaker 3: think back years and years and years ago when it
14:11
Speaker 3: became clear that you owned your cell phone number and
14:14
Speaker 3: if you wanted to change who your carrier was, it
14:18
Speaker 3: used to be like cancel your phone, get a new
14:21
Speaker 3: phone number from the other carrier. And so they made
14:25
Speaker 3: so it was you know, functionally, it wasn't not practical,
14:31
Speaker 3: but it was like high levels of irritating to change
14:34
Speaker 3: your phone number. And so their pricing models at that
14:38
Speaker 3: time were like, look, rhett'spent on this phone carrier. For
14:42
Speaker 3: a while I'm just going to jack up his prices
14:45
Speaker 3: because he's not got change. It's pretty sticky, right, it's
14:48
Speaker 3: just too annoying to him for him to change his
14:50
Speaker 3: phone number. Well, ten thirty three, that's the analogy I
14:54
Speaker 3: think of. It opens up this opportunity where a consum
15:00
Speaker 3: involved in financial services will now have much increased portability
15:07
Speaker 3: of where they want a bank, where they want to
15:09
Speaker 3: get a loan, where they want to do financial services.
15:12
Speaker 3: So there's a bunch of companies who have built their
15:15
Speaker 3: whole business model off of I know it's an oversimplification,
15:19
Speaker 3: but they've built their business model off of the concept
15:22
Speaker 3: of the portability of the consumer. And so that's data
15:26
Speaker 3: visibility and making it convenient to port from company A
15:30
Speaker 3: to company B and to move over if it's a
15:33
Speaker 3: loan or a bank account or a debit card or
15:36
Speaker 3: whatever the product might be, making it simpler to do so,
15:40
Speaker 3: and especially where that's being delivered via a virtual experience
15:45
Speaker 3: on an app or your phone. And so what we're
15:49
Speaker 3: seeing with all of that background of like the underlying
15:52
Speaker 3: pieces of portability that simplifies it doesn't actually encapsulate everything
15:57
Speaker 3: of ten thirty three, but it's a major piece ten
16:00
Speaker 3: thirty three. We're seeing winning the customer is an absolutely
16:05
Speaker 3: important theme.
16:06
Speaker 2: Right.
16:06
Speaker 3: You can't force somebody to be your customer. And if
16:10
Speaker 3: you thought they were sticky, maybe they're not quite as
16:14
Speaker 3: sticky as you thought.
16:15
Speaker 2: Right.
16:16
Speaker 3: And if they're going to be your customer today, does
16:19
Speaker 3: that mean they're going to be your customer tomorrow? And
16:22
Speaker 3: we're seeing this thing that I feel personally, I feel
16:25
Speaker 3: it's really good for consumers is they need to be
16:28
Speaker 3: continually to be one over. So how do you win
16:32
Speaker 3: that customer when it's fairly simple and there's low switching
16:36
Speaker 3: costs for them to move to somebody else? Well, it's
16:40
Speaker 3: sort of obvious on some pieces and not so obvious
16:42
Speaker 3: on others. So the obvious ones, you got to have
16:45
Speaker 3: better products. You need to communicate better. You need to
16:49
Speaker 3: remove things that are high friction and high irritation. Andrews
16:52
Speaker 3: and Horowitz did a study. Angela Strange's authored an article
16:57
Speaker 3: some years ago about more briage servicing. When you service,
17:03
Speaker 3: if you get a loan for your home, get a mortgage,
17:06
Speaker 3: and then you call in for service, how delightful is
17:09
Speaker 3: your experience? Right? And they did the sample set of
17:12
Speaker 3: a number of engagements and there are things like it
17:14
Speaker 3: takes you nine phone calls to figure out an adjustment
17:17
Speaker 3: to an escrow it takes you two phone calls because
17:20
Speaker 3: the first one you got hung up on in order
17:23
Speaker 3: to make it like these like terrible customer experience things.
17:27
Speaker 3: So there's obviously a great room of improvement that can
17:31
Speaker 3: be achieved. I think you just got to fix that
17:33
Speaker 3: kind of stuff in order to continually to win the customer.
17:38
Speaker 3: And that's a big playbook that my company is going
17:40
Speaker 3: off of. We're saying, if we provide the right tools
17:43
Speaker 3: and the right technology to folks that give loans to
17:48
Speaker 3: provide a customer delight, that will result in them winning
17:53
Speaker 3: the customer and winning every engagement with the customer. So
17:56
Speaker 3: I think that's a big theme not only of just
17:58
Speaker 3: money twenty twenty, but we're seeing that trend be sort
18:02
Speaker 3: of nudged by the regulations that are being changed, but
18:05
Speaker 3: we're also seeing that trend be adopted by financial institutions.
18:10
Speaker 3: Right everybody is trying to look to modernize their tech stag.
18:13
Speaker 3: It's not just their modernizing for the sake of modernizing.
18:16
Speaker 3: One of the objectives is so they can continue to
18:18
Speaker 3: win that customer, provide a delightful experience, do it in
18:21
Speaker 3: a cost effective way, and so forth. So it's kind
18:25
Speaker 3: of a long thing, but we feel like there's a
18:27
Speaker 3: lot of opportunity on winning the customer.
18:30
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Speaker 3: Thanks, and now back.
19:11
Speaker 2: To the show. Maybe we can dig into servicing a
19:15
Speaker 2: little bit because I was thinking about this in preparation
19:18
Speaker 2: for our conversation and we spend, you know, on the
19:20
Speaker 2: lending side a lot of time talking about the acquisition,
19:23
Speaker 2: the user experience, the verification, underwriting all those things obviously
19:27
Speaker 2: critically important, but lead into a decision that then has
19:30
Speaker 2: to live, you know, three five thirty years through the
19:34
Speaker 2: life of the loan. And so maybe let's you know,
19:37
Speaker 2: talk about servicing a little bit. And I was thinking
19:39
Speaker 2: about it in relation to insurance. Right, So you know
19:42
Speaker 2: a lot of times maybe you're comparing on price or
19:44
Speaker 2: perception or brand or some other tangible characteristics. But that's
19:50
Speaker 2: servicing that you know, you're filing a claim, like that's
19:53
Speaker 2: when you need that the most, and it's maybe not
19:55
Speaker 2: something you can experience or understand until until it's that
19:59
Speaker 2: that time.
20:01
Speaker 3: It's a great point. It's you think of the insurance example.
20:05
Speaker 3: Right there's before you you choose a company to be
20:09
Speaker 3: your insurance carrier, you can go look to see like
20:13
Speaker 3: their claim rates, and you can go look to see
20:15
Speaker 3: I don't know a lot of people do, but you can,
20:18
Speaker 3: right like, you can see those things. And it's also
20:22
Speaker 3: interesting the way that loans work is that, especially mortgages,
20:27
Speaker 3: the originator rarely is the long tail servicer.
20:31
Speaker 1: Right.
20:32
Speaker 3: Usually they sell those loans and somebody else does it.
20:35
Speaker 3: And so the incentive structure, in part because of Fanny
20:39
Speaker 3: and Freddy and how the standardization and homogenizing the loans.
20:44
Speaker 3: So in part because of that, the incentive structure is
20:47
Speaker 3: to divide the value chain of a mortgage into pieces
20:51
Speaker 3: that misalign the interests. And so you sort of like
20:55
Speaker 3: just you know, do your part during the origination journey
20:58
Speaker 3: and process, and then it moves down down down through
21:01
Speaker 3: the value stream, and after the loan has originated in
21:04
Speaker 3: funds and proceeds are distributed, that usually the loan gets
21:08
Speaker 3: sold and someone that you didn't necessarily agree to do
21:12
Speaker 3: business with is now the party you're with, and they
21:17
Speaker 3: don't generally get raving reviews for the amount of customer
21:22
Speaker 3: service that they provide, and so that's a challenge right
21:26
Speaker 3: our software we focus on really everything but mortgage. We
21:29
Speaker 3: have some mortgage on the platform, but a significant portion
21:33
Speaker 3: of the mortgages in the United States are ran by
21:36
Speaker 3: four big players, and so that hasn't been the area
21:38
Speaker 3: we focused. But we've taken sort of the contrarian view
21:42
Speaker 3: of saying, hey, why don't we focus, Why don't we
21:45
Speaker 3: provide the right technology to our customers so that they
21:48
Speaker 3: can win every interaction, do proactive servicing, and so instead
21:53
Speaker 3: of spending all of this money to go acquire a
21:56
Speaker 3: new customer, or have one business line of one company
22:00
Speaker 3: acquire pay a bunch of money to acquire the customer
22:03
Speaker 3: who's already in the other business line of the same company.
22:07
Speaker 3: Why don't we just treat them with a high level
22:10
Speaker 3: for customer to light and so all of the cool
22:13
Speaker 3: stuff and people do some really cool things on the
22:15
Speaker 3: origination side, why don't we support all of that through
22:19
Speaker 3: the journey and the experience to win every interaction. One
22:24
Speaker 3: example is there was a study done years ago related
22:28
Speaker 3: to this. The CFPB publishes every single year like the
22:32
Speaker 3: reasons people call in and what their complaints are, and
22:36
Speaker 3: then they theme or group them and almost always be
22:40
Speaker 3: on a credit card. The number one complaint is something
22:42
Speaker 3: to do with their rewards. Right, I thought I was
22:45
Speaker 3: going to get ten thousand points for this and I
22:47
Speaker 3: didn't for whatever reasons. Is some like confusion around rewards
22:51
Speaker 3: or or accusations around rewards. Well, one of the things
22:55
Speaker 3: is on the list. Years ago was a study that
22:59
Speaker 3: was done about this concept where if you have a
23:03
Speaker 3: life event as a consumer, if you have a life
23:05
Speaker 3: event that occurs fill in the blank, whatever weird stuff happens, right,
23:09
Speaker 3: you call in your company that you have alone with
23:12
Speaker 3: and you say, life event happened, how can you help me?
23:17
Speaker 3: Two thirds two thirds of the servicing companies this might
23:22
Speaker 3: be an auto loan or personal loan, right, two thirds
23:26
Speaker 3: of their answers were call back after you've missed a payment.
23:32
Speaker 3: And think about that. That makes you chuckle a little bit.
23:35
Speaker 3: You're like, well, that doesn't even pass like the sniff test.
23:37
Speaker 3: That's not likely even like basically logical, because what did
23:42
Speaker 3: the consumer hear? They heard you're not going to help me, right,
23:49
Speaker 3: that's not what they said, but that's what they heard.
23:52
Speaker 3: And so what we've approached that with to say, why
23:55
Speaker 3: does it happen that way? Why does the person who
23:58
Speaker 3: answers the phone and they're happy, they're providing service, they're
24:02
Speaker 3: engaging with a customer, why did they give the answer
24:05
Speaker 3: of callback. And it's not that the person who answered
24:08
Speaker 3: the phone or the company's policies are wrong or anything
24:10
Speaker 3: like that. It's usually that the software that that servicer
24:15
Speaker 3: is using didn't tell them this is the available options
24:19
Speaker 3: of what can be done and how what you can offer.
24:22
Speaker 3: So their software was missing a feature or a function
24:26
Speaker 3: of proactive servicing. Maybe their systems were only designed in
24:30
Speaker 3: a model of reactive servicing, and the platform loan pro
24:35
Speaker 3: provides is around all that. We really provide three experiences, right.
24:38
Speaker 3: The first one is akin to online banking, a customer portal,
24:42
Speaker 3: log in and manage your loan self service kind of thing.
24:45
Speaker 3: The second experience is the agent experience. That's the platform
24:49
Speaker 3: if you called or walked into a branch or virtually
24:52
Speaker 3: or physically engaged to say like, hey, what's up on
24:54
Speaker 3: my loan? What options do I have? Can I change
24:57
Speaker 3: a due date? Can I make a payment early? Whatever?
24:59
Speaker 3: Servicing even, that's the platform that the person who's helping
25:02
Speaker 3: you would pull up your account and do all of
25:05
Speaker 3: those activities. So if you call in and you say, hey,
25:09
Speaker 3: can I change my du date? I don't know? Can you?
25:12
Speaker 3: Is it up to the person on the phone like
25:14
Speaker 3: it can you? Well, it turns out like there's a
25:16
Speaker 3: lot of rules around that. The government's got rules that
25:19
Speaker 3: the f FIEC like does your loan qualify? And what
25:23
Speaker 3: does qualify even mean? There's like all kinds of layers
25:26
Speaker 3: that overhead projector thing again, right, all these layers of
25:30
Speaker 3: can you color within the lines? That's exactly what our
25:33
Speaker 3: software platform does. So to your question about that piece
25:37
Speaker 3: the servicing, like, you can provide a delightful experience, but
25:41
Speaker 3: you need tools in order to do that. Then the
25:45
Speaker 3: third experience we provide is that back office. Where do
25:47
Speaker 3: you configure the tool with all of your guardrails and
25:51
Speaker 3: controls and proactive and reactive servicing things to make sure
25:55
Speaker 3: that one program might have bespoke rules, things tied to
26:00
Speaker 3: versus another program. So how do you configure it that way?
26:03
Speaker 3: I think that's the future of finance is unlocking that
26:07
Speaker 3: kind of think that allows you if you have a
26:11
Speaker 3: book of loans, if you're a bank or credit union
26:13
Speaker 3: or a private credit if you have the right tools
26:16
Speaker 3: to provide servicing, that's how you win the customer again
26:20
Speaker 3: and again. Instead of paying all of the reacquisition cost
26:23
Speaker 3: of getting new customer, just treat your current customer in
26:26
Speaker 3: a way that they want to stay your customer.
26:28
Speaker 2: Yeah, I read. I like that proactive servicing. I want
26:31
Speaker 2: to come back to that, but I wanted to share
26:33
Speaker 2: a story because I had to laugh when you said,
26:35
Speaker 2: like call back when you've missed a payment, because I
26:37
Speaker 2: it's a slightly different analogy, but recently I went to
26:41
Speaker 2: buy some aftermarket football tickets for my son so he
26:44
Speaker 2: and his friend could go to an Ohio State game Buckeye.
26:47
Speaker 2: I'm an alum, big fans, so I went to get
26:50
Speaker 2: a couple tickets, and we were doing some research and
26:53
Speaker 2: I found a decent deal on club seats and the
26:56
Speaker 2: section was C four club seats that showed a view
26:58
Speaker 2: of the field, you know, right at midfield field, good view,
27:01
Speaker 2: you know, not the cheapest tickets, but they were a
27:03
Speaker 2: good price, and I check out and I sent them,
27:06
Speaker 2: you know, the link, and he sent a text back
27:09
Speaker 2: to me, and I looked and they were actually in
27:11
Speaker 2: section C four, which if you've been to the Horseshoe
27:14
Speaker 2: is in the very top of the stadium in the corner.
27:17
Speaker 2: And you know, I went online, I called in and
27:21
Speaker 2: long story short, like the answer to me was I
27:24
Speaker 2: can't do anything about this because the game hasn't happened yet,
27:27
Speaker 2: and just and they admitted like it was a glitch
27:31
Speaker 2: in their system, it was a mapping issue, and they
27:33
Speaker 2: sold me their wrong tickets. But what I heard was
27:36
Speaker 2: I don't want to help you, just like you said,
27:37
Speaker 2: like it and it seemed to be something that like
27:41
Speaker 2: it made no sense, like you can't help me because I'm.
27:44
Speaker 3: Going to wait till the window of opportunity is over,
27:47
Speaker 3: the game's done, then I can help you.
27:49
Speaker 2: You're like, well, that's not I.
27:50
Speaker 3: Wanted to watch the game.
27:52
Speaker 2: Yeah, and against all logic, like I'm willing to buy
27:55
Speaker 2: another set of tickets through this company. I'm not going
27:57
Speaker 2: to mention their name because I may never do business
27:59
Speaker 2: with them again after but you know, I'm willing to
28:03
Speaker 2: transact with you again if you just make this right now.
28:05
Speaker 3: But I think your point is super valid. So the
28:09
Speaker 3: Push ten thirty three is an artifact of what I
28:12
Speaker 3: believe will be a number of things that will make
28:17
Speaker 3: financial services more portable, or another way to say, switching
28:22
Speaker 3: costs will not be as expensive to move from A
28:26
Speaker 3: to B. And it means folks are going to have
28:29
Speaker 3: to provide financial products that have a hook in them
28:34
Speaker 3: that really wants you to stay and they encourage you
28:37
Speaker 3: to stay. And we're seeing something that's super interesting that
28:41
Speaker 3: I mentioned it before, but it's a complete one eighty
28:44
Speaker 3: from how it used to be back in the day.
28:46
Speaker 3: So Carl Pascarella, he's the former CEU of Visa. He's
28:49
Speaker 3: on my board here at Loan Pro and he was
28:52
Speaker 3: heavily involved in the debit card, and so the whole
28:55
Speaker 3: process of a debit card, and one of the big
28:57
Speaker 3: things he's told me in a story is one of
29:01
Speaker 3: the reasons the debit card was really successful is it's
29:05
Speaker 3: an access point to a checking account or a deposit account. Well,
29:09
Speaker 3: the bank wants to increase deposits, but provide a bunch
29:14
Speaker 3: of tools, and this was a really nice new tool
29:17
Speaker 3: that encouraged to increase a deposit. So it used to
29:20
Speaker 3: be when the relationship meant they were bringing their deposits
29:25
Speaker 3: to you, and then you would expand into other cross
29:28
Speaker 3: sell products. If they had deposits with you, then they'll
29:31
Speaker 3: get an at alone from you and so forth. Well,
29:34
Speaker 3: what we're finding is technology has enabled that to flip
29:38
Speaker 3: on its head, where folks are now saying, hey, deposits
29:42
Speaker 3: are kind of a commodity. As long as they're insured deposits,
29:46
Speaker 3: they have online banking, that's good enough for me to
29:50
Speaker 3: engage with. I don't really care where it's at because
29:52
Speaker 3: the government's got a backstop on it for me. But
29:55
Speaker 3: what I really do care about is the lending products
29:58
Speaker 3: that are highly bespo to me and cover my particular situation.
30:03
Speaker 3: And so what we're finding, and many of them are
30:06
Speaker 3: powered by the loan Pro platform, But what we're finding
30:09
Speaker 3: in the ecosystem is these bespoke lending products are the
30:14
Speaker 3: hook of I won you as a customer and then oh,
30:18
Speaker 3: by the way, if you do your auto loan or
30:20
Speaker 3: your mortgage or your ATV or your whatever loan with
30:24
Speaker 3: me and you do your deposits, then there's like an
30:27
Speaker 3: incentive for that. So what we're finding is it's flipped
30:30
Speaker 3: full one eighty, which is just super interesting that technology
30:33
Speaker 3: has enabled that and the push of portability of a
30:37
Speaker 3: consumer is I believe going to accelerate that.
30:41
Speaker 2: Yeah, I think you're right, and I know you guys
30:43
Speaker 2: as well, as U said upstart our API enabled systems
30:46
Speaker 2: as well, and maybe a little bit ahead of the
30:47
Speaker 2: regulator allowing some of that. Do you see across you know,
30:52
Speaker 2: the financial services industry? Are our companies ready for this?
30:56
Speaker 2: Like you know, I know government, I don't love when
30:59
Speaker 2: they get in the business of picking winners and losers.
31:02
Speaker 2: And sometimes these regulations, like he said, you've got the
31:04
Speaker 2: transparencies and they overlay and you know, by by proxy
31:08
Speaker 2: they're they're they're determining who's going to succeed in the
31:11
Speaker 2: new world, maybe proactively or not. But uh, are some
31:16
Speaker 2: of these smaller banks and credit unions, community banks, like
31:19
Speaker 2: are they going to be able to take advantage of
31:21
Speaker 2: this or is this going to put them at a
31:22
Speaker 2: disadvantage kind of requiring more of this portability? And is
31:25
Speaker 2: it only going to make those who have the tech
31:28
Speaker 2: capabilities today, you know, stronger.
31:31
Speaker 3: Yes, yes, and yes, like like it's just it's just
31:34
Speaker 3: a yes, right, Everyone's going to have to modernize their
31:38
Speaker 3: tech stack. Technology is not differentiator. I had a very
31:43
Speaker 3: wealthy founder of a tech company. I asked him, what's
31:47
Speaker 3: what's one of been the most surprising learnings you've had.
31:50
Speaker 3: He's made a ton of money, wildly successful company, and
31:54
Speaker 3: he said, it was surprising to me that a technical
31:58
Speaker 3: moat was in as much of a moat as you
32:01
Speaker 3: think it is. And so there's been a lot of
32:04
Speaker 3: companies who have built out and they think that they're
32:08
Speaker 3: in like they have a technical moat, but it'll get
32:11
Speaker 3: eroded over time. Right, So if you by definition, that
32:14
Speaker 3: means you had like the first mover's advantage and it'll
32:17
Speaker 3: be a moat for a while, but eventually technology in
32:20
Speaker 3: the half life and half fastt moves, it will get eroded.
32:23
Speaker 3: You have to create some other kind of differentiator. And
32:27
Speaker 3: I think that we see everybody in financial services. You
32:30
Speaker 3: guys do a really interesting job with this as well.
32:33
Speaker 3: You're providing a unique product, you're winning a certain customer set,
32:37
Speaker 3: You're providing opportunities to them they can't otherwise achieve in
32:41
Speaker 3: an easy way. So it's this great service that's being provided,
32:45
Speaker 3: but you have to continue to innovate winning. Yes, you
32:49
Speaker 3: know what's that saying. Yesterday's touchdowns don't win today's games. So, like,
32:54
Speaker 3: if you got a cool product good for you, you
32:57
Speaker 3: have to maintain a cool product going forward that meets
33:00
Speaker 3: that meets those needs out there. And I think that's
33:02
Speaker 3: one of the challenges the community banking smaller organizations that
33:07
Speaker 3: haven't invested in this. Almost everyone I speak to they
33:11
Speaker 3: know they need to and they're coming up with strategies
33:15
Speaker 3: about how do they continue to win that customer, how
33:17
Speaker 3: do they differentiate themselves. And it doesn't mean everybody looks
33:21
Speaker 3: the same. It doesn't mean that you can't have a physical,
33:26
Speaker 3: in person branch that knows a certain customer set super
33:31
Speaker 3: well like that will still resonate really well to a
33:34
Speaker 3: certain group of customers. But think of my kids. I've
33:37
Speaker 3: got four kids. My oldest is in high school now crazy,
33:42
Speaker 3: that's a lot of fun. But the experience they have
33:46
Speaker 3: with banking, it's different than certainly my parents. And his expectations,
33:53
Speaker 3: my oldest son, his expectations of why in the world
33:59
Speaker 3: would it not just be on my phone? And you're like, well,
34:03
Speaker 3: I have a really good answer for that, that's right,
34:05
Speaker 3: And so like who he's who, he can do business.
34:08
Speaker 3: So we just probably set up a bank account for him.
34:10
Speaker 3: He's fifteen years old. He's starting a little business there
34:15
Speaker 3: that a couple buddies in him have created this trailer
34:19
Speaker 3: that attaches on the back of a bike and you
34:22
Speaker 3: can like think of like a hardshell trailer you can
34:25
Speaker 3: haul around to go like on a mountain bike in
34:27
Speaker 3: the middle of the woods, and then you can put
34:28
Speaker 3: your tent and all your stuff in your trailer, so
34:30
Speaker 3: you can still do mountain biking, but you can haul
34:33
Speaker 3: your gear with you without a backpack that gets in
34:36
Speaker 3: your way while you're actually riding your bike. So they're
34:38
Speaker 3: starting this business. We're taking them through this journey how
34:41
Speaker 3: do you do it? And trying to treade it as
34:43
Speaker 3: a good learning experience and part of that setting up
34:46
Speaker 3: a bank account. Right, he's a miner. There's only so
34:49
Speaker 3: many banks out there who have a delightful experience to
34:53
Speaker 3: set up a minor custodial bank account online. Most of
34:58
Speaker 3: them it's like, I don't know, bring your mom or
35:00
Speaker 3: dad into a branch, and there's only a handful at
35:04
Speaker 3: least that we found. We did like twenty minute Google
35:06
Speaker 3: search and engage there, and we actually created a relationship
35:10
Speaker 3: with a new institution that my wife and I don't
35:14
Speaker 3: bank with because the folks that we bank with did
35:18
Speaker 3: not have an easy or convenient way to set up
35:21
Speaker 3: a custodial account in an online experience. And so I
35:25
Speaker 3: think those are the kinds of things that they don't
35:28
Speaker 3: necessarily leave someone behind. But all of history is full
35:33
Speaker 3: of you gotta modernight, you gotta update, and you gotta upskill,
35:38
Speaker 3: and the banks are no exceptions. They'll have that same
35:43
Speaker 3: opportunity as well.
35:44
Speaker 2: Yeah, that's funny, Right, went through a very similar experience.
35:47
Speaker 2: My oldest is an noown senior in high school. We
35:50
Speaker 2: voted this morning together, which was fun, but I still
35:52
Speaker 2: remember going through that experience. Like you said, maybe fifteen
35:55
Speaker 2: twenty minutes of googling. It led me down to two
35:58
Speaker 2: financial institutions, and I chose one that I had absolutely
36:01
Speaker 2: zero relationship with before. But I could open that account
36:04
Speaker 2: and put funds in his checking account immediately, and he
36:08
Speaker 2: could have an app on his phone and access to that,
36:10
Speaker 2: So it makes a huge difference. I really enjoyed the conversation.
36:15
Speaker 2: Maybe we can end today with like, what would be
36:17
Speaker 2: advice you would give to some of those smaller lenders,
36:21
Speaker 2: you know, as they're thinking about like how do I
36:22
Speaker 2: differentiate or what should I even do to think about
36:25
Speaker 2: technology and catching up? Is it like some kind of
36:28
Speaker 2: an assessment.
36:30
Speaker 3: Yeah, I think that the way to look at it
36:33
Speaker 3: is to think about who you want to be right
36:36
Speaker 3: and this on a personal level, but also as a business,
36:38
Speaker 3: like what is your brand? What is the problem that
36:41
Speaker 3: you're solving? And if you're a small lender or medium
36:45
Speaker 3: or large lender out there, choose what your differentiators are
36:49
Speaker 3: and choose your group. So basically, think of the original
36:52
Speaker 3: definition of community banking. It used to be if you're,
36:57
Speaker 3: you know, a small bank in Chicago, and your community
37:00
Speaker 3: bank there, you built your products, you understood who you
37:04
Speaker 3: were serving and maybe it was all tied to the
37:06
Speaker 3: meat packing industry because of the geography of the time there. Well,
37:11
Speaker 3: now remove geography and still think of what is a
37:14
Speaker 3: shared experience and who is it you're going after, what
37:17
Speaker 3: problem are you solving, and just build the best products
37:20
Speaker 3: to support that person in that experience. And you need
37:23
Speaker 3: the right tools to do it. It includes a loan
37:27
Speaker 3: management system, a loan origination system, the right kind of
37:30
Speaker 3: partners and we're happy to help in that journey, but
37:33
Speaker 3: we just want to help accelerate and to see each
37:36
Speaker 3: of you be successful.
37:37
Speaker 2: Awesome. Well, thanks again, Ritt, really appreciate the conversation and
37:41
Speaker 2: I hope you have a good Yeah, thank you, Matt.
37:44
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37:46
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38:05
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