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Leveraging Predictive Analytics to Expand Relationships · Leaders in Lending

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You're listening to Leaders and Lending from Upstart, a podcast dedicated to helping consumer
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lenders grow their programs and improve their product offerings. Each week, here,
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decision makers in the finance industry offer insights into the future of the lending industry,
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best practices around digital transformation, and more. Let's get into the show.
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Welcome to Leaders in Lending. I'm your host, Jeff Keltner. This
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week's episode features my conversation with Ben Vega from Umquo Bank. I've been and
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I dive into a lot of topics, starting with an interesting project he had
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recruiting commercial bank clients into the wealth management organization. I thought interesting, how
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you break down the barriers and build a program across silos in the organization.
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We talked about specifically a lot of the human digital how those two things play
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together, what U was doing in that space, which that was really interesting
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their big bank attack program during PPP. Also, I think of fasting my
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conversation experiend what's what they mean by scored lending and what the future of score
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aring and maybe alternative data looks like where that can be valuable. I think
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it's a great conversation and anyone can learn a lot from it, So please
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enjoy this conversation with Ben Piggott. Then, thanks for making the time and
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joining the podcast today. I really appreciate it. Absolutely happy to be here.
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Before we get into the content, there's a bunch of interesting stuff to
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talk about, but I always love to start with this question from my guests.
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How did you wind up in the banking space. It's not usually the
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childhood dream of most of the people I talked to, so I'm curious what
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path led you to where you're at today. Absolutely, I think this is
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a popular question amongst most banking professionals as well. I started off probably a
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more traditional route. I was going to college George Mason University in Northern Virginia,
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and the bank down the street offers college tuition reimbursement program, so that
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was Chevy Chase Bank. I was a teller there and they were helped to
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pay my way through college. After I had graduated at a four year degree
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and also had four years experience. But I also got a little bit more
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exposure to just what all, you know, the different avenues that you could
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go through in a banking career, and I decided to stick with it.
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Moved over to Unqua Bank in the Pacific Northwest. Started off in our branches,
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so we call them stores at the time. Was there for a year
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that I moved into our private bank for wealth management, and that was pretty
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interesting journey. Get a lot of exposure in the wealth management piece because a
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lot of your customers are orderlining on the consumer side, business side, commercial
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side. So having that for five years, I mean, I really did
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get a lot of exposure to the different products and services that we offer through
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some different types of synergies that we did. I went into our frontline strategy
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group, but prior to that, actually we'll probably circle back on this at
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the topic of the conversation. When I was in our wealth management group,
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we started a program where we were partnering with our commercial bank because we're trying
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to identify customers that were within our commercial and the business owners that would be
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a good fit for wealth management. So they had commercial loans with us,
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but they didn't have any type of personal relationship. So I started down this
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initiative where we were going to get the commercial bankers to introduce clients to our
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wealth management and get that wealth management offering to them. Utilizing some of the
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information that we had collected through the underwriting of their commercial loan, and this
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was ended up being very successful and eventually, as we had some other groups
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look in to how the organization was operating, I was then moved under what
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we called our Frontline Strategy group. So Frontline Strategy was helping build the strategy
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with our core baking lines of business. This is retail bank, home lending,
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commercial SPA, etc. Basically the profit centers that we have, the
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different avenues that we have with than the bank itself. As we went through
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another merger, I took a kind of an adjunct kind of dog leg in
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my career and I went over to our ALM side or asset Liability Management,
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working in our treasury group for our interest rate sensitivity analysis. Did this for
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about two and a half years, three years, and this is where we're
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putting out the regulatory reports on how a banks that it was income gets impacted
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through different rate scenarios. Basically a pretty important topic. Right. Just I'm
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alexy to sexy last right, And it was funny you say that because I
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was said, you know, recruited into that group, and I thought this
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was good, good, a good way to start rounding out my banking career.
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I had always been focused more on the production side, hadn't yet looked
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at the balance You haven't yet looked at banking from the balance sheet finance side.
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So this was really good experience. When I was first moved over there,
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you know, interest rates were flat for quite a while, and then
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I started going over there. This is when the rate high really started and
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things got a lot more interesting, especially because of the reporting that we were
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putting out. And really what happens is we run sixteen different scenarios. So
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we'll start with our base scenario, which is just the current economic environment.
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What's your net interest income going to look like in one year without any movement
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to rates, and then we'll look at it what happens if rates go upwards
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one hundred basis points two hundred, three hundred, four hundred in a ramped
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scenario, so slowly increasing, then also again in a shock scenario. Then
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on the inverse of that, what happens when they go downwards? You know,
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yeah, the one to four percent and then diving into the analysis of
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that was actually really fascinating as well too. So you're looking at most of
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our loan portfolios you know what has changed month over month? How is the
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sensitivity? You know, how has our net interest income increased, our dink
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decrease from the prior month? Based on some of these scenarios, and you
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would see what are we doing on our lending side, our cash side,
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you know, how is our cash looking? So four dollar question, but
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were you guys looking at the asset valuation for a long long duration assets on
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the book? So we always we had them marked to market already, so
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that was one thing that was helpful for us, you know, so we
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we had run the book that way and what we did see though were mortgages,
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right, so we were having in higher rate environments. Generally, what
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happens is pre payments start too slow, so people aren't going to be paying
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off their loan as quickly, which in the inverse of that, we're getting
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less cash back to then reinvest at the higher rate. So that was kind
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of one of the impacts that we were looking at when you look at mortgage
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portfolios or the different portfolios that we were invested in, so mortgage backed securities,
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so you would see kind of slower durations on these types of security portfolios
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that we were invested in and that you know, for me, this was
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I had never really looked at that part of the balance in our investment side.
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I was always more focused when we you know, for core baking lines
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of business, to look at your deposits, your loans and you know,
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getting these different types of investment folios that we put cash into. That was
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that was really interesting. But we were very uh, we're very sound on
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how we do that. So luckily, you know, we had already been
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marked to market. Our book was pretty fair in that aspect of it.
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Um. You know, I'm assuming you're getting into what happened last four weeks,
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but best we know, yeah, interest rate risk right, what's right?
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I know, I know. And so from there, um, one
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of the executives that we had in the frontline strategy group, they're saying,
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hey, we we want a product manager for our scored lending channel. Um,
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and I thought it would be a great fit. So I moved into
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that. So that's what brought me into our Scored Lending product manager position in
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the role that I'm currently into now and so quite an interesting career. Actually,
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it all started with helping you know, an extra five thousand dollars a
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year to pay to my tuition and now I found something that I really loved
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and been fortunate enough to be able to build on my experiences throughout my banking
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career to get to the role. But I'm at now and that's uh.
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You know, some people maybe aren't as fortunate to be able to do that.
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But luckily, within the organization I have, they really kind of promote
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that and they have done a good job retaining employees and training them up.
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So everything I want to get to scored lending. Yeah, we let first
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go back to this really interesting project you talked about where arguing with the commercial
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bank. Yeah, management class, and I want to ask a question and
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too fragile. This feels like the kind of thing that is obvious. I
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mean, like, no, we have a bunch of people who own small
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businesses that are doing well. We'd like to have their personal banking as well
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thanking. And yet I find that often either the organizational silos end up creating
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friction, where like this is the commercial bank, this is these we don't
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we don't we don't communicate, or you have data silos ended up making it
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very hard to actually like access the information. Right. So I'm curious what
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challenges you faced in trying to do that and how you overcame them, because
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it to me feels like one of the things where you go, well,
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every bank should of course be doing this, and I think off and they're
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not in there are hurdles in the way. So I'm curious about your experience
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in those fronts getting the organization on board with like cross pollinating across right to
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right referent parts of the organization. Yeah, any kind of data or technology
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issues you had trying to like, you know, often you can't get data
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about the absolutely true customers into your your you know, personal your wealth management
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systems because they're just totally different, speak, different languages kind of thing.
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So I all kind of go back to the genus of this product, right,
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your project that we have, and exactly that light bulb moment right where
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like this seems like a no brainer. You know, here we have commercial
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loans. Uh, the borrowers or guaranteurs of these loans are more than likely
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qualified for some type of wealth management. Yeah, it's just in the nature
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of that. So let's you know, we're we're collecting you know, this
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information to underwrite the commercial loan oft in time, those guarantees. So there's
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some type of personal financial statement that's coming over with these guaranteurs that we can
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review and you know, take a look at and say, hey, this
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this person has, you know, this amount of assets, and we think
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that, you know, we would be a great benefit over here in our
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wealth management division. And it wasn't necessarily so much, or maybe it was
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just as much as a fact that, yes, we want to have a
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full relationships. As much of a fact is that we're kind of branded as
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a business bank of choice, but at the same time we want to know,
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hey, we offer these services too, and oftentimes customers they really enjoy
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the service that they're getting from their commercial partners, and so we try to
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build off of that and say, hey, that service still matches on our
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consumer side, whether it be the wealth or side over here, and oftentimes
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they just don't know about it. So that was the idea and not executing
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that idea. You're right, it wasn't as easy as I thought it was
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going to be. And there's a couple of couple of different reasons why.
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One so even with our culture, we have a very strong service culture.
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So that's also another reason why I thought, hey, this is going to
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work great, you know, I mean, who's not going to want to
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refer their customer over to an internal department. And it turns out that it
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is a little trickier than that, and it has to do one there is
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a human element to it where we had to be very proactive, or I
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say we myself, I had to be very proactive in identifying these customers first.
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And so going into what you're saying with a data issue, there isn't
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some gigantic database where I can just kind of run a query or filter on
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you know, hey, you know, give me the individual borrowers. I
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have asset sizes of this, but preferably you know, in an investments or
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cash or you know, let's exclude their primary residence, etc. So one
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it ended up being, okay, let's start identifying the types of commercial loans,
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you know, the size, industry, maybe location, like do we
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have a wealth management office in proximity to where this borrow lives from. They're
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very manual to review the personal financial statement and any other types of liquidity statements
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that we got from these borrowers. And then from there, let's call on
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the relationship manager kind of give them a prospect sheet say, you know,
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very socializing. This is one of the things was actually deposit gathering, saying
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hey, you know, we offer and this is what we actually found.
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This This was really the ticket that helped them get the leg in the door
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with both management was that these barrowers usually did have some type of relationship with
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us on the consumer side, but they weren't in the best product for them,
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meaning that they were also in a product that is probably the easiest to
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open, quickest to open, to do the transaction. Maybe they were just
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using it as a checking account, but we did have other products due to
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the assets that they had, would offer them, you know, some type
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of like wire services, you know, so like hey, you know,
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you would give free wire services, free cashers, checked higher interest rates paid
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on deposits of this amount. Let's make sure you're in the right product.
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So that was a very low hanging fruit. Let's service the customer and make
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sure they're in the correct product, because if they're not going to be in
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the correct product with us, a competitor is going to come down the way
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and say, hey, your bank's not doing that for you. Will we
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do this for those types of balances, So that was kind of the very
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first versation that we would have with these borrowers. Other ones would say,
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we would like to introduce them, but there's I don't want to go like
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too deep into the tea year, but there's incentives, you know, I
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mean there we we we hadn't thought necessarily about incentive plans um, so it
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would say, well, who's going to own this relationship? But you know
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who, who's going to actually own this customer once I start to introduce them
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over there? How do we build the team around this customer? And that
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was not so much a point of I'm not going to refer but there was
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there was definitely some logistics at the point of the point of service that you
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know, are you going to you know, is this customer going to think
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that I'm their bank? Are they going to think that you're their banker?
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How are we going to manage this relationship together? How are we going to
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build this team around a customer together? And who's going to be the point
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of contact? And so those are certain things that we wanted to hash out
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first um in order for that to happen. So what ended up being it
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did end up being successful, but there were certain things where it wasn't just
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as easy as hey, this is um you know, here's a customer that
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we have and let's we're just going to reach out to them, not include
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the relationship ship managers start sending them uh information regardless, And we wanted to
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be very thoughtful about how we approached it, very considerate of the relationship and
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at the end of the day, we wanted to make sure we're building the
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team around them with the with the game plan and so at this and I
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think the topic that we're on human digital, right, there's kind of these
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pros and cons and when I when I think of human digital, because this
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was a very human approach that we were doing, you know, very manual,
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I would guess, I would say, you wanted to compare human and
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digital to manual to automation. There's a very manual approach. You know.
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There was a lot of eyes on what is going to happen. We were
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kind of thinking through different scenarios where opposed to how do we how would we
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scale something like this? Right, like this works good, We're doing it
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one at a time. It's it's it's working out. But hey, I'm
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one person. I'm going through personal financial statements one at a time. I'm
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literally pulling images of applications, loan documents, and this isn't going to be
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something that we can scale to. And like many organizations, it was also
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at need because or banking organizations, I should say, up until this point,
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you know, we had primarily grown through merger and acquisition, merging with
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other smaller community banks, and so here you have this portfolio of customers that
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maybe do have one foot in the door, or they had come from a
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different organization that didn't offer the types of services that we currently offer, and
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so it was really a good time to take a look at these types of
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relationships and identify customers that we could potentially grow. We expand upon those relationship
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we've grown through merger and acquisition. Now we really want to start focused growing
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organically. And as I was going through this, yes, right, idea,
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but one it's not scalable. And what we ended up doing, which
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was actually really one of the first things are first of its kind for our
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organizations. We partnered with the local company and they we started doing something called
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next Best Offer or what we dub umph was Smartly and what this had done
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was identify model customers and we're doing this for our Treasury management suite of products.
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It's kind of expanding a little bit more as well. But we were
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saying, you know, here's a model customer, model customer being. You
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know, here's a customer that is satisfied with the relationship. Maybe I shouldn't
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use word satisfied. That's a little too and us. But you know,
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here's a customer that is using our products and is profitable, right, and
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we have their primary checking account. We can see through their checking different types
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of transactions that they're going on, maybe payments, right and oftentimes we're looking
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at payments. Here, here's a customer that's paying vendors x amount at this
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type of frequency over this time period, and this would be a good opportunity
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for commercial card ach services, positive pay certain things like that. And so
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what this what smart lead does is it does is automatically right in a digital
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way. So every single night, it's going to go through our data that's
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process and it's going to start submitting leads to bankers to follow up with customers
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saying, hey, did you know your customer has X y z over here
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or is processing x amount of transactions during this time frame? And we have
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a product for that, right that's actually going to benefit them most oftentimes save
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them money because the different way accounts are set up. You know, the
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types of volumes that you have cost x amount if you're not using this service,
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you know. So that's one thing that we're doing is called UNCA Smart
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leads from from a digital standpoint opposed to the human approach that I had so
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kind of a juxtaposition there when it comes to what we were doing years ago
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with the Commercial Bank and MUTH Management to what we're doing now. And there's
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also been a lot larger of a cultural shift in regards to partnering. So
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in addition to this this digital element that we're using with Uncle Smart Leads,
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I think the pandemic, you know, this was an event that really helped
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rallied our associates around seeing the value of partnering together, right. I think,
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you know, there's a lot of talk that we have that hey,
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we're we're you know, individually, we're not as great as we are together.
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Right, So as as a team building a team around a customer,
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we can serve us a lot better than we could, you know, versus
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if they were just only being serviced by a loan in our commercial banking center.
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So what's happened with the pandemic was there was a paycheck protection program and
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what we ended up seeing at the you know, at the end of by
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this head concluded right the FED there was a set amount of dollars that they
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were going to lend out. And you know, as a lender, you
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have their customers trying to keep their business open, try to keep their employees
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paid, all fighting for the same pool of money in a short amount of
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time. And so we were getting applications not only for our customers, but
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for customers from other banks saying, hey, you know, my bank can't
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help me. Can you guys help me get this applications so we can get
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funded. And you know, of course the answer was yes, you know,
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let's let's do the right thing for our community, because these are local
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often that small businesses in our community that they can't get ahold of someone,
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you know, at maybe a larger institution down down the street, but they
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could get ahold of us. And even though they didn't have any relationship with
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us prior to that, we were going to get this loan application through as
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fast as we could and as best as we could for this customer. And
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this was a time period where I mean, I you know, everyone was
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submitting these applications to the SBA website twenty four hours around the clock. We
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ended up doing three billion approximately in these loans, which for h I think,
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I think that was definitely the largest in organ for community lender our size.
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But we were we were, you know, it was quite the effort
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that we had. But to take this to the next level, what we
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also looked at doing was then following up with those customers that didn't have a
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relationship with us, right, So, and we kind of in term we
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we dubbed this I think, you know, something along the big bank attack
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or something of the sort there. Yeah, well I love the big bank
20:07
attack, right And and the idea was like, hey, let's let's grow
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and expand these relationships, you know, I mean, we we had gone
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to bat for these customers and we got a foot in the door with the
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PPP loan, and we know that if we start putting some of the people
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that we have in front of them there there, they are really going to
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love us and they're going to move that over. So the same idea came
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from now we start with one relationship maybe be on the loan side, how
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do we expand this into a greater relationship. And we had our store associates,
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commercial bankers, other that you know, follow up with these businesses and
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start moving over the entire banking relationship. And this ended up being a very
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successful program for us as well too, which also really highlighted what we can
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do together with all the services that we offer. And so that also helped,
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you know, a lot of people's minds set shifted that Hey, this
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you know, servicing the customer, doing what's best for the customer is also
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best for myself as an individual producer. You know, like customers happy they
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have people that they can talk to that I know are going to provide the
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same level of service that I do. Anywhere they go, no matter who
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they call, they're going to get that level of service. So that really
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helped change that mindset when it came to, you know, going back to
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your original question, you know, how do you oaks are overcoming these internal
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referral systems? Right? I think there's one aspect of yes, it does
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need to come top down, you know, it does. There is a
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top down communication that needs to be Have, there's you know, an incentive
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plan you need to make sure that bankers are incentivized too, But at the
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same time, you know, touching, and there's also a digital piece of
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they where this is a very human, you know, decision, whereas what
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we did with umpus smart leads, we helped hate that human decision out of
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it, and we just started using the data to help generating some of these
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leads as well too. So we're kind of approaching it from from two aspects
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of it, where you know, that is something that can get improved with
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a digital solution, you know, helping with these types. It's not necessarily
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AI, but it is predictive analytics where we're taking a model customer and seeing,
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hey, what other customers do we have within our portfolio that BEHAVE,
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Like this customer meaning do they have a loan? What types of transactions are
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they doing? Hey, well, that actually is similar to the transactions this
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customer is doing, and this customer is enjoying using ACG positive pay, so
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let's offer that to them as well. So there's there's definitely some digital tools
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that can help with BANG. Think about that n that line, I mean
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not in the line, but this kind of melding. I feel like there's
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a there was a world, there was a period of time, and there's
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still something to feel like. The personal is replaced by the digital, and
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it's going to be all at the point of interaction, all a digital style
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interaction, no humans in the loop. And then we've got the very relationship
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heavy stuff. And I feel like there's consumers are doing both things right.
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They still want to talk to people, they also want to self serve in
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the digital interaction model in different times. How do you think about how and
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where you balance those two things, how they work together? Like, what
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is the strategy for combining the human and the digital? Where do you at
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one being more valuable than the other? They work together in certain strategies.
23:07
Curious how you think about the way these two technologies are two interaction modes play
23:11
together in you in the future. Hey there, Sarah Butch here, VP
23:15
of Consumer Lending at First Federal Bank of Kansas City. Three years ago,
23:21
we had plans to improve our lending to load to modern income communities. Fast
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forward three years, we've grown our lending distribution to LAMI communities by over ten
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percent thanks to upstart. If you'd like to learn more about fb case's journey
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with Upstart, check out the free case study at upstart dot Com Forward slash
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Lenders. That's Upstart dot Com Forward slash Lenders. All right, back to
23:48
the show, right. I think probably the best answer to that question I
23:53
have is actually our our go to mobile application, and so go To is
24:02
what we've really dubbed for our human digital strategy. It is a mobile application
24:07
where you were putting the banker in your pocket quite literally. And what's happening
24:14
is that within this application, we have store associates who are chatting with you.
24:19
So if you need something you can launch just go to application and you
24:23
have your banker there. And it's kind of the blend where you see other
24:27
types of chat bots AI chatbots banks investing in that. Well, we're saying,
24:32
no, we want to keep it human. You know, we want
24:33
to give you the access that you're used to with the phone getting serviced,
24:38
but at the same time, we want to make sure that you're having a
24:41
human interaction. And that was really what we had invested in. It's been
24:48
going on five six years, maybe maybe a little bit longer than that,
24:52
but within the last four years go To we dubbed it go to and that's
24:56
where we're starting to see a lot more users interact this channel, and they
25:00
do really enjoy it because one, they can get their questions answered, they
25:06
can take care of their day to day business, but they're also talking to
25:11
a real life person, and that I think is kind of where we wanted
25:15
to make sure that was still having these human interactions. We're still occurring through
25:18
a digital channel, so we're in the space right, We're on your phone,
25:22
we're in your pocket, but we're also utilizing our associates to have everyday
25:30
conversations with our customers, so they're still getting that same experience that we would
25:33
have in person. I'll ask two questions following up to that, which is
25:37
one, how do you think about the mode of interaction? I mean,
25:40
you have like text based digital interaction with the real human, you are,
25:42
right indeo based digital teraction with the real human phone call, and you have
25:47
video. Are you focused on one of the other? Are you seeing interest
25:49
in different modes? I'm curious what mode people are enjoying or what you're using
25:53
for that kind of human digitally mediated humans right right, So we're seeing a
25:59
lot more of the interaction come through our chat based platform. And what we're
26:03
also seeing is less volume come through call centers, right, so instead of
26:07
having to staff up call centers over the phone, we're seeing more people engaging
26:10
through the chat interactions through Uncle go to M and then from there, you
26:15
know, we have this whole what we call our digital call center, right,
26:18
and so from their associates are still able to identify opportunities that they come
26:25
in. So a customers asking for a loan, you know, we can
26:29
get them over to the channel to get that application process. And this is
26:32
a good in a mediory because not having the ability to apply now or apply
26:37
through a website at this point in time, but still having the ability to
26:40
talk to someone about a loan and get that process started is a very you
26:44
know, like a huge advantage for us as an institution opposed to here,
26:48
fill out a form and someone will get back to you, you know in
26:52
a day or two. Ah yeah, right, Whereas like I might as
26:56
well have just walked into a branch or I might have been by that time.
27:00
Especially with all the fintech businesses are going in, It's like, hey,
27:03
I can get my loan applied for and funded in forty eight hours,
27:08
you know, online versus you know what's going to take me to actually have
27:11
to walk down the street, Oh you're not open, or I had to
27:14
make an appointment or you know what other you know, you know that that
27:18
period of time, um, you know could really be a game changer for
27:22
some of the uh, you know, regional banks that we have. So
27:25
being able to have that conversation with our customers right there in their pocket and
27:30
get that process started one day sooner, right, is just you know,
27:33
an advantage that we we're definitely trying to capitalize on and get into that space.
27:37
Yeah, the the ability to execute and deliver quickly is certainly something customers
27:41
are demanding. I mean not just you're wanting, but you know kind of
27:47
demanding at this point toil for Uber and Amazon Prime. I guess absolutely that's
27:52
our big it's it's you know ore when we think of technology investments that we
27:56
have, right, you can't do everything, but you can do some thing's
28:00
right. You know, you can do you can do what's right. And
28:03
you know, one of the ways that we decide that, you know,
28:06
what we're going to invest in is kind of the is the mantra for one
28:10
day sooner. You know, is this going to help our customers board their
28:14
loan one day sooner? Is the application process going to go one day sooner?
28:17
How is this technology going to help get something done one day sooner?
28:21
So that's that's really what we have. It makes me think of the fun
28:23
one day more when you say that over and over from La Miss you need
28:27
you need a theme song for one days, but that would probably fly.
28:33
I's just probably just like, Yeah, I'm a musicals guy, so I
28:37
got like one day anyway. I can't say I liked it. I liked
28:40
it. Yeah, we got to find a way to get the one day
28:41
sooner is a that's a great month. I love it. It is.
28:45
Yeah, it is amazingly powerful when you can accelerate the timeline to value for
28:48
your customer. How much day that can improve your conversions, You're you're pulled
28:52
through your your overall business and satisfaction with the customers that you have. Absolutely
28:59
um. One of the questions is he, I mean, the chat based
29:02
interaction is interesting in the I mean, even more recent than the banking issues
29:07
and interest rate risk kedging and in management is this concept of generative AI andarts
29:11
that can kind of behave in a human like way? Is that something you've
29:15
looked at it all are still like I'm also you know, I went into
29:18
like change right and to like, I've got an extra thousand dollars, how
29:21
should I invest from my retirement? It'll do a pretty good job breaking down
29:25
roth iras and iras in four oh one ks and in different investment options and
29:29
where you should start and whatnot and sending these accounts and the CDs and um.
29:33
But have you thought about any ways to like take their first round of
29:37
questions that can be automated or is it still all that's still like a we're
29:41
we're committed to any human human interaction with the Night Channel. M One thing
29:45
that and this is what I've actually loved about is that we're not I guess
29:52
what we would say, Hey, we're not a sales culture. That the
29:53
purpose of this channel isn't to sell it our customer or something, right,
29:57
it's it's to provide CERTA said. We really believe that service first leads to
30:02
more business, so we have a very service based culture. It's actually really
30:07
interesting. Back when Ray Davis started started the bank, Well had taken over
30:11
as the CEO. He dubbed all of our branches then you know stores,
30:17
right, and this store experience was really based off Nordstrom, and we would
30:21
hire not bankers, but we would hire people who worked at Nordstrom, people
30:25
who worked at Starbucks, people who delivered you know, service. And this
30:27
was in our in our front of the house with within our branches or what
30:32
we had then called stores. And so how did we you know, what
30:36
we want to do is translate that experience into a digital experience. And some
30:41
of the stories that come out of this, you know, for the Unqua
30:42
Go too, is being able to do follow ups with your customers when they
30:49
say, hey, I'm trying to finance a wedding, Okay, great,
30:52
Not only will we do that, but you know, we send you the
30:53
handwritten car. There's certain touches that we follow up with, you know,
30:57
help them, put them in touch with a floorist that we might also bank
31:00
as well, you know, really expand on that network. And we think
31:04
that giving one empowering our associates to have that human interaction with our customers goes
31:10
a lot further than to be able to kind of constantly offer you know,
31:15
basically mining a conversation for sales opportunities that you know, we're kind of going
31:18
the different direction. We're minding these conversations for service opportunities, which you know
31:23
hopefully then leads to good graces in getting more business and preferring friends and kind
31:29
of having this net promoter score in one way or another. But we want
31:32
to just really be satisfied with the service that we're giving, so very very
31:37
kind of hardlined with you know, the AI isn't meant to do sales right
31:41
where you might have something like a different chatbots. I will name industry names,
31:48
but you know, it's certain things that don't necessarily work. They're just
31:51
trying to get you through a queue. They're trying to take you know,
31:53
volume out of the call centers. You know, we're actually just trying to
31:59
translate our in store, our in branch experience to a digital channel. Iceland
32:05
and I want to kind of strange that we're getting to the end of our
32:07
time and I'm going to ask this question, but you said you're probably manager
32:10
for scored lending. How do you guys define scored lending? What does that?
32:14
I mean? I feel like all lending should be scored right, Well,
32:16
I think so we're yeah, so well, we I think through our
32:22
loan channels, right, we do do a lot of larger commercial deals that
32:27
need to go through custom underwriting. So scored lending, what we define a
32:30
scored lending is within a parameter set loan amount, collateral risk that can go
32:37
through a scoring model that can basically kick out a approval based on amount of
32:44
factors and then from there help expedite that funding. So typically right now we're
32:49
doing three million and under for business, and all of our consumer lending is
32:52
scored for the most part, unless there needs to be some type of custom
32:55
underwriting. So it's really based on own amount and risk for the most part
33:01
of the different products that we have. And so you know this is this
33:06
is pretty I wouldn't say newer for organizations, but a lot of organizations that
33:10
are still out there at a regional bank level, you know, they will
33:15
do the custom underwriting. They'll they'll go through you know, you'll apply for
33:19
a loan and it will go through underwriters, you know, some type of
33:22
credit underwriting center. They'll take a paper application, they'll go through your financials
33:24
and they'll do an approval that way opposed to one day sooner, right or
33:29
something of a scored lending channel to be able to get that approval, get
33:31
the documents process and move forward. And when it comes to human digital even
33:36
even with our scored lending channel, right, we still have human interaction where
33:42
if we could kind of get down some of these manual reviews, whether they
33:45
be for fraud or incomplete applications or certain things I don't quite date a credit
33:51
box, and we could identify and eliminate those human touches, we could start
33:55
really getting one day sooner to funding for our customers too. So even within
33:59
us score channel, there is human interaction and um, you know, the
34:02
onus with as a product manager is to you know, really help drive you
34:07
know a one day sooner or approach on what are we doing and you know,
34:10
how can we get this done in a more streamlined fashion? And fraud
34:15
fraud check is a big big piece of that too, right, Yeah,
34:17
for sure, One thing I I would do want to dig in on is
34:22
the idea of when you say scoring, I love it. But there's also
34:24
this current debate about alternative scoring approaches all right, data used in scoring.
34:30
What's your take on the opportunities and risks associated with you know, going beyond
34:34
the traditional you know. Yeah, I mean when I look at even most
34:37
scoring mechanisms by banks, there's you know, for consumer loans, there's a
34:42
handful of variables that's related maybe to equity in the in the house or an
34:45
auto loan, and that it's like credit score ten or fifteen things coming off
34:49
the credit file, and it's it's a pretty straightforward set of pretty traditional metrics
34:52
that are used to relations. There's a whole you know, sets of data
34:57
that are non traditional that are right being used by I'm curious how you think
35:00
about you know, you know, moving forward. When you're in that automated
35:04
scoring mechanism, all of a sudden, the question becomes what other kinds of
35:07
data or absolutely it could we use to make better determinations? Right as that
35:12
in that journey, what do you what do you think the future looks like?
35:15
Yeah? Absolutely, so there's you know, is this telling the whole
35:16
story of the customer's ability to repay? Right? You know? Is this
35:20
the best method? Or are there are some of the scoring models, some
35:22
of the larger you know, phycou you know, uh advantage of some of
35:28
these models that are out of the box, you know, are they really
35:31
doing the best to mitigate risk, right, and it all comes down to
35:36
the risk of the portfolio from a bank side. And so right now,
35:39
I mean these traditional models, their advantage is that they have results recorded,
35:45
right, I mean they there is revault of yeah, exactly, default rates,
35:50
certain things like that that that have worked in the past, um,
35:52
but that is starting to turn, right, These alternative credit models are starting
35:57
to say, hey, not only are we seeing lower de fault rates,
36:00
but we're being able to approve more barrowards within you know that these models would
36:04
have declined. Yeah. One huge thing that I think that's kind of a
36:07
really big focus for us too as an organization are these special purpose credit programs.
36:13
So you know, we want to be making sure we're lending to communities
36:16
that these traditional scoring models wouldn't necessarily approve, right, So how can we
36:23
do that? How can we do more lending investing in minorities, you know,
36:28
women owned businesses, black owned businesses, certain things like that where you
36:31
know, hey, they weren't getting qualified through these traditional scoring models. But
36:36
you know what, we're going to be using alternateive scoring models that will help
36:38
them with our special purpose credit programs opposed to you know, just lowering the
36:43
score for some of these loan applicants versus you know, keeping them versus like
36:49
if they you know, if they didn't meet these types of the boxes that
36:52
we've met. So for me, top of mind for alternative scoring models,
36:55
I think there's a great advantage to be helping with the special purpose credit programs
37:00
that are out there. And also I think just the more that we're able
37:07
to prove these models and there you know their efficiencies, you know, to
37:12
mitigating default rates, the stronger it's going to be in the corner too.
37:15
Excellent. Well, I think that's most of the questions I have for you,
37:20
but I appreciate it has been a great conversation. I do have three
37:22
questions I like to ask everybody at the end of the podcast, so absolutely
37:25
I and we can we can jump to those ready. First, what's the
37:29
best piece of career advice you've ever gotten? Well, I'll just go through
37:32
what my journey has brought me to is that, you know it always try
37:38
to be building on your past experiences, so you know, be mindful of
37:44
your career approach. I think that some people or some associates easy to kind
37:49
of just accept the faith that they're at within the organization. But if you're
37:53
intentional about your career path and working with the manager to get you there,
37:58
I think that's um. You know. One of the steps that I would
38:00
take is always trying to build upon your past experiences for your new role,
38:06
and also look outside of your organization for not new opportunities, but to see
38:10
what your organization is doing, because I think oftentimes too when you're an organization,
38:15
I've been with a bank for eleven years, but if I wasn't curious,
38:19
you know, staying curious and looking at what other organizations are doing,
38:22
you know, what roles are they implementing and bringing that back to our organization
38:25
as well. I think that helps kind of diversify the ideas that you can
38:30
bring to your organization as well. Love it. Second question I got is
38:36
what's the best advice about the you know, retail consumer banking industry in general
38:39
that you've gotten or give. I would say, if you're a consumer right
38:46
now, you know, looking around, I think you're in a really good
38:50
place. I think with the fintech industry that's happening. I mean, you're
38:52
getting options and just like anything that they would say, like if hey,
38:57
if you're going to shop for a mortgage, you know, make sure you're
38:59
shopping for more debate. Same thing as as a consumer, you know,
39:01
if you're you have a lot more options to you than you did previously,
39:07
and there are companies who are fighting to provide that service. So you know,
39:10
although it might be hard to switch your checking account from the institution you
39:15
have now, it might be worth doing so if you haven't looked around in
39:17
a while, because there are companies that are willing to kind of go above
39:22
and beyond to kind of break down some of those barriers that they have from
39:25
uh, you know, the banking industry. You know that could really provide
39:29
exceptional service. And you know, make sure that you're you know, you
39:31
are valuable as a consumer in this space. I will I will tell you
39:36
that much right now. All right, that's great and fast. One is
39:40
what's one bold prediction for the future. I would say that, you know
39:47
one bold prediction for the future that would really be for me. I think
39:52
that we're starting to see one thing that's a popular belief within this current industry
39:58
right now is who your competitors are as a bank between your asset size and
40:01
I see this all the time where it's Hey, you're a fifty billion dollar
40:05
bank. Well here's you know, let's compare you to other fifty billion dollar
40:08
banks are less because these are your competitors. And I think that there's a
40:12
digital landscape that's happening right now where you know, we are competing with bigger
40:16
banks, we are competing with FinTechs, and we're not just within a asset
40:20
class of who our competitors are. And so I think the competition within the
40:24
organizations of the products that you're offering, you know, really needs to broaden
40:30
that scope because it's not anymore of just who's in your footprint and who's in
40:34
your asset size. I mean, it really is the ability through this digital
40:37
channel to be able to shop around as a consumer. And if you're not
40:40
capturing that and you're you know, if you're thinking that, you know,
40:46
you're kind of safe with who your competitors are, and you're going to price
40:49
similar to your competitors based off asset size, I think that that's going to
40:52
be a detriment to your organization. Definitely interesting, very true that we you
40:57
could think of your competitors an equity investor point of view, maybe here competitors
41:00
or banks your size. That might be who wants to fund the company,
41:05
where you'll be compared when you do your earnings call when trying to find which
41:10
which depositive product I want or where I will write where I want to invest
41:14
my money? That they couldn't tell you. I bet most conseritors couldn't tell
41:19
you that the asset size of the bank they were, But there's just not
41:21
irrelevant constit They're they're comparing you guests across a lot of different competitors, right
41:25
and you know, we're we're relying on third parties to help kind of provide
41:29
some of that data, and they always try to bucket you in these these
41:32
competitors based on your assets size, and it's it's you know, for them.
41:36
I think what you know, the institutions need to do, and even
41:38
those who help provide you know, pricing analytics or other other opportunities, they
41:44
need to really kind of start rethinking what that competitor pool starts looking like for
41:47
organizations because that landscape is changing drastically. Excellent. I think it's a fabulous
41:53
point and a great place to leave it. Then again, thanks for making
41:57
time and joining us. This was a very fun conversation. I appreciate it.
42:00
Thanks stuff. Upstart partners with banks and credit unions to help grow their
42:05
consumer loan portfolios and deliver a modern, all digital lending experience. As the
42:09
average consumer becomes more digitally savvy, it only makes sense that their bank does
42:15
too. Upstarts AI lending platform uses sophisticated machine learning models to more accurately identify
42:22
risk and approve more applicants than traditional credit models. With fraud rates near zero,
42:28
upstarts all digital experience reduces manual processing for banks and offers a simple and
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convenient experience for consumers. Whether you're looking to grow and enhance your existing personal
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and auto lending programs or you're just getting started, Upstart can help. Upstart
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offers an end to end solution that can help you find more credit worthy borrowers
42:47
within your risk profile. With all digital underwriting, onboarding, loan closing,
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and servicing, It's all possible with Upstart in your quarter. Learn more about
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