This month, we interview Upstart’s SVP of Business Development Jeff Keltner, and look back at the company’s successes and what is in store for its future…
What is Upstart? What did you feel was missing from the personal lending marketplace that inspired you to create this new AI lending model?
Our founding team was really motivated by two core beliefs that (1) many more people are credit-worthy than they may appear based on traditional metrics and (2) the application of modern AI techniques could better identify those creditworthy people and allow lenders to serve them. And while we see this as an industry-wide opportunity, focusing on personal loans to start made the most sense to us as the lack of collateral means these loans are in many ways the most challenging to underwrite. This is also where our AI lending approach could make the biggest impact on the accessibility and cost of credit.
The company is reaching a decade-old next year. What are some lessons learned as a fintech from the past ten years? What are some company goals for the next ten years?
Frankly, it’s hard for me to believe that we’ve been at this for nearly a decade. We came into this really as technologists and have been learning the lending business over time – so we’re continuously learning. Our experience reinforced our belief in the opportunity to expand access to credit while also seeing the opportunity to apply technology to reducing the friction involved on the lending side. Experience has taught us to see that as an equally large opportunity to the credit decisioning side.
As far as goals for the future, we think the capabilities we’ve developed can really be applied across lending products – so we really want to start working on how we bring these capabilities to more kinds of lending products over time.
How has AI technology evolved since you started Upstart and how does that apply to how Upstart runs its platform?
First of all, I think there is a much broader realization that AI will offer a fundamentally better way to tackle these challenges. More institutions are looking at where and how to best apply these technologies instead of asking if they will be critical for their future.
It’s a pretty exciting time in the AI space and things are changing very rapidly. We are seeing advancements in the available computing power and AI techniques, which evolve together as more computing power makes processing larger data sets with more sophisticated techniques possible. In addition, there is an increasing amount of work going into answering questions about measuring fairness and equity in AI-based decisioning systems as well as how to explain what factors are driving decisions made by these systems. We’re excited to help define how to think about these issues in the context of financial services.
Upstart has somehow been able to unlock more viable subprime lending opportunities in the auto lending specifically. What is Upstart doing differently to expand the lending pool in this highly coveted lending category?
Any time we talk about riskier lending areas, like what is often called “subprime”, the reality is that there are many very creditworthy borrowers who are not high risk and the challenge is being able to accurately identify them. Our models are able to better identify those low risk individuals through a combination of leveraging a greater number of data points on each applicant and the application of sophisticated modeling techniques to those data points across a very large set of historical applicants.
The hard truth about this sort of modeling is there is no simple set of explanations for what produces greater accuracy. It’s a combination of a lot of small factors that taken together can make a large difference in the understanding of true risk, plus a lot of hard work to identify those factors and how to best leverage them in the context of a risk model.
“Disruptor” or “Consumer Finance Innovator” – which do you prefer to be called and why?
I would have to go with “innovator” over “disruptor”. Many fintechs have chosen a path of competing with traditional financial institutions and thinking of them as obsolete. However, we have decided to work with existing financial institutions to power better consumer experiences for them. We think we can have the biggest impact on the market and do the most good for consumers by partnering with those institutions to drive more innovation instead of “disrupting” them.
Since going public, Upstart’s stock has been skyrocketing while the company continues to add more and more banking partners. What do you attribute to Upstart’s great success since becoming a publicly traded company?
Since our founding, we have always believed it was important not only to build great technology, but to also build a fundamentally sound business. Some young companies will chase growth at all costs with some notion that building a large consumer base leads to a solid business over time. We decided early on to focus on working toward profitability as we grew our business and only to invest in ways that made sense from that perspective. Sometimes that means we have to grow slower – but I think there is an appreciation for a team that is focused not just on building a great product, but a great company and a great business too.