Episode 496: Leaders and Leadership
The episode discusses how Upstart uses AI and predictive algorithms to improve access to affordable credit while reducing risk for banks. It explores the role of Upstart in credit underwriting and pricing, automation and AI in the loan application process, expanding access to credit for underserved populations, the future of banking and leadership skills, lessons in personal growth and career opportunities, and communication, self-care, and leadership development. Key insights include the importance of understanding customer needs, leveraging technology for efficiency, and embracing leadership at all levels.
AI-driven Credit Risk Assessment
Upstart's AI algorithms analyze over 1,000 variables to make accurate risk predictions beyond traditional credit scores.
Automation for Higher Conversion Rates
Fully automated loan application processes can double or triple conversions, and automating the process increases conversion rates.
Expanding Access to Credit for Underserved Populations
AI can help identify creditworthy individuals with lower credit scores, expanding access to credit for underserved communities.
The Future of Banking and Leadership
Successful bankers need skills in understanding customers, technology, and data fluency. Leadership is essential for scaling organizations.
Lessons in Personal Growth and Career Opportunities
Remaining curious and flexible opens up new opportunities and leads to personal growth in the fintech industry.
Effective Communication and Self-Care
Concise and relatable communication, positive online brand presence, and self-care are important for success in organizations.
- Using AI and Predictive Algorithms to Improve Access to Affordable Credit
- The Role of Upstart in Credit Underwriting and Pricing
- Automation and AI in the Loan Application Process
- Expanding Access to Credit and Serving Underserved Populations
- The Future of Banking and Leadership Skills
- Lessons in Personal Growth and Career Opportunities
- Communication, Self-Care, and Leadership Development
Using AI and Predictive Algorithms to Improve Access to Affordable Credit
00:06 - 07:11
- Upstart, an AI marketplace, uses predictive algorithms to improve access to credit while reducing risk and cost for bank partners.
- The technology analyzes larger sets of data to understand the real risks, as 80% of Americans have never defaulted on a loan but less than half have a prime credit score.
- Upstart licenses their technology to banks and credit unions, allowing them to approve more customers for personal unsecured loans.
- Their core technology focuses on digital onboarding and sophisticated underwriting.
- Upstart's AI algorithms analyze over 1,000 variables from multiple credit bureaus and additional applicant-provided information to make accurate risk predictions beyond traditional credit scores.
The Role of Upstart in Credit Underwriting and Pricing
06:44 - 12:40
- Underwriting is owned by the banker or credit union, while Upstart provides a risk model for prediction of repayment and default timing.
- Lending partners have control over credit metrics such as credit score, debt-to-income ratio, income threshold, bankruptcy history, and recent delinquencies.
- Upstart's system respects the lending partners' criteria and makes offers of credit accordingly.
- The pricing strategy for a given level of risk is determined by each individual lending partner.
Automation and AI in the Loan Application Process
12:11 - 18:08
- Fully automated loan application process can double or triple conversions.
- AI is used to minimize the information required from borrowers while still ensuring accuracy.
- Over 75% of originations are now fully automated without human intervention.
- AI is also used for targeted marketing outreach and identifying at-risk customers.
- By automating the application process without requiring document uploads or phone calls, Upstart significantly increases conversion rates.
Expanding Access to Credit and Serving Underserved Populations
17:46 - 23:41
- AI can help serve underserved populations by identifying creditworthy individuals with lower credit scores.
- Opportunity to expand credit approval without increasing risk by understanding which lower credit score individuals are actually worthy of credit.
- Automation can reduce the cost of offering alternative financial products to underserved communities.
- Access to capital, even in smaller amounts, drives communities and benefits everyone involved.
- Expanding access to credit for consumers and small businesses is crucial for community growth.
The Future of Banking and Leadership Skills
23:23 - 31:01
- Successful bankers need skills in understanding the dual modality of customers, technology capabilities, and data fluency.
- The future of banking will involve a blend of high tech and high touch.
- Leadership is essential for founders and innovators who want to scale their organizations.
- Anyone can be a leader regardless of their position or title.
- Leadership exists at different levels: self-leadership, leading others, leading communities, and leading movements.
Lessons in Personal Growth and Career Opportunities
30:41 - 37:19
- Remaining curious throughout your career can open up new opportunities.
- Being flexible and open to new experiences can lead to unexpected roles.
- Minimize burning bridges as it may limit future opportunities.
- Staying curious and being flexible are important lessons for the fintech community.
- Recognize that just because something has always been done a certain way, it doesn't mean it can't be improved or changed.
Communication, Self-Care, and Leadership Development
36:50 - 42:59
- Being able to communicate concisely and relatably is important for organizations and investors.
- Understanding that not everything will go your way and being coachable is crucial.
- Having a positive online brand presence is important for collaboration with big organizations.
- Taking care of yourself includes avoiding burnout and prioritizing tasks to work smarter, not harder.
- Leadership positions are often thrust upon individuals who were previously successful in their roles.