Drummond Community Bank, a Florida-based institution with total assets of around $800 million, will offer personal loans and auto loan refinancing on its website using Upstart's all-digital lending platform.
With Upstart’s technology, the bank will identify and lend to more people in the community by providing them with easier access to credit, according to Matthew Gallman, vice president and enterprise risk officer at Drummond Community Bank. “Through this partnership, we are aiming to deliver a digital-first customer experience that will give our bank a better chance at retaining existing customers and attracting new ones,” said Gallman. “By utilizing Upstart’s AI lending model, we can identify and serve more customers in our communities who can benefit from affordable credit.”
AI-based lending will vastly improve the experience of customers at Drummond Community Bank, according to Michael Lock, SVP of bank partnerships at Upstart. “If you were to apply for a personal loan at Drummond Community Bank today, you would have a very non-digital experience, which would probably involve talking to somebody in a call center or visiting the branch,” said Lock. “In today's digital world, that's not how people like to get serviced.”
With the introduction of AI-based lending, customers will have an all-digital loan experience: they will no longer need to visit a branch to complete a loan application. They can apply for a loan from their cell phone without leaving the house, and can also check the loan rate within minutes without affecting their credit score. “Our goal is to take only 24 hours between the time you get a rate check on your loan and the time you get the money in your account,” said Lock. “And you should be able to finish the application and loan acceptance process in about 15 minutes.” In addition to the quick service, customers will also benefit from much higher approval rates and more competitive prices.
As a bank partner of Upstart, Drummond Community Bank will also be a part of the Upstart Referral Network, which will help it to gain new customers by targeting borrowers who are searching for loans on the internet and referring them to a loan from Drummond Community Bank.
Partnerships of this nature could bring more power into the hands of bank customers, according to Nate Tsang, founder of WallStreetZen, which conducts automated stock market analysis for part-time investors without a finance background. “AI can be a much better judge of a person's creditworthiness than a rigid credit score. Consumers could see better terms and more approvals, offering them a way to invest in their livelihoods as well as new ventures,” said Tsang. “By expanding their slate of service offerings, Drummond Bank can probably expect to help invest more in its local community.”
The trend of community banks adopting AI-based lending platforms has been on the rise recently, according to Mike de Vere, CEO of Zest AI, a fintech that develops credit underwriting technology. “It’s exciting to see how smaller community banks have been at the forefront of adopting AI-based underwriting technology, even as larger banks are hesitant,” said de Vere. “By using models tailored to their respective markets rather than generic models, these banks are gaining a competitive advantage over larger banks and fintechs in the space.”
Since community banks are mission-driven and know that their success depends on customer satisfaction, they are beginning to embrace the way AI and machine learning enable them to achieve more efficient and inclusive lending through the use of data. “AI lending models have proven to take the bias out of credit models, increasing approval rates by up to 30% for women, seniors and borrowers of color,” said de Vere.
“Ultimately, AI lending platforms are key for these community banks to be able to say yes to more members with no added risk. They create efficiencies for the bank and benefits for society – a great example of doing well by doing good.”