Online Lenders

Upstart uses bank partnerships for its next leg of lending growth

  • Upstart has signed three new partnerships with US banks.
  • These financial institutions will use Upstart to power their digital lending offerings.
close

Email a Friend

Upstart uses bank partnerships for its next leg of lending growth

It’s not easy growing a lender. Borrower acquisition is typically the hardest and most expensive piece of the business. Upstart has found a lending as a service model that enables it to continue growing by enabling bank partners to scale their own digital lending business.

Upstart launched its first bank partnership with BankMobile at the end of 2017. Now, the San Francisco-based bank has signed three more “Powered by Upstart” partnership agreements: First National Bank of Omaha, First Federal Bank of Kansas City and Accion Chicago.

“Powered by Upstart” partnerships are essentially technology licensing agreements where banks leverage Upstart’s white-labeled lending as a service by integrating it into their websites and mobile apps. The banks originate loans under their own bank charters.

“The banks can determine their own credit policies, loan terms, disclosures, and fee structures while taking advance of Upstart’s technology for acquisition, credit pricing and decisioning, verification, and servicing,” said Dave Girouard, Upstart co-founder and CEO and former president of Google Enterprise.

Upstart’s lending as a service agreements can take from six months to one year to complete. Agreements like Upstart’s face a variety of hurdles to get over. First, Upstart needs to provide the efficacy and soundness of its risk models, including fraud, verification, and credit decision. Banks also need to see if the partnership with fly with their regulators.

But beyond the technical parts of creating a lending partnership, Upstart needs to engender trust in its technology. “Another hurdle is generating confidence and understanding of the safety and soundness of the resulting lending program, including model governance,” Girouard said.

There are a variety of competitors vying to power banks’ digital lending programs. TD Bank recently signed with Amount, Avant’s lending as a service product. What set Upstart apart for its new partners is its technology.

“We needed to find a way to use machine learning and artificial intelligence to underwrite our current credit monitoring process, and found Upstart, who was already doing this,” said Marc Butterfield, svp, digital and payment solutions of First National Bank of Omaha. “Upstart has mastered the entire concept of modernizing credit, so we chose to partner with them in an effort to enhance our offerings and improve customer experience.”

First National Bank of Omaha also participated in a $50 million investment that included Progressive Investment Company and Healthcare of Ontario Pension Plan. Upstart loans will be available through Progressive’s website in the near future.

Upstart will work with new partner Accion Chicago to reach more local entrepreneurs with low-cost microloans to minority- and women-owned businesses. “We believe that partnering with Upstart is the most creative, careful, and cost-effective way to lend to these inspirational small business owners that other lenders overlook,” said Brad McConnell, CEO of Accion Chicago.

Upstart has originated more than $3.3B in loans in the last five years. Thus far in 2019, more than 60 percent of Upstart originations were entirely automated and approved in real time, according to the company. Upstart grew revenues by about 80 percent in 2018 and reached profitability in the second half of the year.

0 comments on “Upstart uses bank partnerships for its next leg of lending growth”

Member Exclusive, Online Lenders

Lending Briefing: SaaS SMB lending competition heats up as more fintechs enter the market

  • More fintechs are coming into the US market to offer banks solutions that digitize and streamline their SMB loan application and decisioning process.
  • As this segment of the market is drawing more interest, we sit down with Ranqx to delve into its strategy of scaling in the US market.
Iulia Ciutina | September 14, 2022
Online Lenders, Sponsored

Without the right data, your bank could be turning away qualified borrowers

  • Using alternative data provides a more holistic view of a consumer's creditworthiness.
  • Financial services expert Gary Harvey explains how FIs can achieve this using the right data sets.
Equifax | August 23, 2022
Member Exclusive, Online Lenders

Lending Briefing: Gen Z is expanding the credit market

  • The US credit card market continues to grow: the number of credit cards topped 500 million for the first time ever at the end of Q2 2022.
  • Younger generations are behind the increase, experts say, as more Gen Zers start their credit journeys.
Iulia Ciutina | August 17, 2022
Member Exclusive, Online Lenders

Lending Briefing: The digital lending fintechs attracting capital in a down market

  • Funding is down across the fintech sectors compared to last year, with less capital going to big segments like payments, baking, and lending.
  • We are taking a look at some of the digital lending fintechs that still secured financing in this past quarter, in spite of the down market.
Iulia Ciutina | August 03, 2022
Member Exclusive, Online Lenders

Lending Briefing: Big banks’ Q2 results and rising commercial loan volumes

  • Rising interest rates are a challenge for most financial market participants, but banks benefitted from this as lenders, helping to boost their Q2 bottom line.
  • Commercial loans grew by double-digits compared to last year, the strongest loan growth since the onset of the pandemic.
Iulia Ciutina | July 20, 2022
More Articles