Another Upstart partner

https://www.businesswire.com/news/home/20220630005326/en/

BELLEVUE, Ohio & SAN MATEO, Calif.–(BUSINESS WIRE)–Firelands Federal Credit Union (Firelands FCU), an Ohio-based credit union with over 32,000 members and $385 million in assets, today announced it has partnered with Upstart (NASDAQ: UPST), a leading artificial intelligence (AI) lending platform, to offer AI-powered personal loans and auto refinance loans to its members.

Firelands FCU became an Upstart lending partner in October 2021 and will offer personal loans and auto refinance loans powered by Upstart on its credit union website to better serve its members anywhere, anytime.

“Through our partnership with Upstart to power both personal loans and auto refinance loans, Firelands FCU will accelerate our digital transformation initiative by offering our members a modern, all-digital lending experience,” said Brett Montague, President & CEO at Firelands FCU. “With Upstart’s AI lending platform, we will be able to say yes to more creditworthy members while lending more inclusively across the communities we serve.”

“We are excited to partner with Firelands FCU to provide an all-digital personal lending and auto refinancing experience for its members,” said Michael Lock, SVP of Lending Partnerships for Upstart. “With our AI lending platform, Firelands FCU will be able to help more members easily and quickly access affordable credit.”

Cheers,

mpfd

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I love that Upstart keeps adding partners, and I assume they’re not losing (m)any of these credit union relationships. These are how their business grows. Get that AI lending platform out there, bigger snowball, more revenue, smarter decisions, all that. I liked the OP.

But.

Every time we get a news wire story like this about Upstart, the implication is pretty much exactly the same, and not meaningful for most Fools who read this board. I feel like both the articles and the “excited to partner” quotes are just autotext at this point. Are we announcing any other company’s new customers one post at a time? A new Upstart partnership is not like an acquisition, it really is a new buyer (customer/client) for their AI-driven loan decision services (product). And if UPST is not much of a Saul stock anymore, are these individual announcements really appropriated? I still own my UPST shares and believe in the company long term, I just don’t want the company to get the TSLA treatment here for too many low-value/off-mission posts. If they partner with Chase or Wells Fargo, sure. But until then, I don’t think these individual small CU partnership adds are Saul’s-worthy news. Might be just me.

-n8 (/re-lurk)

32 Likes

-n8

I agree. Posting of press releases without more said is not the intended use of the board. And shouldn’t be done.

But I disagree that this is just another customer announcement.

My investment in Upstart is premised on Upstart’s ability to gain hundreds of partnerships over time with expanding services provided to each. Those lenders are the key; as long as they sign on and increase the usage of Upstart’s platform, the company will grow from the current $2.5 billion market cap.

The addition of each partner does a few things to counter the bear thesis that is prevalent in the market right now beyond the macro-environmental predictions of a further slowing of Upstart’s growth.

Each new partner reducesthe dependency on the ABS markets. This is where somewhere between one-half to two-thirds of the loans originated through Upstart end up. So, each partnership not only reduces the loan percentage ending up on the ABS markets, this small credit union now provides 30,000 potential borrowers at no customer acquisition cost to Upstart as Firelands Credit Union’s name is on the application, not Upstart’s.

And to further counter the bear thesis, I see each partnership as a validation by the experts in lending of Upstart’s ratings ability and the value of its platform provides to the thousands of smaller banks and credit unions.

Much of the bear case made about Upstart notes the dependence on the ABS markets, reads into interim bond reports, and declares that Upstart’s models are failing, eroding, or that because they are “new” Upstart isn’t tested in high rate high inflation macro conditions that we are seeing and will inherently fail. Of course, the changes and use and tweaking of FICO ratings as they stand now are likely similarly new. Albeit, Upstart has changed the pool of borrowers so there is a major difference, but I have yet to see any real analysis regarding that increased borrower pool as the framework and reference used to support the bear thesis begins by classifying Upstart borrowers by FICO scores - not by Upstart’s relative ranking system.

And finally, the partnerships announcements lead me to believe that Upstart is doing well, and will do well because each announcement means that people who lend money for a living are signing with Upstart because they believe Upstart provides value to both their customers and their bottom line.

So, yes, Upstart is out of favor on the board and the reasons are well reasoned and well stated. I don’t deny that they may be right, but I think the announcements like these partnerships tend to make Upstart’s future business success more likely to occur than the outcomes predicted by the bear cases.

And yes, Upstart press release posts … without more, shouldn’t be posted on this board.

T.

43 Likes

I agree that we do not want to see a series of posts about new partners into the future. However, I believe that those posts already made were relevant. Upstart only had about 30 partners at the end of last year so each new partner makes a difference. But more importantly, it shows that Upstart is able to convince potential partners that their AI model is not failing in this harsher environment, like say the models at Redfin or Zillow.

I bought shares of Upstart at $130 last year, watched them head to over £$400 and sold out when they dropped to $250 because of concerns about the company’s business model.

I bought back into Upstart yesterday because:
1 of the reports here about new partnerships
2 the CEO interview highlighted here
3 the low price of the shares and
4 the signs that inflation is abating, not affecting media comment, but which could cause Fed rate hikes to be lower than anticipated and the credit crunch being less onerous than people fear.

Dave Girouard is a thoughtful CEO and accepts that his AI model will not be perfect. Predicting the future in finance never will be perfect but Girouard can effectively build out Upstart to encompass personal lending, auto loans and home mortgages, and where the loans themselves are transferred elsewhere he could well create a significant and valuable company without any competition currently on the horizon.

25 Likes

While I am a fan of what Upstart is doing and the stock, they have added less than 10 credit unions to date this year which tells me we are really in the early innings (may be a great thing). The sales cycle must be long. There are 5,000+ credit unions in the U.S. (by a quick search) so they are just grabbing a few first adopters. I think this gets exciting when they are adding 100 or 200 or more credit unions a year. When they feel like they can’t announce every sale, things will be going really well. It does not seem to be making enough impact on the industry to sell itself right now and I am betting it isn’t lack of brand recognition. Either credit unions don’t see this as much of an opportunity vs everything else they already do or something is holding them back. Can anyone comment? Again, this could be a good thing as we could be very early in the game.

1 Like

Hi Jeff et al.,

If you look carefully at each of these sign-on announcements, you’ll see that it’s the purchaser of the Upstart product that is voluntarily making the announcement. So not only is it free advertising and validation of Upstart’s solution, the “early adopters” clearly want their members and potential borrowers to know they’re using Upstart.

I hope this helps, but I don’t want to take full credit for the information, as I believe it has been pointed out by others in the past.

– Fenix
(board lurker for years, and long UPST)

10 Likes

I feel like both the articles and the “excited to partner” quotes are just autotext at this point.

I’m surprised no one has pointed out one small phrase that separates this press release from all the others, and it illustrates an important advancement of Upstart’s business also mentioned in the CEO interview posted recently. From the press release:

“our partnership with Upstart to power both personal loans and auto refinance loans

This heralds the shift from auto loans being ‘R&D’ retained on Upstart’s balance sheet to being commercially sold directly to partners like Firelands Credit Union.

43 Likes

I think another thing people are missing is that UPST has two different models. One model is where the customer uses their platform and UPST runs their AI. People go to Upstarts platform and Upstart provides the bankers the customer. This part of the model, I believe gives UPST a network moat.

The other part of the model is where the bank runs the UPST API on their own website giving. This is where the bank brings in the customer and UPST is in the back ground. UPST makes more money in the first model but in the second model UPST gets more distribution points and only has to supply their API.

So in this report.

https://seekingalpha.com/pr/18851964-firelands-federal-credi…

It looks like fireland is using UPST’s AI.

“Through our partnership with Upstart to power both personal loans and auto refinance loans, Firelands FCU will accelerate our digital transformation initiative by offering our members a modern, all-digital lending experience,” said Brett Montague, President & CEO at Firelands FCU. “With Upstart’s AI lending platform, we will be able to say yes to more creditworthy members while lending more inclusively across the communities we serve.”

“We are excited to partner with Firelands FCU to provide an all-digital personal lending and auto refinancing experience for its members,” said Michael Lock, SVP of Lending Partnerships for Upstart. “With our AI lending platform, Firelands FCU will be able to help more members easily and quickly access affordable credit.”

Also it appears they are using the API on their own website to run loans.

“Firelands FCU became an Upstart lending partner in October 2021 and will offer personal loans and auto refinance loans powered by Upstart on its credit union website to better serve its members anywhere, anytime.”

Andy

19 Likes

…over 32,000 members and $385 million in assets
I would say that this is a tiny costumer…