Shortened by me:
Dec 2021 - First National Bank of Omaha expands personal loans powered by Upstart
First National Bank of Omaha announced today that the bank has expanded its partnership with Upstart a leading artificial intelligence (AI) lending platform, to scale its personal loan program nationwide.
After a successful pilot program with Upstart in 2019 during which the program’s approval rates and loss rates met or exceeded expectations, along with an exceptional level of customer satisfaction, with a Net Promoter Score (NPS) of 83, FNBO has expanded its program with Upstart to broaden access to affordable credit, reach more borrowers and serve more customers nationwide. Through Upstart’s AI lending platform, FNBO has been able to approve more creditworthy borrowers, with 78% of loans approved instantly.
“FNBO is focused on delivering modern capabilities to our consumers that make capital more accessible and help them with their credit needs. We are expanding our program with Upstart so that more people nationwide can get personal loans they need with higher approval rates through a modern all-digital experience enabled by AI.”
“With proven results through Upstart’s AI lending platform, our partnership with FNBO has grown from an initial pilot to a full-scale nationwide program for personal loans. We are excited to scale our partnership with FNBO to help more consumers benefit from affordable credit based on true risk.”
Through the Upstart Referral Network, individuals come to upstart.com to apply for a personal loan. Once qualified applicants are approved, they are matched with and displayed credit offers from FNBO and seamlessly transition to complete their application and closing process with FNBO. In addition, FNBO plans to also use the Upstart platform to provide AI-powered personal loans to serve more customers through its affinity partners.
About First National Bank Of Omaha
First National Bank of Omaha is a subsidiary of First National of Nebraska. First National of Nebraska and its affiliates have more than $25 billion in assets and nearly 5,000 employee associates. Primary banking offices are located in Nebraska, Colorado, Illinois, Iowa, Kansas, South Dakota and Texas.
You beat me to posting this, but there is one bit you missed I thought worthy of posting on the board. While you captured most of the quote, you missed the part about who at the bank was being quoted:
“FNBO is focused on delivering modern capabilities to our consumers that make capital more accessible and help them with their credit needs,” said Marc Butterfield, senior vice president of Innovation and Disruption at First National Bank of Omaha. “We are expanding our program with Upstart so that more people nationwide can get personal loans they need with higher approval rates through a modern all-digital experience enabled by AI.”
The bolding is mine. Who knew? A large, regional bank has a senior VP of Innovation and Disruption. I don’t believe I have ever seen that position for a bank officer before.
They were on the upstart podcast April 27, 2021
Key quote from Mark
“But it’s a different mindset when your trying to digitally digitally transform existing banking infrastructure vs actually trying to solve for Okay what’s out there that could be threating to banks could disrupt bank business models, how do we respond to that.”
Me- I think the Bank of Omaha was seeing Upstart as this company that helps drive disruption in the banking industry and decided to partner with Upstart
First National Bank of Omaha has been with Upstart since 2019.
This announcement seems to address the concentration issue. Maybe Cross River and the other two or three banks that make up the majority of loan funding are at their respective limits for Upstart-referred loans? If so, Upstart has another funding source for growth in personal loans. Regardless, it is good to diversify the referral banks. I think this is really positive in that it is a confirmation of Upstart’s effectiveness that after two years, this bank expanded its funding for Upstart loans.
There are 89 banks with assets larger than FNB Omaha in the US. They have already partnered with Associated Bank, a larger regional. As they move up market, with increased bank asset size, there will be more loans so more Upstart opportunities/leverage. This is clearly a good sign. Delighted with this announcement and another reference bank for Upstart.
Bob (long on Upstart)
The one thing that I find a little bit worrisome is that the pilot program started in 2019 and now, virtually 2 years later, they roll out in full. That gives me pause in terms of how quickly new bank partners are actually going to contribute meaningful revenue.
Granted, the more banking partners Upstart gains and the more positive news are coming from those banks, the less likely is that future bank partners will take 2 years themselves for a roll-out. But it seems equally unlikely that new partners would go full-on from day 1.
I don’t find two years of evaluation to be a bad thing for Upstart. This feels natural to the lending business.
How often can you collect data points about the performance of a loan portfolio? How many data points do you need to get a statistically significant default rate?
For loans, most people are making monthly payments. This means that for each loan, you get 24 data points over two years. If you originate 1,000 loans as a bank, then at most you get 24,000 data points over two years. Compare this to, say, an internet company that run experiments on clickthrough rate, where you can get similar amount of data in days, if not hours or minutes. You need time to make a quality assessment for loans.
The lengthy data collection process goes both ways. Once established, competitors will likely have to go through the same evaluation process to unseat Upstart. It becomes a moat. I fail to see why this is worrisome as an investor.
“How many data points do you need to get a statistically significant default rate?”
The bank has to accumulate loans then monitor performance (late payments, default) to prove out UPST within the context of its clientele before jumping to into a full-scale commitment.