Leaders in Lending
Leaders in Lending

Episode · 9 months ago

2021 Wrap Up: The Top Bold Predictions in Lending & What’s Ahead in the New Year

ABOUT THIS EPISODE

How we grow digitally and use aids such as AI to accelerate current processes have been hot topics in the finance space for a while. And through the conversations we’ve had on Leaders in Lending, we’ve gained some invaluable insights.

In this special recap episode, Jeff Keltner, Senior Vice President Business Development at Upstart, takes the time to discuss the show's biggest themes and some takeaways for the audience.

We discuss:

  • Recurring themes gathered from guests & digitization
  • The best career & consumer lending advice & bold predictions for the future
  • What to look forward to next year

To hear more from Leaders in Lending, check us out on Apple Podcasts, Spotify, or on our website.

Listening on a desktop & can’t see the links? Just search for Leaders in Lending on your favorite podcast player.

To win the consumer overall is going to take getting to a place where we have access to a more holistic view, where we can take advantage of all the day to we have on a consumer in an the experience at any time. You are listening to leaders and lending from upstart, a podcast dedicated to helping consumer lenders grow their programs and improve their product offerings. Each week here, decision makers in the finance industry offer insights into the future of the lending industry, Best Practices around digital transformation. In more let's get into the show. Welcome to leaders and lending. I'm your host, Jeff Keltner. As we entered that time of year here, in the holiday season, we thought it made a little bit of sense to take an episode here and recap kind of look back on some of the themes we've heard and things we've seen through this podcast. So I want to take today's episode and really walk through some of the themes we've heard, some of the interesting moments from our first calendar year here at the leaders and lending podcast. We thought it'd be kind of fun to do. We will not have an episode next week do to the holidays, but we will be back with weekly content for you in the New Year. So we started this podcast this year. Really this was something that our team came up with. is a way to connect with the banking audience. So try and provide some useful content, some insights and to connect with with our in the customers, the partners we had in the banking and Credit Union space. And I was maybe call it a reluctant host. Was Not certainly on my on my to do list to become a podcast host. But you know, what really inspired me to do this was the belief that we could have interesting conversations and I could only maybe help people understand some things better, but I could actually learn a lot myself from the guests, and that's really what motivates me every week to do these podcasts, is the opportunity to learn from really interesting, insightful thought leaders in the industry. So I hope over the course of the first a couple dozen episodes I've gotten a little bit better as a host. I think we've improved the format a little bit. Hopefully my questions and structuring. You've got, lobertter, I certainly know I was very nervous in the first podcast and I've certainly found, I think, my rhythm in terms of asking questions and finding the interesting nuggets in there. I will give you two things I've learned that may be useful to you, but that comes specifically about hosting the podcast and trying to find the interesting perspectives. And so I'm always looking for some combination, and I tell all my guests this, either interesting insights or perspective, kind of unique points of view, or actionable advice, something either something you say I hadn't thought about, I hadn't thought about things that way, or something that you can go hey, I can take that and use it tomorrow or or try that or look at that metric or think of things that way. And in the two things I've learned, the really interesting number one, when I have prediscussions with my guests, which I often do, if I'm not careful, they give me the best answers in the pre interview and then when I come to the podcast I get quick yes, no, maybe that seems right, and so I've often tried not to keep the dialog pretty fresh, for both myself and for the gas, because I do find that it's very easy for them to give me the great answer up front. That's probably a general statement about life and people and interviews and questions, but I found it really interesting in the second thing I've learned is just how frequent weekly actually is, and I know that we enjoy making the podcast but making sure we have interesting guests every week as a challenge. If you have suggestions for people or topics or categories you'd like to learn about, please do email me at Jeff at upstartcom. We would love to hear about those and make sure we can find guests that are going to be most interesting and useful for our audience. Well, those are certainly been my things and I'd like to keep today, you know, either actionable advice or insightful perspective. But I really what I really wanted to do was just take a couple of minutes and walk through what I think of as the themes, the kind of recurring messages that I hear from my guests and what...

...they've been and maybe a few thoughts about them. So I think right from the very beginning we had on Richard Hunt to start with, Kathy Myers and Mare from first financial bank and Mark Butterfield from First National Bank, Olmahall and it was very clear that digitization was going to be one of the major themes for all of the episodes we had. It's very clear that every financial institution fee feels a ton of pressure to move from, you know, traditional processes to digital enabled processes, I would say now even to mobile processes. Not even digital just in the web browser, desktop optimized is not really enough anymore, and that that trend was really accelerated by the covid pandemic and that really forced most financial institutions to take what had been a five or a ten year plan and turn it into a one or two or three year plan. And I think that's, you know, everything I'll say is kind of like themes on that, on that core f fundamental theme, which is, like I fail, every guests wants to talk about. How are we going digital? What does that mean? But I really found three things I want to take away as kind of high level messages about what's coming and digitization or how you win that I think kind of ran through multiple episodes, each of them and we're really the kind of the the higher level themes that I took away from the specifics of each guest talked about. So number one, I think every every fiphigh will love to hear this, but the human touch still really matters, and this was a really interesting theme to see from all of our guests how they're thinking about integrating digital experiences with in person, on the phone or at least a more human touch, and when and where those things make the most sense. And I think you know, I think why. The annual for first of Marcredit Union recently kind of had the phrase finding the right mix of bricks and clicks and I love that. Yet to love a triple, triple rhyming is always good. But I think right from from our early episodes we talked to Rob Relli about how they enabled their branch employees to interact with a digital experience, how happy they're, their branch employees were and their customers were, even those who started that application experience in branch, but then we're able to complete digitally. I think that was really powerful. We've seen a lot of that conversation. Anything else point that they were actually getting certified Financial Planning Capability, Certifi Financial Coaching, sorry for their branch employees. Was a really interesting take on how you do this. But a lot of our conversations have talked about moving the more administrative processing, you know, kind of wrote work to digital and ideally automated, right. And then secondly, moving on from there, how do we then actually up level our staff to be able to have more value added advisory conversations with our clients? And I think that theme of needing to figure out not giving up on the human even the physical and branch that's still a thing we need. We don't need it for everything, right, and some of the cashing a check, you know, making withdrawal, submitting an application, those things may not have to happen in branch. But figuring out what kind of product may need to have at least, if not an impersonal experience, the human experience. I think the conversation with Axos Bank where I was talking to to them about their ex variance and being branchless, right, and how they still had a high touch experience. Anthony was talking about how they brought really a high touch experience despite a branch lest footprint. I thought that was really interesting to make sure that, when you're thinking about moving forward digital and human touch, that human touch doesn't have to be in person. It can be virtual, right. But where do you where do you really optimize for the high touch experience and what that's going to provide and how do you automate a lot of the rest of that and provide a digital front end. The second theme I heard kind of flows right out of that one, which was, when you think about your digital road map or your transformation road map, whether you want to think of it as digital...

...per se or not, that you really want to start with the customer at the center. And the two conversations where this really stuck out to me were mark from USA and Jim Wexler from from whisfiss Oh. I think really were talking about wanting to not just take and take a process and digitize it and in whatever, but really start from the customers needs. How do I put the customers desires once at the middle, not let my ORC Chart, which so how often happens in larger organizations, where the most important link on the website isn't the one that customer wants the most, but the one that the has the most cloud internal of the organization sween. That what we sometimes in technology called shipping our ORG chart, as opposed to following our customer and making sure we're solving their needs and creating value for them. And so I think that distinction was was really interesting to me. That focus on starting with your customer. I think you know jumped about putting the customer in the room and putting the customer in the center of your thinking. I think is really critical and flowing out of that, I thought was this great conversation that kind of exemplified by what we talked about with Matt From Liberty Bank, where we talked about the need to not only think about digital as the way the consumer interacts with the institution, but actually how do I transform my internal processes to match what I can do in digital delivery? And then if I if I take my current helock process, I think was the one mat really focus on it forty five or sixty or ninety days for many in the industry, and digitize it, but I don't make it better, right I keep the same processes in the same number back and forth and the same documentation requirements, then I haven't really met the expectations. And another thing here, another theme, was really the high level of expectations consumers have for simplicity in their interactions and I think a lot of what I was hearing here for starting with your customers needs was make sure you're really thinking about how do I re engineer my process so that I can deliver a super high quality digital experience right, and that kind of theme, starting with that customer need of not just thinking of digital as a code of paint over an existing system in process, but the need to really re engineer, re architect, maybe the financial offering, the actual core of the product, maybe just the process and the way I think about delivering it, but really starting from first principles to build what can be a really great experience, a really great capability, not just a digital version of what we had before. I think was really interesting and so that, to me, will be another of the big themes that we take away from here. So human touch. How do we integrate the human touch, when and where, and how do we pull that together with our digital and then how do we start with the customer make sure we're really taking a holistic approach to moving our experiences into the digital age? was another great, I think, theme from these conversations. And then, you know, I think you can expect this because we picked a lot of the guests, but I think this sense that data and analytics and AI will be a core differentiator, not just to digitize, not just to improve processes, but also to really get to improving the way processing is done, using data in a smarter way, in a more full featured way. I think was really interesting. We talked about this with with Jake and chuck when we talked about from a bound credit union, when we talked about their kind of work around analytics. How do they get smarter? How are we building that infrastructure, data layer? I think was one of these pieces of vice that we got through the course of this these episodes. It was really interesting. How do you do you think about if data is a kiast? Are you managing it well? To all of your systems have access to all of the information you have on your consumer? Can you leverage it all to get a holistic picture? We talked about this with gym dikes from terror day. How do you get a holistic picture of your customer so you can make smart decisions about documentation maybe you need in the loan...

...process, about products to offer to them so when they call in they're getting a personalized experience? How do we you know this, since the data is going to be key and you're not going to win in the new world just because you have a digital front end and in fact not just because you kind of re engineered your processes. That might help you really be the best in class at one process, but to win the consumer overall is going to take getting to a place where we have access to a more holistic view, where we can take advantage of all the data we have on a consumer and any experience at any time, digital, in person in the branch and a chat, and so that that infrastructure, in that kind of full core, fundamental data layer and how that data layer enables different kinds of experiences is critical and I think we also talked about quite a bit how the application of Ai across that kind of enhanced set of data can really provide tremendous advantage to consumers. You know, we talked about this with Sam said, who from customers bank, where kind of went through performance of different loan portfolios through the stress of the initial periods of the pandemic and how aid kind of I think many historically look at ai in the context of underwriting and said, hey, it makes sense that this, I can see great results, but what's going to happen when we experience a stress? And so we kind of walk through the results we've seen and the power that AI has demonstrated, not only to help increase approval rates and lower loss rates and better price risk during normal times, but even to increase that amount of separation and kind of better protect portfolios during times of stress, at least as exemplified by the current pandemic. Think that was a really interesting conversation. When we talk to Jim Atara, another kind of angle on this from Apple Bank was a question of can we use AI to increase the customer base that we can serve, to grow our portfolio by being able to better serve conference, better understand risk and thereby increase our ability to serve those customers? And this is one of the fundamental things that brought upstart and me into the financial services industry in the beginning was the fundamental belief that you know, when you look at credit, that many people are either denied credit or overcharge credit, and the people that are denied often not because they wouldn't pay back, with because we didn't understand that they would pay back. And example, I was us. You can you can look at any quote unquote risky pool that maybe has a twenty percent to fault rate or fifteen or thirty, whatever you want, but it just US twenty. As an example. If you have a twenty percent to vault rate, that's pretty scary to a bank for sure, but it also means eighty percent up borrowers. We're good and we're often declining that entire pool because we can't tell the eighty from the twenty, and that's a failure of the credit system and one that AI can help overcomon. As you do that, as you close that gap in our understanding credit risk and started proving some of those eighty by understanding who the twenty are that are not going to actually be able to pay you back, you're able to expand the number of customers you can help, which is great. And of course we always look at a credit loss is not only as bad for the lender, which it obviously is, but also bad for the consumer. Whenever we've given a bar where alone that they're ultimately unable to repay, we haven't helped them either, and so it's bad for everybody. And when we can use AI to improve that, we're now able to get great performance results but also actually improve the number of consumers we could serve. As lenders, which I think is really what brought everybody here. And of course we had a great episode with upstarts. Paul Goo ore, Co founder, had a product and dated science where we really delved into some of the specifics of how upstart is thought about the challenge of AI and underwriting from a data point of view, a modeling point of view, a regulatory point of view. So that's a topic that's obviously there endeared our hearts. But those were kind of the three. If I think about the the overarching message of digitization is coming. What do we do? I think of those is the three big things I took away from this. Like the human touch still matters.

We got to figure out how and when to integrate it and leveraget and how to combine it with digital to as we're building digital experiences, start with that customer as your core focus. Don't they'll start with a technology you have or the thing you want to build, or start with what your customer needs. Make sure you're solving for that and make sure you're digging underneath the processes so that you're not just putting a digital code of paint on top of what is, in effect the manual process we've seen. I've seen processes that are submit a form and then it all goes back committed the branch to sign your paperwork and like that's not digital right. How do I transform my process to really deliver on the promise of digital summer? Two, and the number three, obviously, is the infrastructure for data and the value of data and the ability to take advantage of data and the technologies like machine learning and artificial intelligence and how they will really enhance our ability to get the most out of the data we have. I think those were kind of the broad themes I took away from from the podcast. Would love to hear your thoughts on if I miss something or the other other themes you thought were really important, because I kind of look at the the threads that ran through many of our conversations. Those were those were some of my the ones that I took away at as kind of most meaningful and inconsistent from those conversations. One are the things we've been doing from the beginning of the PODCAST that I've really enjoyed. As I was closed with three questions. What's the best piece of crue advice you've ever gotten? What's the best piece of consumer lending or consumer finance advice you've ever gotten? And then, finally, what's one bold prediction for the future? I've been asked as now once as a guest on a podcast, but I wanted to share a couple of my favorite of those. I thought there were some really interesting answers. Are All interesting, so you should listen to all the episodes and here all the predictions, but a few that set out to me as either interesting or insightful. Number One, Gym Ataria from Apple Bank, who told us that I'm of growth and consumer learning. Market share will come for small and midsize banks who take advantage of INTECH partnerships, and I love this. I think the ability for small and midsize banks to compete and to actually grow and beat some the larger institutions to take market share, particularly in the consumer segment, is really possible, and they can do that through investment in technology, through partnerships with financial technology comes. I think there's a huge amount of opportunity the obviously it's in near dear to our heart, so we'll do that. You know, I think maybe I naturally picked that, but I think that's a really strong message about what the future of this industry can look like for credit unions and small banks, as I think that's that's really valuable. Number two, nate longfellow from most Fargo toils. Customers will rule, and I do think this is a key message. It kind of goes with my themes the conversation above. But ultimately I think nates point was customers are in charge and whatever you think the answer should be, the customers going to determine their own answer and it's up to us to figure out what that is and give the customers what they want. And consumers are now more empowered than they've ever been, whether it's shopping sites or embedded finance and different places. But can consumers no longer have to accept and they are used to an incredibly high degree of service and they will be imposing their expectations upon us and it's up to us to kind of meet those. So I thought that was the primacy of the consumer at the top of the food chain. I think it is a really interesting trend to see in it is interesting prediction and my third interesting prediction. But I really like Matt Gohman and from Drumming Community Bank, who said embeddedded finance will become the whole pie. I think that was his phrase from the podcast. And this is really interesting to me that the idea that finance is becoming embedded. This is sort of been true point of sales. Obviously, to some extent, embedded finance, with the idea that we're putting finance and embedding it into different experiences, both lending and depository, savings and investment, and it's kind of being woven into the fabric of different kinds of services, be they merchant type services or advisory Type Services. I think is a really interesting concept. And the question of then, how do we as financial institutions shift to be now be able to offer our services in...

...a way that consumers want to experience in those embedded locations? What are the partnerships we need? Where the technology capabilities? What are the integration possibilities that drive that and the drive winners and losers in the space, I think is a really interesting one. So that that message that embedded finance maybe is that the core, I think is a really interesting prediction. And then I had to end with this one from from den Jim Dives, from terriveror anybody. He said the future. He made a grat reference to the graduate movie, which it just I'm a soccer for I guess. And the future in this kid is not plastics, but the future is data, and I think that's really true. There's everybody's trying to come up with their analogy, as they to the new oil, if they do the new sand, what it? What is data? But I think what we know is the few is going to come in data. But, more importantly, the future is coming to those who can take advantage of the data, and that's a very different thing and it's in many ways overwhelming the amount of data we can capture or have on an individual and then the question becomes who has both the inhouse capabilities, the technology partners and a data infrastructure, the piping in the tubes and the wiring to actually be able to capture all the data points and have them available to the right people in the right formats at the right times to be able to take advantage, and then who's going to do the best job actually leveraging that data do something? So I agree with the Jim that data is the future and in the future will be will be one by those who are able to make the most value out of the data and I think that is still an emerging and evolving skill set. It's not obvious to me exactly how that plays out, but I think Jim is probably absolutely right that the future is data and that's something we all need to figure out how to get on board with and how to take advantage of and, you know, actually be in the forefront of being able to take advantage of that data and and I will say it can feel like your way behind, but I think we're the very early innings of people really getting to understand what the power of that data is and how they can leverage it so it's not too late. And my other piece of advice that I've given many times, I think, over the course of this podcast, but is there's this infrastructure layer of data that's not sexy. It's not the new web APP or the lap or the fast consumer thing, and those are cool. It's not the new, you know, automated IV are tool that lowers your calls in our costs and all those things are really cool. But there's this layer of data capability that allows you to integrate data across all your systems and I I think that is a it's kind of like the trump that bridges and the tunnels and the roads and interstate highway system that make transportation here work. The all of those things only work if you can actually get all that data and share it and make it usable and have it in the right formats and accessible with a timeliness to it, and I think there's a ton of investment to be made in that space. That's super valuable for anyone and I think it's a pretty cool thing for people to be able to go and do because it's going to really pay tremendous dividends and your ability to leverage that data over time. So those are a few of my thoughts, both on some of my favorite bold predictions from from the past a couple episodes, as well as some of the themes that I've taken away from the guests. And there their things. I want to say, as we're coming through the Thanksgiving period and into to my favorite holiday season time of year, a big thank you to every guess that's come on the show. I certainly have learned a lot from all of them. I hope all of you as listeners have learned a lot from them as well, and want to give you guys a little perspective on what's coming next year. So we will be back in the new year with weekly content. We're going to continue to kind of try and keep very high level of interesting content with that focus on, you know, unique perspectives or different perspectives and insightful perspectives and actionable advice. So kind of these interesting either points of view for way to think about something or or something you could take away and implement really quickly in your institution being kind of my guiding principles for what I'm looking for in my interviews. And...

...then we're also going to try and mix in a few different kinds of guests. We really started this the show with the sense that we wanted to have executives from the learning industry there, and we've had a lot of learning executives and I want to have a lot more people in the trenches doing the job who can share their wins and their misses and their learnings with you so you can learn from what they're seeing and doing and we can kind of all go through this journey together. But I also want to start mixing in a few more slightly different episodes from service providers, fintext maybe areas like crypto and blockchain. You know, people like ai providers or marketing agencies. I think subject matter experts and topics that are meaningful, useful, important for audience understand execute well, but aren't necessarily people who are doing the actual job of learning executive. So I'd love your thoughts and opinions on kinds of guests that could be interesting. I'd really like to get people who are at the forefront of underwriting or regulatory issues or blockchain and web three what that's going to look like. You know, mobile technologies, Ai is, all these things that I think are are impacting our industry in our space. I want to make sure I'm bringing in the right subject matter experts from outside the space who really can help us understand where these things are taking and pushing us. And then I'm going to have a couple more episodes for some upstarters. People really liked my conversation with Paul this year is one of our highest reviewed. Coming around episodes, we'd like to bring our other cofounders. I got three cofounders upstre so I gotta we got to get everybody on the on the podcast here. So you'll hear from Anna and Dave as well, and so we'll do a little bit of that and, of course we'll continue to bring on lots of Credit Union and bank executives who are in the trenches every day doing the job running consumer banking and consumer lending programs, to share at their wisdom and insight and knowledge and experience with you as well. So couple of things are changing, but the one thing that won't be changing as our commitment to continuing to bring you new and interesting content every week. We are our weekly podcast and we're going to keep that going for as long as we can. As I said at the top of this episode, we won't have an episode next week. We're taking one week hiatus for the holidays. Please do enjoy the time with your families and relaxing a little bit, and then we will see you right up in the beginning of the new year, back to our weekly cadence with useful content. So happy holidays to everybody and thanks for listening. Up Start Partners with banks and credit unions to help grow their consumer loan port folios and deliver a modern, all digital lending experience. As the average consumer becomes more digitally savvy, it only makes sense that their bank does too. Up Starts AI landing platform uses sophisticated machine learning models to more accurately identify risk and approve more applicants than traditional credit models. With fraud rates near zero. Upstarts all digital experience reduces manual processing for banks and offers a simple and convenient experience for consumers. Whether you're looking to grow and enhance your existing personal and auto lending programs or you're just getting started, upstart can help. Upstart offers an into end solution that can help you find more credit worthy borrowers within your risk profile, with all digital underwriting, onboarding, loan closing and servicing. It's all possible with upstart in your corner. Learn more about finding new borrowers, enhancing your credit decisioning process and growing your business by visiting UPSTARTCOM forward banks. That's upstartcom forward banks. You've been listening to leaders and lending from upstart. Make sure you never miss an episode. Subscribe to leaders and lending in your favorite podcast player using apple podcast. Leave us a quick rating by tapping the number of stars you think the show deserves. Thanks for listening. Until next time. The views and opinions expressed by the host and guests on the leaders and lending podcast are their own and their participation in this podcast does not imply an endorsement of such views by their organization or themselves. The content provided is for informational purposes only and the discussion between the host and guests should not be taken as...

...financial advice by companies or individuals.

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