Leaders in Lending
Leaders in Lending

Episode 89 · 1 month ago

Lending Leaders: 2022 Trends and 2023 Predictions


We’ve covered a wide range of topics that are propelling change in the lending space this year- from use of technology to policy recommendations to unexpected changes, our guests didn’t disappoint in the insights and predictions they shared.

Despite a difficult macro environment, and among increasingly high interest rates, credit unions grew their memberships proving that lending responsibly and investing in communities drives demand. While collectively financial institutions made tremendous strides in expanding customer experience and leveraging technology,

In our final episode of the year, our host, Jeff Keltner, will take a look back at our series highlights from 2022, and what some key takeaways mean for 2023.

Join us as Jeff discuss:

  • The importance of leading with lending in difficult economic times
  • The potential of blockchain to improve product experiences despite the collapse of FTX
  • Recent AI-powered technologies
  • Inclusivity and access in AI

And then you're 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, and more. Let's get into the show. Welcome to Leaders and Lending. I'm your host, Jeff Keltner. This week's episode, we wanted to really just recap some of our second year in businesses A podcasts. I want to start off by saying thank you very much to all the listeners. You've had more than sixty five thousand streams of the podcast, which is fabulous, really exceeded our expectations. Um, so thank you for your support. First and foremost all of the listeners. Thank you, secondly to all the guests who come on to share your perspectives. And last, but certainly not least, thank you all the team both here at Upstart and it's sweet Fish Media that helped us produce the podcast. I certainly I couldn't do it without you guys, and it's been fantastic. I've certainly learned a lot from this year, so I figured we'd share a little bit about what we've seen on the podcast this year, what I've learned, and maybe share some of the some of the themes of what we expected coming in. So here you go. You know, I started gonna start with some of our most popular episodes during the holidays. You may hear a few of these, may have already heard a few of these replayed as we kind of work our way through the holidays. But our most popular episode of the year, drumroll Please, was from Dave Gerard, the founder and CEO of Upstart. We talked through the history of Upstart, why access to credit matters, how we built the A models here at Upstart, why we chose to partner with credit unions and banks um. The second most popular episode was of Tony Hana from Key Bank that this was a really interesting episode talking about strong technical infrastructure, the future of open banking. I think we called the episodes safe as risky, so I thought that was a great kind of risk perspective on things. Number three Tom fun and talked about the study adoption of AI and m L banking benefits to serving the underserved markets. So I think that was a fun episode. Tom from Associated Bank, and then rounding out the top five Raja from Plaid and Rich who talked about bnp L with us. And so I thought having some fin techs in that top episodes is really interesting. You know. When we started the podcast, we really had a thesis around interviewing talking to banking executives credit union executives about their experience in the industry and what we could share experiences and learning and learn from what people in the field had tried and done. And I think we really expanded that this year to reach out to some fin techs, to reach out to infrastructure players and technology providers, and even some folks in the defy blockchain space to talk about what we're seeing in areas that are not directly from folks in this space, not directly from you know, practitioners in the banking and credit union space, but from people I think we have really interesting perspectives, and it was really interesting for me. We are a little nervous about doing that. It was...

...a little off what we had intended UM and and yet I think it worked really well, so something maybe we'll continue a little bit into next year. UM. One of people's favorite parts of our podcast are the bold predictions at the end uh and so I wanted to highlight a few that have played out and not played out um the way maybe we we thought. So I go through some of my favorite Tony from from Key Bank, I said earlier as one of our our number two most listening to episode of the year, lea that inflation would be a main characteristic of Tony. I think you think you in the prize for that. That's been pretty true. I think we've all been a little bit surprised by exactly what the macro economy had in store for us and our kind of trying to find our way through what's coming. In KALs sal Wars from CMME actually predicted that because consumers will continue spending through the economic cycle. So we'll see and then one's kind of maintained, but we'll see if we'll see if that that retains its truth as we come to maybe a different part of the economic cycle than we've seen historically. There are two two more bold predictions that I thought were worth highlighting that were related in a certain way. One was the idea of ow ownership and car ownership changing, particularly moving to things like unknowned assets, fees for owning assets something more like a subscription model. That was Michael Hostetler from from Crane Credit Union who said that, and then uh Nicole Matthews from the Carolina's Telco credit union suggested Amazon was going to start selling cars. And I don't know if we have yet enough time to to judge the oppressions and accuracy of either of those two specific predictions, but I do think saw the fascinating shift in the auto market in ways that we're somewhat unexpected where we ended up with, you know, a big shift in the way cars are bought and sold. I think we see more changes on the horizon as we look at what the future of e v s are, what the future of direct to consumer models are, So I think there's lots of interesting things coming in that space. So those bowl predictions think are most of these I'm not always looking for one year, so some of these have a few years to play out. But I think the theme around shifts in the underlying infrastructure in in just general structure of the auto market and the auto both not just the auto lending market, but the auto retail purchase process, I think is a really interesting trend and thing that will be impacting lenders for years to come. And so I think those are key interesting themes from the Bold Predictions. But if I just look over the overall guests and conversations I've had, one of my favorite parts about doing the podcast is how much I can learn from practitioners, learn from others in the field, and I find the I used to be nervous about doing these interviews because I needed to be super prepared and in wanted to be ready for what would company. I found that in many ways coming in I won't say unprepared, that would sound wrong, um, but really more curious to learn from people and following the conversation where the interesting topics take us has been a lot of fun for me. And so I learned a lot from all my guests, and...

I want to talk about a couple of things. I think that we're themes that came up throughout this year, topic areas that were current that I think are really interesting. One, you know, I think one one idea that tough times are an opportunity to either to take advantage of market and efficiencies of nervousness. And I think the old of a quote when everybody else's greedy, get nervous and what everybody else is nervous, get greedy. And I think a lot of people are nervous right now. And I don't think that means we have to be greedy, but I think it means there's opportunity to differentiate, to serve and underserved customer. UM. An interesting trend through the year, both through the podcast and just my conversations with industry executives, has been the growth in credit unions. UM. The you know, it's been a big year for credit unions, and I think they have maintained lending, particularly to consumers, despite a difficult macro environment and a difficult interest rate environment. You know, as of November, whin six million people became credit union members this year. UM. It's the highest level of growth ever for growth of credit union membership. So we've got a lot of partners in the credit unions space. We got a lot of guests from the credit union space, and I think that's interesting, and I think credit unions really have leaned into bringing both new kinds of products and new kinds of technologies to enable experiences and someone in an aggressive way. And I think that's really enabled them to lay the foundation for that ongoing growth and to be ready for what comes next. And I think that's one of the trends that I heard from my guess was, Hey, there are uncertain times right now, but this is a moment to invest in the future and to think about how we laid the foundation for what we want to have available and how we want to serve customers, not just today but for the future. And I think those who are able to find the ways to invest and improve UH and drive better experiences for their customers and their members through these times will be the ones who come out really strong on the back end. A second set of topics that UM surprised me a little bit for how much people like hearing about them was was defy crypto blockchain. It's maybe a really interesting time to talk about this. I'm recording this episode while we're still trying to figure out what exactly happened at ft X. You know what that the ripples of that will be across the crypto marketplace. But a number of guests pointed this out to me this year in the podcast, and one of my favorite technology analysts, Ben Thompson, who writes stratecher Um the kind of a daily newsletter. It has a point of view that, like in many ways cryptocurrencies are are a distraction from the real power of blockchain, and I think maybe as cryptocurrencies struggle in terms of valuation, in terms of some of the centralization that happened around the on ramps and off ramps into crypto and defy, this idea of what are the product experiences that can be uniquely enabled by the concept of the blockchain is still really relevant and I'm so optimistic that going into next year we will see some real iteration around what's possible with the blockchain, about new and innovative things being built on top of the blockchain. The first wave of innovation for any new technology is almost always do...

...the old thing in a new way. But the most interesting wave is almost always what's a new kind of product or capability or offering that's only possible in the context of the new technology. And I think that's what we have yet to really see in blockchain, what we're waiting for to hit the market. But I think what a lot of my credit union and banking executives were asking to understand and are keeping their eye out for, so maybe well we'll see some of those things emerge, but certainly was interesting to me, given how little business impact UM, blockchain and crypto has really had on the core banking industry to date, how much interest there was and understanding that technology. The other area that I think probably felt that way to everyone in and I think will continue to in was artificial intelligence. That was obviously a topic near and dear to my heart, to the heart of all of us here at Upstart, but also I think you been in just the last few weeks really an explosion of interest and the opportunity and capability of general AI. UH in particularly, I think two technologies came out that that tell us really interesting things about how these technologies will play on. Those were the two product offerings. Really Chat GPT. If you haven't tried it, it's a chat let's chat that open ai dot com. But you can now chat with the AI body who will respond to you and answer questions, and it's really it's interesting to me that people are really having fun time. I mean, every was worried about homework in the high school essay and being totally written because it can write some pretty convincing pros well and not always I'm not always accurate. It was really fascinating. In the rumors are that GPT for the underlying language model is right around the corner and in order of magnitude more impressive and capable. UM, So that was really interesting. The other technology that came out in the space in the last few weeks that we've seen more and more about is the stable diffusion, which is this text image generation capability, and it's a it's really fascinating. There's a couple of ways you can use it, but you can go just give it a couple of words a description and it will come up with images and paintings and photo realism and it's just unbelievable what the AI is generating. But the lesson I took from both of those because they're really interesting and I think they have a lot of things that teach us about how things may play out in the credit space, in the banking space in general. So Chat GPT was this chat interface built on top of a large language model called GPT three UH and GPT three was almost two years old when Chat GPT came out, so it was not a new technology, but there was this gap between the capacity of the underlying language model in the interface that was placed on top of it, where when they put it in the concept of this chatbot, all of a sudden, a much broader community of people could interface with it. You didn't need a technical background, you didn't need to set up a development environment, you didn't need to have code running locally on your machine. You could just go to a website, type in some stuff and see the impressive answers. And that was both a matter of an interface productization of the underlying technology in a way that was accessible to users, useful for...

...them in different contexts, and also some fine tuning of that model, where there's the core language model, but then the group spent all the time kind of refining the answers and kind of doing a training layer on top of the underlying language model that made it much more useful and insightful. And I think that's really an interesting element of what it takes for a new technology. I think of blockchain and many much the way of a GPT three, where it's an interesting underlying technology, but it needs the right vessel to come forward, the right context in which to be implemented, the right product in which to be used for most people to understand the capability and really interact with it and see the opportunity. And I think we're still in the early days of seeing that in AI and in blockchain UM and stable the fusion was similar. It's you can download it top source, so you can download the code. I tried to do it just yesterday, and I used to spend a couple of hours trying to get all the right Python packages and all the mac My Mac is running the new Apple Silicon or not the Intel Silicon, and these packages don't work. And after a couple hours I gave up. I couldn't I couldn't get it running UM. But then an app came along called Linsa that made it possible to both use stable diffusion in the context of an iPhone app, but also to do something interesting, which was upload tended twenty photos of yourself and get avatars where you could get some, you know, artistically drawn versions of yourself in different superhero mode and sci fi mode and whatever, different kind of themes that they had built. And that made the technology immediately useful, and it became the number one app in the App Store. And again I think it's this really interesting element of UM, the underlying technology advancing to a point. But then having to be packaged and just distributed and made accessible to users in the right way. And I think that's a really interesting lesson for us all about what these new technologies are capable of. But then often the important part, and so many of my conversations were about, well, it's not the technology how I deliver a customer experience, it's how I leverage that to enhance the capabilities of my team or provide um more information at the right time, where to integrate experiences from different places, and so that not just investment in the core technology, but investment and how do I really turn that into the experience my user, my customer, my team member needs. I think is it's a real lesson when you see what happened with chat, GPT or with LINSA in terms of taking an existing technology new but certainly not super new, uh and making it more accessible and interesting. I think it's really interesting lessons for us all to take away. We also had a lot of conversations on the podcast about specifically AI and the concept of responsible lending and fairness head on you know, upstarts Chief appliance Officer Any Delgado had Tom Fawning from Associated Bank talked to him about how AI models enabled greater opportunities to lend underserved communities. And I think that's really a theme that ran through a lot of the people talking about AI, whether it was Natalie Artists from a U B or Nikoleland from the National Bankers Association, or when I talked to that and they called both about the More and Fair initiative, was this idea that...

...we're not what we're trying to do is not use the AI for the sake of AI, or even for profitability in many ways, but just actually be able to serve a community has traditionally been underserved, and the context of More than Fair to ask the question, how do we make sure that the mechanisms, the metrics we're using to guide policy discussions are incorporating not just fairness, which I'm not trying to diminish as an important metric, but inclusivity, of access, of availability of things like credit, as other critical principles and things we have to pursue, and how we think about maybe changing the way we think about those in the context and AI. So I think those two conversations I expect to be big next year. So I'll just slipped to I looked at UM, what's coming down the pipe? What do we what are we going to be doing? What's the interesting stuff for next year? I think those three themes are going to be continual, but maybe overarching them all will be you know, what's happening to the macro economy, how do we measure that? How do we think about moving from a what I might call a risk off environment for many lenders today worried about the future of the credit environment, worried about losses, and moved to a world where they are more confident about their ability to lend safely into their communities. I think, I think we don't really know what that's going to be in that question will be top of everyone's minds. We started working hard on that. We actually uh kind of pre announced in our latest earnings call what we call the Upstart Macro Index. So a measurement that actually isolates specifically UM the macro environment's impact on credit performance and does that in a way that's not impacted by things like mixed shift or changing credit policies, are changing pricing strategies, but really can look at and isolate just the environment of the macro and the macro economic environment and what that impact is on losses in the portfolio. I think it's a really interesting development. So keep your eyes peeled for more on us on that front, because we're just at the early stages of talking about what we're trying to do there. But I think helping people at least get a better picture of how the economy is impacting lending portfolios is the first step to being able to respond to and deal with that, and we're gonna be focused obviously on that through all of next year. I'm sure all of our conversations will have the threat of where is the economy at and what does that do for my my lending my current lending strategy. But then I want to really keep this podcast focused on the big the big trends and chefts that are going to impact the way we think about consumer experiences and banking moving forward, whether that's the shifting environment and auto how we buy and sell cars, what's happening with o ems and direct to consumer, and how that changes the way lenders will interact with financing vehicles, um, the continued evolution of AI its ability I think not only to do things in underwriting, which obviously is an area we've seen a lot of improvement and a lot of focus. But I think across the experience, from marketing to customer service interactions, to automating and processes, to improving and internal operations, there so much room for AI to impact us. I think there'll be a lot of conversations and hopefully here we go from a lot of ideas and list to a lot of deployments and real practice about how these things...

...can impact the business. Um I think the discussion of blockchain, how blockchain is becoming real product and becoming underlying technology that could power really interesting and different products and experiences, will be probably a theme for our guests. Uh And then last thing says, please reach out to us on LinkedIn on Twitter. I'm on both, the companies on both, the podcast is on both. Reach out, tell us what you think, what you'd like to hear about the my my core goal I tell all my guests this when we start the podcast, when we before we record, I give a little speel on what we try and do, and my goal is always that all of my listeners come away with some inside, a different perspective, a different way to think about something, an idea they could try, a lesson they could implement in their business, but are practical positive for their for their professional lives out of listening to the podcast, and please send us your advice on what those would be for you, What people we could talk to, topics we could cover things you'd like to know more about or understand better, so we can find the right guests. We've got exciting guests lined up, you know again, following the credit union, banking executives, some more fintech practitioners, and people on the cutting edge of some of these technologies. I'm excited for where those things take us in the next year and the conversations we're gonna have. I hope you all are excited for the conversations we'll be able to have next year as well. So let me just end this episode with a second round of thank you to everyone who listens to the podcast. I did not expect to have that kind of listenership we've gotten, and I really appreciate each and one of you tuning in and spending time with me each week. It always boggles my mind when people and may be like, oh, I listen to podcast, Like I still kind of can't believe that people actually bother to listen to it because it's just me talking to people, and so I appreciate all of these, you know, for downloading and listening. I appreciate all my guests. Thank thank you to all for coming on and out. It can be nerve wracking to agree to come on on the microphone and the camera and not really know what you're gonna be asked, but we all appreciate the honesty and the conversation and I learned a lot, and I think the audience does as well. And finally, thank you to all the staff here, all the team members who helped put this thing together. It's certainly is me on the front lines, the face and the voice, but a lot of the work goes into it from our team, from Ali here on my team, from everyone here up Starry, who puts effort into this podcast, and then too, our our friends of sweet Fish Media who help us produce and make this thing sound good and make us sound smart. So I thank you everyone who puts us together. And I hope you'll have a wonderful holidays and we'll see you in the new year with a whole bunch of new content and some great guests and conversations. So please enjoy time off and time with family, and we'll be back at it in the new year. Up Start partners with banks and credit unions to help grow their consumer loan portfolios 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 lending platform uses sophisticated machine learning models to more accurately identify risk and approve more applicants than traditional credit models, which rod rates near zero. Up Starts 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 end to 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 quarter. Learn more about finding new borrowers, enhancing your credit decisioning process, and growing your business by visiting upstart dot com Slash four Dash Banks that's upstart dot com Slash four dash 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 Podcasts. Leave us a quick rating by tapping the number of stars you think the show deserves. Thanks for listening, until next time.

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