Leaders in Lending
Leaders in Lending

Episode 88 · 1 month ago

Seismic Shifts in the Indirect Lending Landscape

ABOUT THIS EPISODE

The car industry has been hit by multiple disruptions in recent years due to the supply chain and the lack of inventory. But people still are buying cars, and they are certainly still applying for auto loans.

Adam Brice, SVP of Lending at EFCU Financial, shares his experience in the auto lending space- what the future may look like in auto lending, and also how AI plays into the future of common sense lending.

Join us as Jeff and Adam discuss:

  • The state of indirect financing in auto lending in the current auto sales and supply market
  • How Credit Union Service Organizations (CUSOs) can enable CU success
  • How AI lending fits in with a common sense approach 

Want to learn more about how Upstart partners with credit unions? Check out this case study mentioned in the episode.

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 features my conversation with Adam Bryce, the senior vice president of Lending at e f c U Credit Financial Credit Union, their credit union in Baton Rouge, Louisiana. I enjoyed this conversation Adam. We started off talking about his perspective on what he calls common sense lending and what that kind of means. It really got into a little bit of kind of automated underwriting AI and where AI fits with respect to common sense lending and more human oriented, human judgment oriented approaches to lending. About that was really interesting. Conversation kind of started and ended with that. In the middle, we talked quite a bit about the state of indirect financing, particularly auto lending UH and where that is going given the current state of both the auto sales and supply market and the way O E. M s and manufacturers now that you're moving in terms of how people buy cars. Is a really interesting exploration of what is coming down the pipe on what the future may look like in auto lending, and also how AI plays into the future of common sense lending. So please enjoy this conversation with Adam. Adam, Welcome to the podcast, and thanks for making time to join us today. Thank you for having me. I'm looking forward to it and I'm really eager to get to talking about some lending issues. Let's do it. Well, let me just start by asking you this question, which I kind of ask all my guess how did you wind up in the banking lending industry? I don't think it's the dream in you as have as kids. What was your path to this place? Man? That that's an interesting question because, uh, you know, I started out that McDonald's as a just a crew worker, and I kind of worked my way up to a manager. Um, I was not really I was not early pleased, you know, being there. It was just kind of a star job as a child, and I was in college and I was looking to kind of get into more of the financial sector because it kind of interested me. UM, and one of my friends who was a manager with me at one of the McDonald's, applied and got a job at the f U Financial at the point at that time it was the Federal Credit Union. UM, So she was kind of telling me a little bit about it, and I applied, and I started off as a part time teller, working twenty hours a week while I was in school, and once I once I graduated from school, then I I became a full time employee. UM. I started off as a teller, and you know, I've worked my way up over the fifteen years that i've been here. You know, I've heard more and more people started off as a teller. I haven't heard that came from the McDonald's crew through the manager to the bank tell. But I've heard a lot of stories recently people starting off and tellers. But I think is it's interesting to see the longevity of people in this industry that let's start off and stick with...

...it. UM. I think it's fast in particularly. I think that's true. Credit. One of the things that's kind of funny. They're like, you know, you talk about the McDonald's thing, um our chief operations officer started off at McDonald's is just like a croup person and she started off as a teller here and she's up to up to you know, chief operations offer. Our VP of operations was a croup person McDonald's. She also started off as a teller here and worked our way up. Um. I feel like, and I'm not saying this, you know about the McDonald's or the fast food industry in general, but working in type of like a food service, I think it kind of prepares you, um for you know, hard work, you know, kind of pays off type of thing. Because I never worked so hard in my life. At McDonald's. You know, we were always on my always on your feet, you're always moving, you're always going. It doesn't stop. You know, people are coming and get food and it's just a fast pace and it it's it was a very difficult and tough job and you know, you didn't make a whole lot of money at it. And I feel like that prepared me very well for the future as far as you know, a job that you know, I was kind of looking for and kind of what type of environment I really wanted to be in. That is that is a fascinating uh, perspective, and I think it's I actually think it's very useful for anybody to have a a service related job early in their career to give a sense of what that's like, what's happening. I always try and tell my kids, you know, but I used to the people working back there, that's a hard job. They're working hard, and it's easy to kind of see the bus invisible, just cogs in the wheel of getting your you know, your happy meal or whatever. But um, it is a it is a hard job. And I think a good experience for anybody puts a lot of things in and uh, it certainly puts the value on a dollar. And you know, working in that type of environment, the fast paced environment, you know, dealing with you know, people and customers and you know, dealing with our food, it's it can be. It's a tough job. It's a very very tough job. Let's talk about a different job for a while now. When we had our earlier chat, you used a phrase that I wanted you to to explain what you mean by and the dive into which was common sense lending. And you say that to me, and the first thing that pops in my mind is the old saying there's nothing so uncommon as common sense. Um, but I'm curious what you mean by common sense lending, how you think about like what what that really means? How you apply that in the context of the credit. So when I look at a review and application, you know, I try to take a common sense approach. And what I mean by that is does the loan make sense? Is? Is the member gonna pay that loan back? Do they have the ability, do they have the stability? Do they have the willingness to do that? And an example that I'm going to share with you is this. So let's say member John Doe comes into the Cray Union and needs a five thousand dollar loan. Well, remember John Doe has a two thousand and eight Chevrolet Silorado with a hundred fifty tho miles on it that it's free and clear of any leans that he wants to use as collateral. Well, generally speaking, most financial institutions will decline that loan because the collateral is too old. It's either policy guide minds, it's not within their...

...procedures. But the vehicle itself was worth ten thousand dollars and John is coming in to get five thousand dollars, so you have a loan to value well in that situation nine times out of tend, especially from the financial institutions that we see around the batter Rogira, they're going to turn down that loan. But then John Doe comes and reads reapplies for a loan, but he's going to go for the unsecured route this time, He's going to apply for five thousand dollars unsecured, and guess what happens, John Doe gets a proof of five thousand unsecured. So in that sense, why why would you want to give someone a five thousand island secure loan versus not wanting to give someone a five dollar loan that is secured? And and that's kind of my argument there. You know, if you're gonna give someone five dollars unsecured, why would you not go ahead and may do some type of policy exception and approve a loan that's secured. I would much rather have some type of collateral on the books when it comes to you know, alone like that, versus going an unsecured route. So at that time, I'm willing to go ahead, make an exception to our policy and approve a five thousand dollar loan on an older model vehicle. You know, if the member were to default, at least we have something to fall back on and we can go and you know, pick up the collateral and at least try to recoup some of our losses. Well, if John doe Um defaults on unsecure loan, well, guess what, You're most fine institutions are pretty much out that money if if it's a loan default. So that's kind of where my common sense approach kind of comes into play. We're it's a fascinating point, and I think it's interesting because it kind of points to the fact that most of our policies have blind spots in terms of what they're protecting against it. And where do you think that comes from? Because you're right that, like you can imagine that at a certain point, if you are willing to totally right, like it's less risky to put a lean enough car than not for the same loan. Why would we approve on over here and not have the ability to have our policy support you know, at least the amount on a secured autolane that we would give an unsecured loan for at a similar rate. How do you think we end up in a world where the policies do that, where they kind of have these strange um because that seems really weird that you have two policies to two products, one clearly safer than the other and the other one willing to make love, but the first one wouldn't like that. Those policies are out of whack. How does that? Why does that happen in the context of our policies. It's fascinating question. It's really hard to to explain why that happens. But I just think that the risk that's evaluated and and maybe you know people or you know employees are and are not thinking about you know, the context of well, you know, if the member is gonna if you're gonna put a member for a five thousand on secure loan, why wouldn't you just approve them for the secure loan and just make the exception. I mean, in that situation with John Doe, we were in a good position the loan to value was I mean, we were in a great position of my loan...

...to value standpoint, we had collateral versus you know, something unsecured where you have nothing really to fall back on, and you know where I where I've developed. That was, you know, before I came into lending UM, you know, I was an underwriter on our indirect side. So I saw some things that you know, dealers were sent us some older model units, like maybe we see a two thousand ten unit with two hundred thousand miles, but the person who was buying the unit was an eight hundred credit score. They had a twelve year job as an engineer, you know, and the loan made sense. And and most of our policy procedures we were missing out on loans like that, you know, we were declined. Other lenders were declining these loans. And once you know, I kind of came into this role, I saw some of those things and I felt like that was an area that we could kind of take advantage of UM. And not to say that I want to be I want the FCU financial to the the you know, the older model unit, you know, high mileage unit type of lender. But no, it's more about you know, taking that common sense of a sense approach, you know, seeing what you know, what the applicant is, you know who they are, what their stability, their ability, their willingness is to pay the loan, you know, and if it makes sense. You know, from a loan device standpoint, you know, maybe the collateral has a little bit higher miledge, but you have a buyer or you know, an applicant who is extremely strong. They've never had delinquency on their credit report, they've never defaulted on a loan, They've paid everything perfect. So we were we were missing loans like that, and one when I came in, you know, it was some of those changes that I started to make where you know, we would instead of just decline the loan, we would I would just go ahead and make a policy exception and approve the loan. And we've had some outstanding performance on you know, some of those lending decisions. I'm curious if you see um the world I mean, I guess I'm started in the world of a HI based underwriting and approaches, and in some ways I think of those as kind of you know, automated ways to have you know, I think what realistically happens when you apply more sophisticated underwriting as you start eliminating the policies like let's say a maximum age of vehicle, because you can say, well, the maximum ajor vehicle is a risk signal. But I got lots of other risk signals, like the ones I might use in my unsecured And so while you know, for like like it's riskier to have an older vehicle or a higher LTV than it is a lower, you know, I can kind of understand the holistic risk and incorporate other factors, so I don't have to have a hard policy kind of well that increases the risk and decreases my recovery value. But in this case it totally makes sense. I would have given them a guy the money unsecure to the risk is still acceptable, and I think in some ways they can kind of automate some of this policy exceptions by really expanding policy and bringing more factors into play at the kind of automated level as opposed to having to have a human...

...judgment. Do you see that as part of what the opportunity for automated underwriting with more advanced than like the traditional policies, which are you know, a pretty limited set of things typically that are in the policy. It's got to be readable, understandable, usable by a human or do you think that there's that's not really where this is headed. It requires some more human judgment to make these kind of determinations. So I do think it does require a little more human judgment to make some of these decisions like that. You know, when I talk about common sense lending, you know, with an AI you know based model, you know, usually the applicant has to fit in a certain box or certain algorithms, you know, to qualify for certain certain things. And a lot of times there's gonna be you know, some certain lockdown parameters on AI where you know, let's say alone would automatically be declined because the unit is eight years old or the unit has a hundred fifty thousand miles, you know, and AI assist that's is built that around some of parameters like that, it's just gonna automatically turn it down. Versus when you have a humans eyes on something like that, Uh, you know, you can make you know, common sense decisions on you know, whether you should approve or decline a loane. And you know, the whole common sense versus AI is is kind of an interesting discussion because you know, I think you know, in in several years and in the future where you're going to see more AI lending. But you know, with regards to AI versus common sense, you know, AI doesn't have you know, the member in front of them, talking and hearing what the member is saying and kind of getting a feel and a read on the member, and you know what they're trying to do and what they're requesting, what they're needing. You know, AI is gonna just you know, have algorithms and have parameters on what uh it's going to approve or what it's going to climb, when it's gonna counter or versus you know, a human who has you know that human aspect where you know, you're sitting down in front of the member, you're talking to them, You're getting a good feel for what they're trying to do and what they're trying to accomplish. And I guess maybe some uh, some emotion, maybe some um of the comments that the members are making may go factor into that decision. Um. I can't tell you how many times where I may have declined a loan um based on what I've seen on a credit report, on a job history, and then you know, uh, it comes to loan application, comes back to me and I get a little bit more of the story from the member and from the loan officer telling me, hey, this is what's going on, this is why they're trying to do this, And I start kind of reloking at things, and it kind of goes back to the old mantra of credit unions, where we're people helping people and we want to try to help you know, our membership. So when I get more of the story and kind of you know, kind of can dot some eyes and cross some teas and kind of re evaluate some things. When I hear these things, I'm able to make a better, more sound decision. And my opinion...

...versus a an eight I modeled that is only going to make you know, decisions based on the algorithms and parameters that are set in that AIM model. Interesting, I guess I'm a little more optimistic than you are. That not that I will replace all human judgment, uh Megan, some kinds of lending. Maybe not. But I do think the uh, the strictness of the policies is due to the lack of ability to use lots of points of data in the model. And I think the beauty of AI is its ability to look at more more holistic picture. Right, if you think about a traditional underwriting policy, it has ten or fifteen characteristics, it might not be able to weigh off. You know, in your instance, a super old vehicle versus a good credit score, and alone we would have made on the under secure because it's got a hey, we don't do old vehicles. But like you know, and and I'm alle can go you know, actually in this circumstance that's low risk, and I'm hopeful that you can actually have policies that are more inclusive or you know, the automated decision if you will. If I think of like the natural outcome of the policy just being programmatized, that like that answer will become more inclusive, more accurate, not that there may not be exceptions that you want to make for data points that you don't have, but that that model can take more data points in UM and like the risk of learning this borrow the money unsecurity go walk. I mean, yeah, this is obviously something we should do and that can be I mean, there's no reason that couldn't be automated in the scene in an aimideline. Fact. I think you do see that UM with a lot of the lenders we work with. So maybe I'm optimistic that there's a I can improve the state of the art in kind of the standard policy outcome and at the same time leave room for, you know, a more holistic picture because obviously, you know, some of my founders would argue that AI would completely be perfect in its decision making, but that would require that every piece of information available to a human be made available to the AI, which isn't a realistic We don't have the fields for all those things, and so there will always be things where there's a story or an element of data that's not available to the model that could be you know, influencing how you want to make a decision. That's that's like not that the model is wrong, it's just incomplete in the case of certain kinds of data or information or story that it just doesn't have access to. Sure, Now, like what you're saying with that, I do see in the future as AI advances, you know, from from under Ryan standpoint, I do see that, you know, AI will be able to make some of those you know, adjustments and assumptions and you know, kind of evaluating the risk versus you know, what is that state versus you know with a I. I do see some of that that's going to come into play. I do eventually see that, you know, AI will be able to kind of recognize some of those things. Yeah, we're working hard to make that truth, so hopefully we'll bring that to fruition. Hey there, I'm David brand, s VP of Lending Operations at Share and View Federal Credit Union. When we saw our members turn to personal loans to consolidate and pay down their debt, we knew we needed to improve our digital process. We were able to launch with Upstart in just sixty six days without any heavy lifting or hiring any additional staff. Best of all, we've been able to work with our account manager to adjuster loan volume and returns given the current economic...

...environment. If you wanted to learn more about how we've been able to scale to ten million dollars a month in personal loan volume and acquire over members to expand relationships with, you can check out our case study on Upstart dot com slash lenders. That's Upstar dot com slash Lenders. Thanks for your time. Now back to the show. I wanted to have back to a category of lending. You mentioned where you started off in the indirect side doing this underwriting, and I think the indirect lending is is really fascinating question. I mean, I think the nature of lending for automobiles has changed quite a bit during COVID. I think we see shifts as ev s come to market and the kind of power balance between O E M s and dealers and where the lenders sitting in between those two things, and as models like Carvana or CarMax that are a little separate from the more traditional UM sales models come to FRISI and so, so I'm curious what you see having having changed durning let's say the COVID time period when we've had really strange impacts the sales of cars as well as the financing, and what you see kind of moving forward in the indirect space. I think it's a lot of lenders I see pulling back or curious or uncertain about what the future of automobile lending is going to look like, given the disruptions going on in the world a finance, but also specifically in the world of automobile sales and distribution. Yeah, so I think COVID kind of taught us a lot about dealerships and indirect lending. And you know what was going on because you saw once kind of COVID hit, you started seeing dealership inventories be affected. You started seeing you know, cars, you know, gone were the days of a dealership having five cars on a lot, where now if you go drive around to most dealerships you might see thirty, forty or fifty cars on a on a lot. And I think COVID had a lot to do with that. And the reason that is, and I think the manufacturers saw this is instead of you know, having five units on on a dealership lot, during COVID, you know, the inventory issues were low. They were having trouble getting you know, chips and vehicles, vehicles were sitting out without you know, without any chips. They were having issues, you know, trying to get inventory out to the dealerships. But what they saw was that didn't stop the customer from coming in and buying a vehicle. No, Instead, the customer would come in, put a down payment on a vehicle and have it ordered, and then the vehicle would come in a month later and they would go buy the vehicle at that point. And I think that's kind of some of the adjustments that you see. And because of that and the supply issue chain, you know, prices went up. Valuations went up on on automobiles, and I think manufacturers saw that and they saw that, well, hey, we don't have to have you know, all these units on the lot because we're still doing great in sales, are overhead still really good, We're still making really good profits, you know, and people are still willing to come in and buy a vehicle, whether they have to you know, wait for it for a month or two months or...

...wherever that may be. And I think COVID kind of helped manufacturers realize that and see that, and so I kind of I kind of think you're gonna start seeing some changes in the indirect landscape with dealerships, you know. And one of the things that you know, automatically point to is Tesla. Tesla has a direct sales to consumer line where there's no intermediary like a dealership UM to kind of you know, maybe sell some mancillary products and you know, have a pricing and you know things like that. You know, Tesla goes from from Tesla to the consumer. Um you may have heard Forward is trying is going to do that with their electric vehicles, where they're going to try the model of we're gonna send vehicles from the manufacturer straight to the consumer and cut the dealerships out. Now some of the some of the peaks and valleys of this is. Let's say for the state of Louisiana where we are located. Um, there are not any um direct consumer sales allowed for autos in the state Louisiana. There is there is a law against that, and there has to be some type of subsidiary or in a mediary like the dealer. Can I ask, how does Tesla get around? I've always been curious about this, Like, I know those laws exist, I know that, you know, the manufacturers seemed to be working towards either direct sales for evs or at least I've heard like no negotiation, no haggle, pricing requirements or they're gonna start to like dictate a little bit more of the customer experience in the sale price to the to the dealer. But how has Tesla gotten around? Do they just not selling louisianay up to drive to nearby state to buy a Tesla or how do they actually managed to sell Tesla's in the state. If you want to buy a Tesla in the state of Louisiana, you can't. You have to go drive into Texas to go buy a Tesla, UM, I gotta go pick it up in Texas, correct, And there are they're actually fifteen states where direct sales to consumer are not allowed UM. Tesla actually sued the state of Michigan in two thousand and sixteen because they had a similar issue, and it took them about four years for for them to settle, but they eventually settled where they were able to sell vehicles through some type of subsidiary. Now in the state of Louisiana, there's a similar thing going on. Tesla last filed lawsuit against the state Louisiana. UM. They filed lawsuit against the Louisiana Dealers Association and certain Motor Vehicle Commission that they believe that UM some of those people were entering enter in an unlawful conspiracy to bar Tesla from doing business in the state Louisiana. And that isn't an ongoing lawsuit right now. So they're trying to you know, be able to sell vehicles in the state of Louisiana. And there's there's obviously gonna be some you know, some other things that play with you know, kind of people coming together trying to go against Tesla to kind of keep them out of the Louisiana market fascinating. So sorry, I didn't mean to interrupt it. You made that point. I was like, I've always wondered how this this worked and what the reality...

...was. So how do you as a lender think about how you deal with this kind of changing landscape for what's happening with the sales and financing a car with me, it's it's got to be I imagine shifting what lenders are expecting or able to do in that space. Yeah. So in the state of Louisiana, you know, e FC Financial is one of the top indirect lenders in the state. We we do, you know, a great business with our dealership landscape, and it does concern me a little bit from an indirect lending standpoint. Um, you know you're seeing tasles at this model. CarMax has a has a similar model where they don't CarMax only uses national enders. They won't use any local lenders. Um. They have a no haggle pricing method, um where you go straight straight to Carmacks. The prices, what the prices. There's no haggling versus you know, going to dealerships. You're you're haggling on prices, you're haggling on ancillary products things like that. UM. But you know, when you see forward, you know, a major manufacturer who you know produces the most trucks UM and sells the most trucks in the country, including the state of Louisiana. Talking about going to a model like this, you know that basically cuts out, you know, a portion of indirect lending because indirect lending is based on you know, dealerships and you know, the consumer going to the dealership applying for a loan after they've picked out a vehicle, and that application comes out to you know, several different lenders, one being US, and so it is a little intimidating to see that. And honestly, I think if Ford has the success that they think they're gonna have like Tesla's UM, indirect could be in a little trouble you know, in the in the future. UM, it will take a while for for some of those manufacturers to adjust to some of those things. But you could see indirect lending UH ceased to exist in ten to fifteen years if you start seeing more manufacturers go to this consumer manufact sure to consumer model. And but what do you mean, like even in Tesla. There's may not be through the traditional rails, but like I bought a Tesla, um, I financed it. It was a really interesting experience for me because I went to my bank and said, you know, I called my the guy I work with at the bank, I said, can I get an autoline? Well, you have to walk into the local branch and fill out. I said, add it. It's a Tesla man. And I went online and I said, they want a finance and I said, yes, I do um and they responded to me with the rate from my bank, who could not originate an auto loan for me digitally, but they were willing to fund the paper on Tesla's website. So I got a loan from my bank through Tesla, right, and they and I was like, I was really stunned. But they were still clearly, you know, offering. They were using an indirect model to work with lenders to offer loans to customers on the Tesla website. So there's still an opportunity there for lenders to some extent. I think Tesla works with a handful just a couple of banks, right, a couple of big national lenders. But you know, at the end of the day, these guys don't want to I mean, they want the cars to...

...get financed and they don't want to be a bank, so they're gonna need to find partners to make that happen, I think, and I think that's what you see with a lot of these national lenders like Tesla or national dealers like Tesla, CarMax, car Vonna. You know, they don't like to deal from what I in my experience, they don't like to deal with some of the smaller community banks and credit unions in the area. They prefer to deal with the national enders. And maybe that's an opportunity that's gonna you know, pick up for some of the national enders, like you know, your cap ones, your chases in US banks and Bank of Americas and things like that. But then when you really think about it, it starts cutting out the small the small guys, the small credit unions, your your smaller financial institutions uh and in these areas, and you know that could you know that could be a problem for you know, smaller institutions going forward for something like that when they're not willing to do business with a local lender unless you know you've signed up through them for like doing like an indirect channel. But you know, you see you see like CarMax, you know, who refuses to sign up local enders. They only deal with national enders, and so they kind of cut the small guy out. And you know, again, if you if you start seeing some of those things like that where we have to go instead of going to X y Z Ford dealership down the road, you know, we have to get in touch with Ford to try to contract them and get signed up with them through an indirect you know, you know, subsidiary um to do business with them, you know, going forward, if they're going to kind of go to this direct to consumer model, but then you know, you look at it this way. Ford has their own financing they have for motor credit. You know, who's to say they just they just hold on with for motor credit and just trying to filter all of those applications straight to forward motor credit and just cut out your national enders altogether. That's interesting question. My experience with those captive lenders is that they are I mean, I don't think they have the capital available to actually lend all of the cords sold in the country right there. They're gonna need some some way to have at least a sational depository dollars brought into funde loans. But my experiences are also not as full credit spectrum as the sales arm of the manufacturer would like to be. Right Like, ultimately, if you go to a dealer and say how do the captives do, they go, Well, they're great in the prime superprime space. But if I get my near prime guy who's buying a used vehicle or a lower in vehicle, they don't. They don't support that right, And I'm going my local credit union who is willing to approve somebody who's maybe you know, has a bit more of a story and is willing to take a chance and look at a different picture than a credit sport. So it'll be interesting to see if that plays out, because my my history is that those captive guys are both short dollars and uninterested in the level of risk that's involved in getting into, you know, the full spectrum of people who buy cars, because ultimately cars are not only by super prime credit holders right there, bought by a pre broad section of the American consumer, including those with less than pristine credit. So it'll be interesting. I feel like they're gonna still need partners in that space to help them, you know, with both the capital and the ability to either take on or...

...at least understand the level of risk that I think most of their systems are not are not used to trying to understand and estimate and deal with. I would I would absolutely agree with that. I mean, they're they're definitely gonna need capital if they were to try to do something like that, and they will probably try to partner with other other institutions, But I think you would see them trying to partner with bigger institutions who have you know, bigger capital to be able to offer them, versus you know, partnering with X y Z little credit union the City of Baton Rouge. Yeah. Do you think they're a play for custos in the space, Maan, I've always thought that the the QSA model is interesting for credit unions where they can kind of band together create a bigger balance sheet in conjunction than any one of them has individually and reduced the burden on whatever the partner is in terms of diligence and oversights, kind of like you know, the QUSO itself or one member credit union and not fifty but then you can bring to bear the balance sheet of fifty or a hundred. Do you see something where that with you know, the credit unions or locals it's sis banded together in a way like that to to kind of become a national player and be able to you know, to be a value to one of these larger institutions where they can get in the game. Absolutely. Um, you know, credit unions, at the end of the day, you know, we are competitive against one another. But when you have situations that you're describing like this and trying to you know, kind of band together and develop a cuso to be able to compete with some of your national banks, you know, I can absolutely see something like that happening, you know, because at the end of the day, you know, you know, they may start ignoring the small guys, and if you band together and kind of come to come together as one conglomerate, one big coust us, so you know, you're able to offer kind of the same things that maybe a national that national lender can offer. So I absolutely could see something like that happen in the future. Yeah, I think of the really interesting that's places out it is certainly a fascinating space and as you said, we've had a couple of destructions that are unexpected. I mean the supply chain, the lack of inventory, um was not necessarily something any of us all and it was pandemic related, but not in the kind of people wouldn't go to dealerships to buy cars way, but in like a total supply disruption. But it is kind of pointing the way towards maybe with the future of I'm gonnaile purchasing and financing. Looks like I do have my standard three questions, and I ask everybody at the end of the podcast, and what's the best piece of career advice you've ever gotten? And I'm curious where it came from me to come from McDonald's or when you were a teller, what's out of jail? Well, believe it or not, it actually came from my dad. I like it. Um so my dad, um uh. He's had a corporate job with a big chemical company for a long time. You know, I've always trusted his judgment, and you know, I always bounce things off of him when it comes to like a business perspective. You know, when I have some questions and maybe he gives me some some good insight and one day you know, I had a question because my supervisor came to me and wanted to give me some more work and responsibilities that may have been outside of my job description. And I called my dad and asked him about this, and this is what he told me. You know, if your supervisor gives you more work and responsibilities, be open and respective. They wouldn't give...

...you more work responsibilities if they didn't didn't think you can handle it. Maybe they are prepping you for something in the future. Taken on, be willing to learn, and do it with a smile on your face. And I've kind of taken that that advice to heart, and anytime that's ever happened, I've always kind of done that and and at the end of the day, it has helped me help prepare me for you know, future movements up the up the organization, and it has definitely helped me do that. I like that. That's great advice. I um. I've seen some movement now, like they called the quiet quitting and the not doing the things that aren't exactly in the job description. And there's certainly, I think a value in placing limits on how much you work in your time. You can't just ask everything but I do think when you get that thing that's outside, it's often an indication like hey, I respect your capability that I need help, and it's indication that you've got a chance to distinguish yourself. And um, you know, it's also reasonable to ask for promotions or things when you're doing that, but I do think it those are opportun unties to really stand out versus the crowd. Great advice. Um, second question, what's the best piece of advice? Maybe maybe kind of cover these last two a little bit, but the best piece of advice about consumer lending? Maybe you're gonna tell me it's a used common sense. Well, and that's where that's where it is. And you know, like I said, I kind of prep myself in the past few days for some of these questions, So that's exactly where I'm gonna go. Um, my best advice has approved a loan if it makes sense? Does the member show the ability, stability and willingness to pay will the old will the member ultimately pay this loan back? And anytime I'm making a loan decision, you know, that's the last question I asked myself before I hit the approval button. Is this loan going to behave does this member going to be able to pay this loan back? And if the answer is yes, then approve the loan. Because nine times that attend your instincts, you know, as an underwriterer, you know, as a as a manager, you know, reviewing these applications, typically your instincts are correct. And when I what I've seen by by doing this and applying you know, some of my instincts and applying some method start lending, you know, it's it's turned tenfold for for e FC financial alright, So use common sense, even if it is not as common as we would like to be developed. Common sense. If you don't have UM, it is a good thing, all right. My last question, what's one bold prediction for the future. My one bold prediction for the future may not be very bold, but I I foresee lending underwriting to be all AI within the next ten years. People want decisions instantly, They want everything instantaneous. We have a younger generation up and coming who instead of waiting five, ten, fifteen mins for a decision, they want it now, now, now. And as you see technology developed, as you see AI developed, you know you're you're you're talking about efficiency standards, quicker responses back to the member, and so I just for see, I foresee with the technology development that we're seeing, you know, around our country and the way things are progressing seen in lending, I think in the...

...next ten years you're going to see underwriting basically go to all ai And it's just I think it makes for better for efficiency for fian troditions and it makes for a better experience for the member in the customer. Oh that's ah. The tenure timeline is interesting because it reminds me there's an old I think it's Alan kay Quotes says, we always overestimate what technology can do in the short term and underestimate what it will do in the long term. I feel like ten years is writing that long term range where people go, I don't see it next year and go yeah, but you know the ten years, five between five and ten years, amazing things can can shift in that time period that can be um can seem unrealistic at the time, But I like that l Ai lending and in ten years beautiful. Adam, thank you so much for taking the time and sharing your perspective today. I really appreciated the conversation. I'm sure the audience fills well, absolutely, thank you for having me. I really enjoyed it and I'm looking forward to here in the here the podcast. Up Start partners with banks and credit unions to help grow their consumer loan portfolios and deliver a modern, all digital lenning experience. As the average consumer becomes more digitally savvy, it only makes sense that their bank does too. Upstarts AI lending 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 learning 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 forward dash banks. That's upstart dot com slash forward dash banks. You've been listening to Leaders and Lending from Upstart. Make sure you never missed an episode. Subscribe to Leaders in 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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