Upstart, a consumer lending platform known for its artificial intelligence approach to consumer loan underwriting, is expanding its technology to more car dealerships. The criteria used by this technology assesses more than traditional credit and underwriting vectors by including factors such as education and employment. Upstart is looking to expand this non-traditional technology to dealerships nationwide in the next fiscal quarter.
This push aims to serve drivers with fair and poor credit by creating a more level playing field for loan approvals at the dealership level, according to the company. Upstart says its technology will empower drivers across the United States who may not have qualified for affordable financing.
National availability planned for the end of the third quarter
In the published transcript of Upstart’s first quarter 2022 earnings call, CEO Dave Girouard said the lending platform had already negotiated more than 11,000 auto refinance loans in the first quarter. This is almost double the amount funded by Upstart in all of 2021.
After Prodigy was acquired by Upstart in April 2021, the company significantly increased the rollout of its automotive retail product. It currently partners with over 500 dealerships and 57 banks and credit unions, a dramatic expansion from the 100 it started with.
This growth was primarily driven by its commitment to advancing car buying technology. At the end of the third quarter, Upstart said it intended to make these features available nationwide. The Upstart team is working to finalize details, but its loaner software is currently in dealerships in four states in a total of about a dozen bundles with retail loans.
As the economy battles inflation, increased access to credit is all the more important as more drivers need help financing their next vehicle.
“Artificial intelligence will reshape the economics of lending in ways that will reverberate for decades,” and the goal is to “modernize the car-buying experience,” Girouard says.
Technology is a Decision API
Since founding Upstart 10 years ago, the company says it has worked to improve “access to affordable credit while reducing the risk and cost of lending to [its] banking partners.
The company said this not only helps drivers get credit approval, but also ensures they find the best rates available. Upstart isn’t turning to direct auto lending by making loans itself, but rather empowering dealerships and banks to use its artificial intelligence technology to make better credit decisions right in the field.
Girouard, who has served as CEO of Upstart since co-founding it in 2012, said upgrades to its current AI technology will streamline the loan approval process. The AI model framework focuses on what Upstart says is its approach to measuring credit in a more nuanced way. And with only 77% of major banks having an online application, this technology coming directly into dealerships will reach drivers who otherwise would not have access to it.
Dealerships will now be able to leverage Upstarts AI technology to provide instant credit decisions for loans. Just as its credit decision API has served borrowers with expanded underwriting criteria that consider 15 different factors, Upstart’s latest technology will help lenders refinance and purchase loans with more confidence. borrowers who are overlooked by traditional underwriting methods.
According to a statement from Upstarts Product Manager Director Alex Rouse, the credit decision API uses these same 15 different factors to improve the current decision process. It is a simple plug-and-play process that gives full control to the bank or dealer, but encourages the use of available technology to manage business risk more effectively.
What this means for you as a borrower
The seamless API experience is focused on experience and opportunity. Upstart notes that the loan process is complicated and difficult for both the borrower and the lender. The purpose of the Decision API is to improve the experience by providing instant decisions and the ability to work directly with the DMV to circumvent the hassle caused by title transfer or lien release.
Along with that, Upstart says most loans come from dealerships, so tapping into that market directly benefits consumers — particularly because most dealership loans come at a higher cost than those found outside the lot.
So, as a borrower, Upstart’s goal is better rates and a simpler lending experience offered at its partner dealerships – soon to be nationwide. This is especially good news for borrowers with poor credit or no history. Dealerships will have the ability to better respond to drivers based on the AI model. Dealerships can easily consider drivers using the Upstarts Decision API considering education, employment, and more than just credit.
Upstart continues to offer refi
As Upstart expands its footprint, it will continue to offer refinance to drivers. Girouard shared wins from 2021, where Upstart managed over 11,000 loans. The refi process enabled through AI Upstart technology is known to go nowhere with the addition of the Decision API. Its additional technology will continue to enable fair lending and increase lending. This can be seen in the first quarter, where Upstart’s loan approval rate reached 74%.
Advanced Technology Means Increased Approval
The Upstart approach could be an encouraging sign in the world of auto credit, which still tends to favor credit score alone. Borrowers are likely to reap the rewards of this growth as the broadening of acceptance criteria leads to more available loans and fairer lending practices.