Upstart Holdings: about the company. The company is the developer of a cloud platform for lending using artificial intelligence. The platform itself unites consumers and a network of partner banks of the company. With the help of artificial intelligence in the Upstart platform, consumers receive a high percentage of loan approval at lower rates, partner banks in turn gain access to new customers with a low level of fraud.
Since the foundation of the company, partner banks have issued 620 thousand loans to individuals. In 2020, approximately 70% of loans issued through the Upstart platform were fully automated.
The head of the company, Dave Girouard, previously served as president of Google Enterprise, where he oversaw the global Big Tech cloud application business with a turnover of $1 billion, in March 2012 he founded Upstart.
According to Crunchbase.com, Upstart raised $144.1 million in total. The company's shareholders include Third Point Ventures, Stone Ridge Trust V, Khosla Ventures, Rakuten, First Round Capital.
How the Upstart credit platform works. The company's platform uses AI and machine learning to more accurately assess loan risk.
At the moment, AI includes more than 1600 variables that are "trained" by more than 9 million possible loan repayment events.
Despite the complexity of the technology, the platform is provided to partner banks in the form of a simple cloud application. The platform itself is very easy to integrate into banking systems.
Upstart platform. The platform provides banks with access to consumer loans. The first loan product on the platform was an unsecured personal loan.
Through the platform, consumers can quickly find out about the rate, choose the right loan, and provide the necessary information for verification. The process of lending by the consumer:
Online questionnaire: answers to questions regarding personal information, education and employment history. After filling out the questionnaire, the platform evaluates the consumer for a potential loan.
Loans: After receiving approval, the platform provides credit offers from banks. The consumer can get acquainted with the rates, loan fees, possible loan amount and terms.
Verification: If a loan offer is selected, the platform verifies the data provided.
Disbursement: after completion of the verification and agreement with the terms of the loan, the money is transferred to the bank account on the next business day.
The platform provides borrowers to partner banks in accordance with their criteria.
▪ Referrals: collection of consumer data and transfer of this
data to the bank.
▪ Configurations: setting up a loan program
(minimum credit rating, loan size, interest rates, etc.).
▪ Service: the platform manages all communications
with borrowers, credit reporting agencies.
Upstart ecosystem. The company collects applications via Upstart.com , where consumers are provided with offers from a network of partner banks.Consumers on the Upstart platform are usually offered unsecured personal loans in the amount of $ 1 thousand to $ 50 thousand with an interest rate of 6.5% to 35.99% for a period of 3 to 5 years.
Partner banks can hold loans that match their risks and objectives, and banks can also sell their loans to institutional investors.
Financial indicators of the company. In 2018, the company's revenue growth rate was 73%, in 2019 65%, in 2020 about 50%.
The net profit margin in 2018 was - 11%, -3% in 2019, and about 5% for 2020.
Partner banks. Non-renewal of contracts with current partner banks may negatively affect the company's business and its financial condition.
Competition. The company operates in a fairly competitive market, among the competitors may be banks, non-bank lenders and other lending platforms.
Key personnel. If Upstart Holdings is unable to retain or attract new staff, this may negatively affect the company's business.
To summarize: the company is experiencing a slowdown in revenue growth, while it has a fairly large untapped market (artificial intelligence will gradually be introduced into the industry, and as the technology matures, there will be a sharp increase in technology adoption).The simple implementation of the Upstart platform in banking systems can create a positive environment for further business growth. To date, the application has one of the lowest customer default rates on the market. In total, about 120 thousand borrowers used the service, who repaid the loan amounts with interest for $ 1.5 billion. Last year, developers launched a platform for lending to banks and credit unions. The first client was the startup BankMobile. According to Forbes experts, the service may become a threat to such online lending leaders as FICO, Avant and LendingClub.