Upstart represents what Carsurance describes in its infographic as 2018’s most impactful innovations in the financial services industry. This San Francisco–based startup uses artificial intelligence as the bedrock on which its peer-to-peer lending platform is built.
Since its inception in 2012, the company has been serving as a matchmaker between young professionals in need of a personal loan and any willing lenders.
After achieving profitability in the second half of 2018, Upstart is planning to open its licensing business to more financial institutions. Recently, it raked in a total of $50 million in Series D funding.
Comprehensive Credit Scoring
What makes Upstart special is its AI-driven algorithm designed to assess the creditworthiness of borrowers more accurately than oversimplified and misguided FICO scores.
The tech startup uses machine learning to analyze the latest consumer information to guide its partners when it comes to charging rates and determining proper loan sizes to different applicants.
Unlike today’s norm, Upstart does not stop at a person’s credit score and years of credit. The company also includes an applicant’s education, area of study, and job history into the equation. As a result, it has been able to assist numerous borrowers, usually millennials, in taking out a larger personal loan at a lower rate.
Upstart puts a premium on automation to eliminate the need for inconvenient documentation and time-consuming phone screening. The company was able to fully automate two-thirds of all the loans it processed in the last 24 months.
White-Labeled Lending Platform
A P2P lending platform at heart, Upstart has been licensing its AI-powered application as a “lending-as-a-service.” This way, banks and credit unions can leverage the startup’s patent-pending technology for risk modeling and automation.
With more accurate analytics, the company has been helping its partners make sounder credit decisions, which is especially critical when offering unsecured loans. Through white labeling, Upstart lets financial institutions easily implement unique credit policies and terms that make sense for their lending programs.
Upstart is a quintessential fintech startup with an ambition for permanent disruption of the financial services industry by fixing its outdated, flawed credit reporting system. With its proven longevity, consistent profitability, and promising business model, other companies in this space may learn a thing or two from it in terms of reconciling innovation with sustainability.