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Upstart Says Automated Credit Origination Process Draws ‘Best Borrowers’

Upstart achieved an all-time high in its automated credit origination process in the fourth quarter.

The artificial intelligence (AI) lending marketplace had 89% of its unsecured loans approved through an instant and fully automated process during the quarter ended Dec. 31, Upstart said in a presentation released Tuesday (Feb. 13) in conjunction with the company’s quarterly earnings call.

Upstart CEO Dave Girouard said during the call that this percentage may vary from quarter to quarter, but that the long-term trend has been toward greater automation and, “It’s a big win for us.”

“We believe process automation is a durable advantage for Upstart that creates an obviously better user experience,” Girouard said. “Who wouldn’t want to be approved instantly for a loan rather than having to upload documents, schedule phone calls, or wait hours or days for a response from a credit analyst? We believe a fast, automated approval is essential to winning over borrowers who have lots of choices and little patience or time — and these tend to be the best borrowers.”

In addition to providing a better user experience, the automated credit origination process also delivers a conversion rate that is more than three times higher, Girouard said.

While 27% of the applications that involved a manual step converted to a funded loan, 92% of those that were automatically approved converted, he added.

This has delivered value that Upstart has begun to promote in its marketing, Girouard said.

“Improved conversion from automation mechanically reduces up-funnel costs associated with customer acquisition and data associated with generating the rate in the verification step, contributing directly to our efficiency and allowing us to pass the savings along to our lending partners,” Girouard said during the call.

Upstart made these gains in automation at a time when the company’s transaction volume dipped, according to a press release issued Tuesday.

In the fourth quarter, 129,664 loans were originated, totaling $1.3 billion across the company’s platform, down 19% from the same quarter a year earlier.

For the full fiscal year, 437,659 loans were originated, totaling $4.6 billion, down 59% from fiscal year 2022.

“Despite the difficult lending environment, we delivered solid results to end the year,” Girouard said in the release. “The numbers will show that we’ve actually become more efficient in 2023. And even while becoming more efficient, we’ve laid the groundwork to become a more resilient and diversified company that can thrive through a wide range of economic conditions.”