4 Key Takeaways: How FNBO Lends to Consumers and Navigates Risk During a Pandemic With Upstart

First National Bank of Omaha (FNBO) and Upstart recently teamed up with American Banker to discuss how banks can delight and meet consumer demand while managing risk during the  pandemic. This unique discussion focused on both FNBO’s decision to leverage AI for consumer lending as well as how they have adapted during the first few months of the COVID-19 pandemic.

Marc Butterfield, SVP, Innovation & Disruption, FNBO and Nick Baxter, EVP and Chief Risk Officer, FNBO, discussed a variety of tactics and learnings along the way, particularly engaging with key internal stakeholders, identifying what made sense across teams, and working efficiently with the risk team. 

COVID-19 and its impact on the lending industry

The lending landscape has changed dramatically since the pandemic happened. Many banks slowed down or even halted their consumer lending programs due to the economic uncertainty and potential risk. FNBO made a conscious decision to move with the changes and embrace technology to make it easier for customers to get the right products in their hands when they needed it. 

FNBO focused on three questions to drive their decisions:

  1. How can I approve more people, given a certain risk tolerance?
  2. How can I understand the risk and price more accurately?
  3. What is the loss probability and timing of repayment?

The changing economy and its impact on borrowers

Since the pandemic, interest rates have dropped, but the impact it has on borrowers and risk has also changed. Nick explained, “During a riskier time, the average consumer was paying more. Borrowers on the margin were being declined even though they might have been approvable during more positive economic times.” 

Upstart uses a more comprehensive way to determine credit risk and worthiness. While traditional models look at factors such as high vs low credit scores to connect the dots, Upstart uses a more granular method to determine a borrower’s credit risk. 

FNBO’s 4 key takeaways 

Marc and Nick provided perspective on AI lending particularly during this challenging time. Both recalled seeing positive payments from borrowers, despite the millions facing job loss and hardship. In looking back at the last six months of the pandemic, these are four of their biggest takeaways. 

Takeaway #1: Focus on AI

FNBO already had some components of a digital presence, but realized they needed to increase measures to ramp up their ability to meet customers where they are, which is increasingly online. 

Prior to the pandemic, rather than trying to learn about everything, they were focused on machine learning and used a two-pronged approach. One was to gain a deeper level of how AI works and then examine use cases. The other was to look at other financial institutions that were doing well and understand how and why they were able to do this. 

Takeaway #2: Lead with value and benefits to rally internal teams

Breaking from traditional norms and getting internal buy-in can be very challenging. When asked about getting the executive team on board with adopting an all-digital lending solution enabled by AI, Nick revealed he owed much of the credit to the innovation team. 

During internal discussions, Marc led with how each stakeholder would benefit from these changes. Leading from a position of value was a useful way to help prevent internal disagreements. He identified it as a business problem, and said, “In order to be a successful company, we need to innovate and we need to fix a problem. Everyone can benefit.”

Nick added, “It’s going to be a continuing process. Keep the value proposition and its applicability front-of-mind to the people who are involved so there’s something in it for everybody.”

Takeaway #3: Learn early, learn often

FBNO made it a point to work cross-functionally—their innovation and risk teams were a crucial part of growing their knowledge. With Upstart, FNBO wanted to discover if they could get the incremental value and benefits through specific products.

Marc noted, “It wasn’t focused on the financial returns. Rather, it was what we wanted to learn and what that investment would look like.” 

Takeaway #4: You don’t need to change the whole business strategy 

Even before the pandemic, FNBO was committed to providing value and making sure their customers had easy access to the right products at the right time. This core business strategy hasn’t changed, and having an all-digital lending experience enabled FNBO to serve customers the way their customers increasingly wanted to be served.  

Nick pointed out, “So, what have we seen in the four to five months since the pandemic? For us, it’s reinforced the need that people want credit for specific purposes at a certain time. If you don’t have a product that fits that bill, then you’re wasting your time marketing to customers.” 

Want to know how Upstart can help your business? Contact our team directly at banks@upstart.com to get started today.

* When you check your rate, we check your credit report. This initial (soft) inquiry will not affect your credit score. If you accept your rate and proceed with your application, we do another (hard) credit inquiry that will impact your credit score. If you take out a loan, repayment information will be reported to the credit bureaus.