Vantage West Leverages Short-Term Loan Flexibility to Withstand Economic Cycles
By Allison Huber, Content Marketing Manager, Upstart Lending
NAFCU and Upstart’s recent webinar “AI Lending Partnerships and the Power of Efficiency” featured some powerful advice from Vantage West’s Chief Lending Officer, Jeremy Pinard, in light of the recent failures of both Silicon Valley Bank (SVB) and Signature Bank: “Optimizing your portfolio to withstand the economic cycles that we go through and creating optionality is key.”
Alongside Upstart’s VP of Account Management, Ed Walters, the two discussed how personal loans can serve members’ needs for short-term cash flow support while delivering on some much-needed diversification as economic cycles change.
Delivering on members’ credit needs
Pinard explained that several factors caused the leadership team to seek out a fintech partner for consumer loans, including evolving member expectations and financing needs. Over the past 18 months, Pinard explained that members’ spending habits have shifted towards credit cards and personal loans for short-term cash flow support, especially as savings have dwindled post-COVID stimulus and inflation has risen. “We’re really seeing a shift from ample savings to leveraging credit to maintain a quality of life,” said Pinard.
In addition, the Vantage West team knew that they needed to improve their digital experience to meet members where they wanted to be met, both online and in the branch. As a $2.7B credit union heavily concentrated in Tucson, Arizona, the Upstart partnership would allow Vantage West to reach new members outside of its physical branch footprint.
Leveraging high-yield, short duration loans
Personal loans also afforded the Vantage West team the ability to quickly scale their portfolio without adding additional headcount and use their high yield and short duration to invest back into their members. Working alongside their dedicated account manager at Upstart, the team at Vantage West set their appropriate targets for volume, losses and rates.“We are now bringing on partners like Upstart to drive volume we would never have access to,” Pinard said. “Lending drives the revenue we use to invest back into those digital experiences for the member.”
How AI is helping Vantage West lend deeper
Prior to Upstart, the credit union was not lending heavily to near-prime borrowers and with the improved credit decisioning of AI based models, they are now able to lend deeper down the credit spectrum without increasing losses. “That’s what I love about that partnership – we have Upstart’s experience and partnership to dip into that near prime category so we can learn as an organization and build that capability,” Pinard said.
Pinard underscored that understanding risk appetite was key in building the partnership, and six months in, loss performance has performed better than their 5 percent target – the credit union has yet to charge-off their first loan.
Preparing for economic cycles
Moving forward, the Vantage West leadership team is prioritizing both organizational automation and adoption of artificial intelligence. By automating low value-add work, the team can deploy a more robust balance sheet while cutting their expenses.
Pinard and team view the Upstart partnership as an integral piece of their goal to use AI and more data points to improve credit decisioning and ultimately create a better digital experience. Moving forward, the partnership will allow them to have continued optionality as market conditions change and also provide the revenue to invest back into better experiences for their members.
In the wake of the SVB and Signature collapse, Pinard implored credit unions to revisit and evaluate their balance sheets to ensure a healthy diversification strategy. “Recent events with SVB and liquidity show that if you don’t have levers to pull and you’re just a mortgage shop, you’re hurting. The partnership has allowed for optionality to shift originations and create risk-adjusted returns, geographic diversification and for us to become a better lender to near-prime borrowers.”
In case you missed the webinar, you can check out the full recording here.