Online digital lender Upstart invested in technology including automation and AI to improve its loan processing and underwriting models in the third quarter. 

The effort resulted in increased automation in loan processing, Chief Executive Dave Girouard said during the company’s Q3 earnings call this week. This quarter, 88% of Upstart’s loan processing was automated, up from 75% in Q3 2022. 

“We continue to benefit from high levels of loan processing automation and fraud modeling efficacy,” Girouard said.  

For example, the San Mateo, Calif.-based company also has automation in place to block fraudulent applications and has updated its core personal loan underwriting model to improve decisioning accuracy by about 15%. 

As Upstart continues to invest in AI, its clients are migrating to its digital options, with nearly 70% of loan applications filed through Upstart’s mobile platform, according to the earnings presentation.  

BIGGER PICTURE: Financial institutions including Citibank, Wells Fargo and Fifth Third Bank also invested in automation in Q3. 

Fifth Third is using automation to process auto loans while Citibank is using automation in its back-office operations to drive efficiency. 

BY THE NUMBERS: In Q3, Upstart reported: 

• Revenue of $134.6 million, down 14% year over year; 
• Net loss of $40.3 million, compared to a $56.2 million loss in Q3 2022; and 
• Operating expenses of $178.4 million, down 17% YoY. 

NOTEWORTHY: During Q3, Upstart gained four financial institution clients: 

• $1.3 billion Farmers Insurance Federal Credit Union; 
• $623 million Heritage Financial Credit Union; 
• $10 billion Idaho Central Credit Union; and  
• $169 million Naveo Credit Union.

FLASHBACK: In May, Upstart launched an automated lending solution for small and medium-sized businesses and added capabilities to its auto lending segment by launching digital financing and online sales applications to improve loan approval rates and expand credit access. 

MARKET REACTION: Shares of Upstart [NYSE: UPST] were down 1.18% from market open to $20.87 at market close. Upstart has a market capitalization of $1.70 billion. 

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