Introduction

Apple Bank has been committed to serving its customers’ financial needs in New York and its surrounding counties since 1863, providing 161 years of service. As a 16 billion dollar institution, Apple competes with some of the largest banks in the world in the Greater New York Metropolitan area to win borrowers with a fraction of their competitors’ technology budgets.

Their secret? Partnering with Upstart to offer products curated to their customers’ life goals, complete with a digital, next-day funding experience.

Partnering to tap into the personal loan opportunity

Apple Bank recognized the need for personal loans from its customers, who wanted quick access to capital with the same level of personalization and care Apple Bank offered with its other products. The bank also saw the potential to acquire new customers with this product and began seeking out the help of an experienced partner.

Since Apple had limited experience with in-house software development, partnering was an easy decision for the team. As Apple began speaking to several third parties, Gordon Levy, Senior Vice President of Risk and Analytics, described customer experience as the number one criteria in the partner evaluation process.

“The first thing we look for in a partnership is that it must be a sensational user experience for our customers. That is number one,” Levy explained. “There are certainly other aspects, such as underwriting capabilities and credit models, but the first thing we look for is a product that can satisfy all of our customer needs, and Upstart can do that.”

Aligning the internal teams

After evaluating several fintech partners, the Apple team felt that Upstart’s best-in-class customer experience, the quality of its underwriting model and its aligned team set it apart from the competition. Rather than pushing products, Upstart’s experience centered on supporting the customers’ life journeys, including features such as next-day funding. Additionally, since Upstart’s model looked at thousands of variables, such as income and employment history, to assess borrower risk, there was an opportunity to provide affordable credit to borrowers who were historically underserved.

As a very cross-functional team, understanding timelines and milestones was key to gaining buy-in for the partnership. “The feeling from just about everyone was, we need to work with them,” Levy said. Connie Moyer, Head of Compliance, added, “We spent a lot of time doing due diligence, and Upstart dotted all its I’S and crossed all its T’s; Upstart shared a lot of information with us.”

The Apple team decided to move forward with the Upstart Referral Network to acquire net new customers, and Upstart’s white label solution, which enabled the bank to provide personal loans to its existing customers through its bank website and other marketing channels.

Serving borrowers’ needs during the pandemic and beyond

When Apple Bank launched Upstart-powered personal loans through both its bank website and the Upstart Referral Network in February 2021, the bank focused on training its branch staff on the new product and how to speak about it to customers.

“It was a combination of catering and communicating to existing customers while making this a way to acquire new customers,” Levy said.

Launching personal loans mid-pandemic in February 2021 was hugely beneficial to underserved borrowers in New York. Since Upstart’s model is proven to outperform traditional lending models, Apple was able to provide support and financial assistance to New York residents during a very challenging time.

“There is truly demand and a need for this type of product in the communities that we serve. There is a profound need,” Levy said. “Upstart allows us to do business with borrowers that others can’t, and our borrowers know and appreciate that.” One customer writes, “I appreciate all Apple Bank has done. This is my second loan, and I am so grateful, especially for the low-interest rate.” Another writes, “As a consumer in need, we thought about getting a small loan, and we didn’t think a bank could be our savior since we don’t have very good credit. This time, I dared to submit my application, and Apple Bank became my hero today.”¹

Gaining high-yielding loans and new customers

Because Upstart’s AI technology allows Apple to approve more loans than traditional underwriting methods, Apple has gained more profitable loans. In fact, the bank has increased its return target by 300 bps since launching to keep pace with the rising rate environment. After seeing strong yields, the bank doubled its monthly loan volume target effective Q1 2024.

As a bank committed to being prudent with its balance sheet and customer deposits, Levy explained that the majority of loans are performing as expected and well within expected losses.

Another benefit of the partnership is that Apple has gained new customers in the process. Nearly three years into the Upstart partnership, Apple has gained a material amount of new customers to grow relationships with.

Lending more inclusively

Additionally, Upstart has enabled Apple Bank to lend more inclusively to low-to-moderate income (LMI) borrowers. In fact, 28 percent of Apple’s loans originated through Upstart are made within LMI areas in the state of New York.

Moyer shared, “Upstart has developed a product that takes into account people’s lives and has allowed credit to be accessible to so many more people at a much better price than would’ve been available.” Moyer added, “If we were under a traditional FICO kind of modeling for unsecured credit, we would not have lent to as many people in as many lower income areas as we have.”

A trusted partner through outside examinations

According to the Apple Bank leadership team, Upstart has also been a valuable and close partner who has supported the bank through outside examinations. Moyer shared, “My team has learned a lot about how to balance fair lending and AI interests. Also, we’ve learned how to walk a regulator through a non-traditional type of credit lending process.”

What’s next for Apple?

Looking ahead, the Apple Bank team looks forward to serving even more borrowers by expanding personal lending into New Jersey. The team also looks forward to potentially growing its relationship with Upstart into additional future product areas with a primary 2024 focus on deepening relationships with these new customers by leveraging Upstart’s deposit account opening feature within the application flow and lead generation banners.

Ultimately, through the Upstart partnership, Apple has successfully been able to compete with larger institutions in New York while expanding access to affordable credit to historically underserved borrowers. “The Upstart model has allowed us to understand there are ways that a non-traditional borrower can still receive a loan,” said Levy.