Deeply connected to the Kansas and Missouri communities for an impressive 88 years, First Federal Bank of Kansas City (FFBKC) is laser-focused on serving its customers through consumer loans.

As a mutually owned institution (meaning its depositors own the institution), customer success is at the heart of the bank. With 11 branches in the greater Kansas City area and a nationwide lending presence, FFBKC is known primarily as a mortgage lender.

However, with a strong belief in empowering consumers to improve their financial situation, like consolidating and paying off high-interest credit card debt, FFBKC noticed a gap in its product offering — unsecured personal loans.

Historically, personal loans weren’t offered at FFBKC, but personal loans aligned with its mission of helping customers pay off their debt at lower interest rates while also diversifying their assets. "If we were going to be truly about our mission, vision, and values to help communities prosper, we knew we needed to add a product offering in the unsecured consumer lending space to help our customers," explained Barry Cooper, Chief Innovation Officer at FFBKC.

Unsecured loans also fit into the bank’s strategic plan to intentionally and proactively engage in fintech partnerships. The next step was finding the right partner.

Upstart: A blend of scale, ease, and speed

At a FinTech conference, FFBKC’s executive team saw a presentation given by Upstart and was impressed by the technology and white-glove service offering. Though FFBKC had already started to build an infrastructure to provide digital products and services, the reality of building its own platform internally would be expensive and risky.

Cooper explained that as a smaller community bank, FFBKC couldn't grow new products and services itself. “We had this desire for a turnkey solution, and we found a partner that had the right type of attitude about a partnership. That made it easy,” Cooper said.

FFBKC saw Upstart as a solution to help their customers quickly access affordable credit while reducing lending risk and costs. The partnership meant FFBKC could proactively help its customers by launching a new product, all without taxing the bank's resources.

From a business standpoint, FFBKC knew that Upstart could help it scale quickly because of Upstart's turnkey infrastructure. This meant the bank could forgo the heavy lifting of implementing this kind of digital transformation. In addition, FFBKC knew that Upstart proactively works with regulators to ensure fair lending and appreciated Upstart’s support and collaboration should a regulator request additional information.

Three key reasons led to FFBKC's decision to partner with Upstart:

As an FFBKC board member during Upstart’s vendor evaluation process, Cooper established himself as Upstart’s champion and worked to gain buy-in from the rest of the executive team.

Ultimately, Upstart’s alignment with FFBKC’s business model, dedication to customer success, and disruptive AI and machine-learning model pushed FFBKC to move forward with the partnership.

Complete control over risk and limits

FFBKC was able to go live with Upstart in just three months and was pleased with Upstart’s transparent and consultative approach. Cooper explained that other fintech partnerships had failed due to a lack of transparency around the product roadmap. With Upstart, the team members shared real-time insights they were seeing from the model and applied these insights in ways that allowed FFBKC to increase profitability.

As a partner, Upstart is responsible for predicting the risk of a loan, while lending partners like FFBKC have the freedom to apply their pricing strategy to Upstart’s risk analysis of the loans. With Upstart, lenders control their own loss limits. While Upstart’s machine learning models estimate borrower risk, lenders then specify how much risk they are willing to take on and proceed with those parameters.

As a traditional, more conservative institution, FFBKC opted for what Cooper calls a, “crawl, walk, run” approach, and began with a $500,000 loan origination target per month in April 2019.

Full control over loan volume and risk proved to be crucial when COVID-19 struck.

The executive team also plans to double down on consumer lending, looking for more disruptive technologies like Upstart.

“We’re open to more risk, whether it’s in the digital transformation space, new goods and services, or partners. As an older conservative bank in the Midwest, our survival depends on being able to do this well,” Cooper explained.

In the meantime, FFBKC looks forward to a bright, continued partnership with Upstart. “We are going to listen and support whatever initiatives that Upstart presents. We might not do every one of them, but every one of them will be reviewed at the executive level,” Cooper said. “Upstart has earned that right with us.”