How Reading Cooperative Bank scaled personal loans while minimizing risk
For leaders at Reading Cooperative Bank, post-pandemic consumer spending habits signaled demand for personal loans. With excess stimulus funds dwindling, their customers turned to personal loans to consolidate debt and maintain their quality of life.
Achieving scale without adding headcount
Reading faced the challenge of scaling its personal loan portfolio without introducing additional risk and resources. In order to scale profitably, Reading needed a partner that could automate credit decisions, servicing and collections while aligning with its mission to combine transparency, fairness and customer-centricity through modern technology.
“Scaling and building a personal lending portfolio is expensive, especially at the community bank level,” said Julie Thurlow, President and CEO. EVP and Chief Banking Officer Phil Bryan added, “If we couldn’t do it quickly and easily to get funding to borrowers in a short amount of time, we didn’t want to do it at all.”
After carefully evaluating around ten fintech companies, Reading chose Upstart’s Referral Network, enabling the bank to acquire new customers within its risk appetite. The Upstart Referral Network empowered them to gain new qualified applicants on Upstart.com who met Reading’s desired parameters.
Another strength of Upstart was its AI-powered credit decisioning, which provided a more accurate risk assessment and streamlined the lending process, enabling faster approvals for borrowers. The automation reduced costs and ensured that funds reached borrowers quickly, aligning with the bank’s mission of enhancing convenience and accessibility.
“Something that stood out versus competitors is Upstart’s evolving credit model that determines if someone has attributes to pay a personal loan on a timely basis.”
Julie Thurlow
President and CEO
The bank also opted for Upstart’s white-label experience that reflected Reading’s brand identity during the loan application process on the Reading Cooperative Bank website. This allowed Reading’s existing, creditworthy customers to enjoy a seamless and efficient loan application process, receive instant approval and obtain funds as quickly as the following day.1
Due diligence and model governance
In addition to aligning with Upstart’s mission to deliver affordable credit with a great customer experience, transparency with regulators was a key component in getting the bank’s stakeholders on board with the partnership. Leaders at the bank, including Thurlow and Bryan, spoke with several of Upstart’s customers and had an external auditor review the program.
Overall, the Reading team was pleased with the thoroughness of Upstart’s response. From Upstart’s risk management and model governance team to the third party used for model validation and testing, the Reading team felt confident in proceeding with the partnership and went live in just 76 days.
After go-live, Upstart demonstrated its commitment to compliance and regulatory support. In terms of model governance and regulatory exams, Bryan stated that Upstart was a trusted partner through Reading’s regulatory examinations, including its most recent one in Q2 2023 — “Upstart did a lot of the leg work with regulatory bodies and going over their model,” he said.
Risk management and portfolio monitoring
Risk control was a critical aspect of the partnership, and the Reading team collaborated closely with their dedicated Upstart account manager to establish program controls and determine their desired level of risk exposure. By carefully analyzing market opportunities, Reading identified a monthly loan volume threshold of $1.5M spread evenly throughout the month as an optimal approach.
As a result, the bank successfully scaled its personal loan portfolio from $150k to $8M within the first ten months after going live on the Upstart Referral Network.
Furthermore, Reading worked to increase its yield from 5 to 8.25 percent, enhancing profitability, especially in challenging economic times. Through quarterly KPI reporting, Reading also observed lower than expected delinquency rates from the Upstart partnership.
Upstart did a lot of the leg work with regulatory bodies and going over their model.”
Phil Bryan
EVP and Chief Banking Officer
A partnership to withstand changing economic conditions
By leveraging Upstart’s scale and utilizing the same learnings as its largest lending partners, leaders at the bank believe they’ve gained a competitive advantage. “The advantage of Upstart is the scale — we’re benefitting from all the loans originated on the platform and using the same model and learnings used across the largest lending partners,” said Thurlow.
The timing of the partnership with Upstart proved advantageous for Reading — current market conditions, coupled with a well-designed strategy to mitigate risk, have increased demand for consumer credit. Reading is optimistic about converting Upstart-sourced customers into depositors in the future and further automating their digital banking processes to deliver the best customer experience possible. “It’s a tough market to hire people, so when you find an end-to-end solution without needing to hire staff, it makes growing a portfolio much easier to manage,” said Bryan.
1. Funds for loans are that accepted by 5pm EST (not including weekends or holidays) will be sent on the next business day.