Crowe: Without getting too wonky, obviously, thinking. I can go in a lot of different directions here, so I’m just going to keep it general as possible. Half a basis point gain is, could be billions for people. Probably same can be said for so many other large banks, or even installment loans in Ontario something like what SunTrust change its name to, whatever.
Crowe: This will be fuel that would spend billions of dollars, and something like that, so what is Upstart doing that is going to fend them off and keep like $300, $400 billion dollars banks from just going no we’re going to take this over.
Until we go through a full credit cycle, we don’t know how strong what it’s saying is going to work
Frankel: Sure. Upstart is not a lender itself, it provides some kind of a cloud-based artificial intelligence platform that uses about 1,000 different data points on consumers to improve it. The big strength in the program right now is that it has over 1 million loans worth of consumer data to look at to be able to better predict, if you have a college degree, does that affect your default risk, things of that nature. In theory, and this is a big part of the thesis, is that Upstart’s platform could power some of these big banks lending operations, and cut down under losses. Like you mentioned, Goldman Sachs has the market’s platform that already makes personal loans, so instead of using the FICO score to evaluate borrowers, it could use Upstart’s platform, theoretically cut down on its losses, and make more loans with less risk of loss and everybody wins. That’s kind of a lot of the thesis is that eventually bigger and bigger institutions will catch onto this and bring it on.
What is Upstart doing that is so unique, and so proprietary that no big bank like you said, if there’s money to be made, Goldman is going to make it
Hall: It’s the platform, right? That’s the idea, and in that Tyler, I think to answer your question as to haven’t had too, I mean, I think that’s just the simple answers is that, I mean, let’s don’t ignore entrenched players. Why change what’s worked for as long as this has been the thing, right? Why increase the risk of trying something that doesn’t work, right? So I think in a way that’s what makes the timing great for Upstart is because we have been on this strong economic growth period for as long as we have that the cycle has been in its favor to start. That’s the reason I rated it No. 7, as appealing as the risk-reward profile’s changed because the valuation has come down so much, but the level of absolute risk is the same. If it does work, I think it works in more ways than just being able to reduce risk, right? As a lender, if you’re lender, do you want to adopt its platform and pay them, you can not just cut down the amount of defaults that you potentially end up to, but you can find like the right, like risk profile that works for what’s you trying to do, maybe you just want to grow your loan book more and take on a little bit more risk, right? You could, they say with their algo, that you can do that, so it’s really interesting what they’re doing. I’m just not convinced it’s going to be as good until we go through a full credit cycle, and that’s why I rated as low as I did. I don’t want people to think it’s a value stocks. This is not, a value stock is still a tremendous amount of risk it’s not going to work out. It could be a very profitable company for two or three more years and grow like crazy, and then lenders stop buying their loans because the default rates are much higher than anybody predicted.