AI-driven auto originations hit $4.1B through Upstart in 4Q

Artificial intelligence (AI)-based lending platform Upstart expects to facilitate $1.5 billion in auto loans on its platform in 2022 on the heels of accelerated growth in 2021.

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Upstart’s bank partners originated 495,205 auto and personal loans totaling $4.1 billion on the platform in Q4 2021, a year-over-year increase of 301%, according to the company’s earnings release. Upstart facilitated $11.8 billion in all loans across the platform for the full year 2021, up 338% YoY.

Fourth-quarter revenue clocked in at $305 million, a 252% YoY increase, contributing to a 264% jump in revenue for the full year 2021 to $849 million.

While Upstart did not break out the number of auto loans originated during Q4, auto refinance transactions “accelerated” in 2021, Chief Executive Dave Girouard said on Tuesday’s earnings call, noting that Upstart will invest in “funnel and model improvements” for its auto channel in 2022.

In Q3 2021, Upstart tripled the number of dealers on the platform compared with a year earlier and rebranded its auto loan product to Upstart Auto Retail, formally Prodigy, following the acquisition of Prodigy Software in Q2 2021.

“Right at the top of the list for 2022 was achieving meaningful scale with auto lending on our platform. We believe in our core that AI lending isn’t a one-category phenomenon, but will eventually transform virtually all flavors of credit,” Girouard said. “Our auto refi funnel performance is now comparable to where our personal loan funnel was in 2019 on a channel-adjusted basis.”

Meanwhile, Upstart currently funds auto loans from its own balance sheet but plans to begin funneling the loans to its bank partners and investors at “reasonable scale” next quarter, Chief Financial Officer Sanjay Datta said on the call, noting that Upstart will then pivot to a fee model in line with its core business strategy.

Acceleration ahead

Upstart plans to see “rapid acceleration” of its auto business in 2022, despite the headwinds facing the auto finance industry, Girouard added. “The biggest challenge for auto retail at the moment is the supply chain that car manufacturers and the auto industry overall is seeing. It can be challenging to sell software to a dealership that helps them sell more cars when they don’t have enough cars to sell in the first place,” he said.

Looking deeper, Upstart partners with 42 banks and credit unions as well as more than 150 institutional investors who fund loans on the platform, Girouard said, noting the platform also recently added seven lenders who do not carry a FICO score requirement.

Upstart also doubled the company’s headcount in product, engineering and machine learning in 2021 thanks to increased profits, Girouard added. “We generated more cash in 2021 than we burned in our entire eight-plus years as a private company,” he said.

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