NXTsoft, Upstart Partnership Aims To Bring AI To More Lenders

NXTsoft, which provides API connectivity for banks and FinTechs, announced on Wednesday (June 23) that it has formed a partnership with the artificial intelligence (AI) lending platform provider Upstart.

The arrangement will “enable Upstart to more efficiently implement its all-digital AI lending platform to any U.S.-based financial institution,” the two companies said in a news release.

Upstart’s AI leverages more than 1,000 variable and advanced machine learning algorithms, allowing for greater automation and more accurate risk-based pricing. In turn, this lets banks and credit unions approve more borrowers at the same loss rate as traditional FICO score-based models.

Via the integration with Birmingham, Alabama-based NXTsoft, FIs can more quickly integrate Upstart’s AI platform into their services. NXTsoft says its OmniConnect secure API solution “has established API connectivity to 99 percent of all U.S-based core systems, and can provide API connectivity between these core systems and any ancillary FinTech solution.”

Founded 25 years ago, NXTsoft provides OmniConnect to more than 1,000 financial institutions.

Upstart, based in San Mateo, said its mission is to “help solve the massive inefficiencies in the credit market.” The company added that the industry “has relied on credit scores and a handful of variables to make lending decisions, resulting in very inaccurate assessments of a borrower’s true credit worth.”

That has created a situation where less than half of American consumers have access to prime credit, even though 80 percent of them have never defaulted on a loan. “This disparity is a direct result of the limited information available to financial institutions to make better credit assessments,” the companies said.

And while the number of banks using AI to assess credit risk has tripled over the past three years, those gains have mostly been limited to the largest lenders, according to a report compiled by PYMNTS and Brighterion.

In 2018, just 5 percent of FIs used AI systems for credit risk management and fraud detection. This year, that figure rose to 16 percent. However, those numbers were skewed. Only a handful of smaller banks reported using AI, while 79 percent of those with $100 billion or more in assets said they were using AI.

For more on this topic, download a copy of the PYMNTS report, AI in Focus: The Navigating Bank Credit Risk Playbook.