The Future of Financing is Faster with Keishawn Batts of Upstart

Paul J Daly:‍

0:00You know, the funny thing about listening to your own content

‍Unknown: 0:09

this is Auto Collabs number one,

Paul J Daly: 0:11

I don't do it much, but when I do, I'm usually in the car. And I have to say I had a long drive the other day and I popped in the Auto Collabs episode that we did with John Fitzpatrick and and sometimes we just we just make me laugh I just Just smile about it. I don't know I appreciate you guys the fact that we get to do this

Kyle Mountsier: 0:35

we we make me laugh. That's make me laugh. That's a good podcast name for some that's the Dexter Auto Collabs shirt. We make me laugh we make me laugh.

Michael Cirillo: 0:44

That's every time I get into the car, it auto plays whatever was you know in the in the podcast real? And it's always either in Auto Collabs or dealer playbook and my kids. I don't know if it's that they're enamored or they're disgusted, but probably discussed this. Yeah, they're like you listen to unshare

Paul J Daly: 1:08

and that's your son says it like

Kyle Mountsier: 1:14

you like you like your own voice?

Michael Cirillo: 1:17

Are you you're all night Lesnar.

Paul J Daly: 1:19

I sure hope not. So write that No, I mean, we get to talk with Keishawn Batts again, with Upstart and he's he's been he's been on the show a few times that we've had some webinars with him always brings just a great energy and passion, some laughs some great insights. So looking forward to this conversation, we'll see if we can make me laugh again, with Keishawn Batts. All right, we're here again with our good friend Keishawn Batts. Thanks for joining us again.

Keishawn Batts: 1:50

Always a pleasure,

Paul J Daly: 1:52

man. So look, seasons are moving along. We're having lots of conversations since we talked last. There have been a few things that have gone on in the industry. But But first, for the people who haven't seen you haven't heard from you. Just give us a brief overview about your career in automotive, just set the table for 60 seconds, then we're going to get into some stuff.

Keishawn Batts: 2:14

Yes, I'm the third bearded brother of the ASOTU CON team. This is my third time being part of one of these casts so excited. I've been a part of the auto finance and auto family. for about 20 years, I started my career very in a humble way. I was detailing cars at a Porsche dealership in Richmond, Virginia. But throughout my career, I've worked in sales at a dealership or worked in finance. And shortly after graduating college, I took the fortunate turn to indirect lending. So I've been a part of the banking industry for the last 15 to 20 years. And what's been really exciting about it the most is I've seen the industry evolve so much right? Like, I'll never forget, like in the first couple of years, I was dealing with cash for clunkers. Right. And now we're talking about electric vehicle market penetration and, you know, digital retailing. And, you know, I think I was part of like a pilot when Dealertrack and route one first like got off the launch, but when the bank I was working at so I've seen it come a long way. Today I get the fortunate pleasure of leading our dealer success team at upstart auto retail, where we have the great mission of making access to credit more affordable for customers at a dealership. And we utilize that with our digital retailing tools. So I get the chance to have the fortune of leading an amazing sales force that's out there every day helping our dealers in the best of times and more challenging times to sell more cars.

Kyle Mountsier: 3:38

Well definitely. You left out my favorite part though. Because you have a new venture that you're doing which is our one of our favorite things, which is what we're doing right now but you're the co host of a new pod that

Keishawn Batts: 3:51

is right that is right shameless plug, Upstart, does have their own podcast leadership in the dealership where I get the fortune of talking with some of my long friends and new friends about their business and how everyone is looking through a different lens in the automotive industry now in preparing for whatever comes around the corner next. So yes, that is a new venture of mine and I'm really excited about it every week.

Kyle Mountsier: 4:17

So good. So cool.

Paul J Daly: 4:18

You mentioned you mentioned highs, lows, challenges. Gonna gonna shift the conversation here obviously just getting through still in a residual is gonna last for a while but like major DMS outage and you've been on the finance side and having a tool that helps move things along. What have you what have you seen like as far as resiliency and what is this kind of revealed to you, especially on the finance side and how to help dealers, you know, get finance transactions pushed

Keishawn Batts: 4:42

through? No, I think resiliency is the right word. Again, in my few decades of being an automotive industry. That's all dealers ever do, right? They're always resilient, whether it's a pandemic, where there's some federal mandate for cash for clunkers or the the introduction of drugs to consumer sales like dealerships are resilient. And I think, because, you know, as many of us know, dealerships are so diverse and generations and ages, like, you have people that have done it when all it was was paper, you have people that have done them and all it is is digital. So one of the things I'm really impressed by is one the resiliency of these dealers that hey, I can't use my DMs, go find that stack of 100 page, printer paper, we haven't too bad and let's work on some Foursquare's, right, let's put some of these cars in the road and find a lender that is still operating where we can get these deals funded. Like, let's find a workaround. Right? Like that is really exciting to me. And the thing that, like the automotive industry doesn't get a lot of credit for is like the community. Like you log in to LinkedIn. Are you talking to somebody today they're on the phone talking to their buddies across the country, they're talking to their, their competitor next door, they own a Ford dealership, they're talking to the other Ford store. And like everybody's just working together, right? Like, forget profit and market share in a time of me like everybody's working together. And I think that's what really excites me. Just just to be a part of this community.

Paul J Daly: 6:03

That's amazing. You You said it, I mean that there is a we take it for granted very often in the industry. But that is legit how it is. It's not like, Oh, I wonder if someone is going through? Oh, I wonder if someone will help me. It's like, no, there is a massive Rolodex of who use that word. But everyone's got, I know, I know what it means. So to you. Everybody's got dozens of numbers and friends that they can call in 20 groups all across the country, from social media that are just ready to be like, Oh, help you What do you need care for competitors or not? I love it.

Keishawn Batts: 6:36

So good. Industry like none other. I will say that, like they're always willing to help. But once everything goes back to normal to compete about VDP, then

Paul J Daly: 6:43

they're back in it's like, it's like, hey, off the field where there's but once again, I feel I'm gonna hit you as hard as I can. What is what are some of the other challenges that you're seeing out there? Especially we have a high rate environment? It's a big topic of conversation constantly, a lot of negative equity running around, you know, what are some of these? How are these things playing out? And how are you addressing them? Yeah, I

Keishawn Batts: 7:03

think all of those things that you mentioned, aligned to like credit tightening, right, we're seeing a worsening of credit portfolios, you're seeing a rise in delinquency, haven't really seen the same and like charge offs quite yet. But that goes into lenders traditionally tightening their business to your point negative equity, oh, I don't want to do 130% advance at 75 months anymore, right? Because I don't know where this market is going, like customers are underperforming. So I think dealers and all the things they're doing are seeing that squeeze as well, where maybe they're not making as much on gross, because they need to cut their deal 1000 or $2,000 to fit the customer's payment they're looking for, as well as fixing the the approval offer. They're getting back from a lender. So I think the dealers are feeling that friction in both areas, right? Interest rates have gone up, I bought a Audi a4. And I was paying 450 A month I'm buying another Audi a4. Why is my payment now? 700. Right, like customers don't understand that. Right. So I think the dealers have to get creative in ways that make purchases more affordable. And they have to get creative in their structures, and not only how they're purchasing these vehicles at auction aisles, but the profit they're expecting to receive when they're submitting these loans to lenders to fit within that space of tightening. So I think the dealers are filling it consumers are but again, like we talked about before, like they're still resilient, like the Tsar is still relatively respectful for the remainder of this year. And again, I think that speaks to the dealers finding a way. Yeah,

Kyle Mountsier: 8:35

isn't that, you know, I've had a lot of conversations recently about this are like whether or not you can actually impact it, right? Like, like, as an industry, we're just going to sell the amount of cars, it's, it's your decision on whether or not you get your fair share for your market. And whether or not you can, you know, create the margins that makes sense. I you know, when I look at a deal and the structure when it comes to like the price, I mean, you have the four the four classic things, right? It's like the price, the interest rate, the trade, the downpayment, that's what you get the term, right. It's like basically what five things that's, that's what you get to deal with. And so when it comes to creativity, it's, it's, it's almost not as much in kind of like, okay, the customer is ready to buy the car, there's actually some pre work that has to be done, to make sure that you're ready to have those conversations like from an inventory perspective, or, you know, knowing who your lenders are making sure you have the right lenders for your client base, all of that type of stuff. When it comes to that pre work and like having it set up where are you seeing dealers focus the most attention right now. Yeah,

Keishawn Batts: 9:45

it really is dealers getting consumers more educated about what to expect at a dealership whether it's a dealer putting their as low as rate available from the OEM or captive on their website or apart Should they have with a lender that's placing it right? Like dealers are, in my opinion, doing a better job of disarming customers with information that they're supplying on their website, right, which allows those things that we just talked about to be a little bit easier, right? Whether it's rebates that OEMs are now putting back into the market, or in the sense of extended terms, I think dealers are doing a great job to be more transparent where they can, or where they they're comfortable with, that then disarms the customer, whether it's fixed prices, rebates, again, trading offers, like, you know, guarantee trade offers, like they're doing really creative things to ensure the customer has a better experience is more equipped with information, and thus makes it easier for the salesperson, the GSM and the finance manager when it's time to close the deal. So, again, I think resiliency is something we continue to talk about, like, I haven't seen many challenges, but in front of dealers over the two decades, where they're like, ah, you know, I'm typing out like, high interest rates, I'm out, right, like, I don't have any inventory. I'm out like, no, the viewers will just move to something else and figure it out. And I think, in this current restriction that we have around lending, I think they're figuring it out.

Paul J Daly: 11:08

That's funny, you mentioned that who, what, what over the last 50 years may dealers tap out? You know, you'll pay me how much for my store. Which I think is probably like the most like gets go out, go out where your boots? Go, I get a lot from that list. I'm gonna shift the conversation for a second. It has to do with a lot of the themes, right resiliency, what are we doing, when things are changing? How are we leveraging technology and the resources at hand to do so? Big conversation around AI powered financing? That is a growing topic? You know, in a lot of ways, it's kind of been used for a while. But can you help educate us on how is AI powered financing being really leveraged for auto lending right now and maybe explain to us, like, it seems like a broad thing, but how does it actually work?

Keishawn Batts: 12:00

Yeah, AI lending is at the cornerstone of like the future of automotive, right? Whether it's the older bank that's been around hundreds of years, where they're using an antiquated loan origination system, or they're looking for something new, or organizations like us that it's the heart and brain of our organization, where it just allows better access to credit for customers, I think, you know, you use the term AI, it's a variety of different things, you know, apples talking about a chat GPT release something. But I think from a lending perspective, what it really does is removes a lot of the unconscious or the conscious bias that humans have, when they create a credit Buy Box, right? Or when they look at someone's debt to income, or they look at an individual with a thin file, right? Like, it's really hard for a credit risk officer that's been at a bank for 30 years to look at a thin file registered nurse out of like Chapel Hill, North Carolina, and say they should get a $90,000 car right there registered nurse is always going to have a job probably has no debt. And like, is the probably the most employable person in America. Right? Only

Kyle Mountsier: 13:12

problem that registered nurse maybe has is that she went to UNC. The only problem that that registered nurse,

Keishawn Batts: 13:20

or somebody out there like but you look at all of those things in the traditional models, like, oh, this person doesn't have any credit. They've never shown the ability. Oh, yeah, that makes 7080 grand a year. But they've never done anything, right. Like, that's where AI uses a variety of different variables, where they're looking at a person's job, job type, the history of their addresses a variety of different things that yes, some of the banks do deliver that in a very great way. But AI takes it one step further, that it learns off of that behavior over a period of time. So that you know, you don't have to wait until there's a recession or there's something bad happens, the model is just continuing to learn based on customer behavior. So there are going to be time for an AI model gets tighter before everyone else does, but it's going to predict them. And that AI model will loosen up before everyone else does as well, because it's constantly learning on customer behavior. And that is to the benefit of the consumer. Right? Like I don't know, like electric vehicles or as some of these OEMs moved to the US. The model will learn something about electric vehicle residuals or the value of those, those vehicles on the second hand market. It may say, Well, you know what, we'll give this person 180% advance because we know that if they go to sell it, they're probably going to get that money back. So like there's more things that are additive to variables beyond just a traditional model that just learns on 13 variables, right? The great AI models out there have 1000s of them. And

Kyle Mountsier: 14:53

I think the probably bigger trigger for that is like we saw over the last four years a man Massive hiring influx into the industry of like net new personnel that also then got elevated into management positions. And that that person now has to make decisions, reading credit profiles, reading Bureau scores, understanding all of this even on just like you said, how to structure that deal and who to send it to right? Even if it's prime credit. It's like, what about this prime credit this car, this lender advanced, this downpayment tells me where to get the best option, you know, especially if it's not a manufacturer, financing type deal. Like leveraging that to, to allow that person to spend the time in management where their best, which is probably coaching, and not having to do the tasks of like, deciding where to send a deal for Max profitability, and lowest lowest possible payment, right, for sure. Those things are will speed up career pathing in our industry to

Keishawn Batts: 15:58

Oh, for sure, it gives people with more time to focus on the thing that they're there for. And that's to get customers in and out of the dealership and delighted in their experience, right. And having AI financing again, as we think about the other things it does from an income verification and address verification, like removes the steps, like how many car guys have lost a deal because it had to go home and pronounce their W two or may want to

Kyle Mountsier: 16:18

preach to a guy to talk about removing steps.

Keishawn Batts: 16:23

So I mean, like to your point, right? There's a guy that's pretty reputable in the industry. And like, you want to go buy a nice car, they're like, hey, we need your W two, we need to verify who you are like, really, you guys know who I am, like, I want to talk to your owner. But like, again, some of the things AI lending, where they look at your behaviors and look at your checking account your savings account, they look at like just variables on you. That's like, Alright, there's a high probability Kyle is telling us the truth about his income. We don't need it. There's a high probability Kyle lives where he says he lives, right. Some of those things that, you know, banks tend to be conservative with.

Paul J Daly: 17:00

Oh, my goodness, what do you think? So you're kind of living on the edge of the future a little bit, because it's seeing all this stuff going on? And like leveraging AI financing, what do you see the state of dealership financing going being in like 10 years from now? Where are we? Where are we going five years from now? I won't I won't send you to 2030. Yeah,

Keishawn Batts: 17:19

I was about to say, Wow. 2034? Wow, I think five years from now. I think it's faster. I think, as you think of all the things that have shifted any industry, you know, obviously the easy one is talking about the Apple iPhone, right? Like, we're only really what 15 years removed from like the first iPhone, like, look how far we've gotten. And I think organizations like us that are like disrupting the industry and finding ways to present AI financing. And as dealers adopt to find that value, things speed up. And that makes us better, but then it also makes our competitors better. And what does that do that makes all the dealers better? So I think the traditional model where there's this bad urban myth, it finance managers want to keep you in a dealership for two hours. That's not true. It's just the resources that they have, through their channels, their lenders, and fax machines, and what hey,

Paul J Daly: 18:10

if they could get you out of there in seven minutes, they'd love it.

Keishawn Batts: 18:13

They love it, they make more money if they could do it. Because the guy's not angry that he thought he was going to spend his Saturday in this convertible. And he's spending all day in the dealership, right? He's just in and out. So he, of course, is gonna buy that warranty now. So I think the future is much quicker, right? Lender decisions agree process to do more things digitally? The bill, the Remove being of stipulations, or just some of the paperwork that's involved, right. Like, I think that's where we are five years from now. And I think everybody is better for the consumer, the salesperson, the GSM, the finance manager, the finance director, the GM, and the lenders, right? Like it reduces cost as well. So I think that's where we are five years from now or two. And

Kyle Mountsier: 18:59

I pray you're right, because I was all preaching that in 2017. And we were moving to it and

Paul J Daly: 19:06

faster than we were in 2017. I

Kyle Mountsier: 19:08

would say there are a lot of people in the industry that are faster. But I think as an industry, we have to be known for being faster. And that's what I'm there, we

Paul J Daly: 19:16

got a little bit of a lift there. A little bit of a lift.

Keishawn Batts: 19:19

I think the thing that we talked about earlier, just being a community, all it takes is one really good organization to speed it up. And you guys know, the community will be like, Oh, who is that? Well, they do what for you? The 20 groups are talking right? Like that's one of the most powerful things in our community is the 20 groups. Right? You get a couple 20 groups like you did what with who? Oh, yeah, I'm gonna try them out. Right. Like some of our best referrals come from 20 groups and they're already have this halo effect, like I heard you did so and so far I trust Absolutely. So it's, it's viral almost right. You know, as organizations continue to perform well, other dealers in the community will hear about it and we'll all get better for it. So

Kyle Mountsier: 19:58

I love hey, look, now you're Speak in our language. And I think that's because you're a part of this community. Hey Keyshawn. As always, it is just a massive pleasure hanging out with you. We go highs and lows, we get excited. We talk real talk, and you are definitely a bright light in our industry. Thanks for doing all that you do and for being a part of this episode of Auto Collabs. Absolutely.

Keishawn Batts: 20:19

Always a pleasure, guys. Hopefully I get invited for fourth time this year. But thank you, as always, and I'll see you guys in person at some point too soon. It's

Paul J Daly: 20:25

coming. All right, Kyle, five years ago, you said in that interview, you've been saying it's gonna be really easy. Five years from now. And you said that five years ago, we just set it on that show

Kyle Mountsier: 20:39

again, man, I this The reality is, is I think that there are pockets of our industry that make it super easy to buy a car. Right. And, and the moving that to like a wholesale change where it's just like buying a car is easy. That's a that's a reality. We're still a waste from there. But, you know, technology companies like upstart, and some others out there are doing everything they possibly can to equip dealers with the technology tools necessary for that. But the process and the change management that comes along with that is definitely no joke. So, you know, I'm hopeful that in the next five years that we've cracked that code, because I think the manufacturers, the consumers, the net new players as OEMs are demanding it out of us. But yeah, well, we'll see.

Unknown: 21:33

You're like, well,

Michael Cirillo: 21:34

we put like a timer clock somewhere now counting down five years. So that in five years, we're reminded to do another episode to see if it's still this reminds me of it's a little bit like when Best Buy 20 years ago said that they were going to update their computer system No.

Kyle Mountsier: 21:51

Stop.

Michael Cirillo: 21:55

We promise we're updating the system next year. And then 16 years went by,

Kyle Mountsier: 22:00

and it's still on Das.

Paul J Daly: 22:02

And here we are. green blinking cursor.

Michael Cirillo: 22:05

They're like we did update our system. It's called everyone shops on Amazon.

Paul J Daly: 22:09

Yeah. We just moved everything to the internet. Gotcha. Got Oh my gosh. Well, look, we hope you had a good time with us. We really enjoy doing these episodes, bringing some of the thought leadership to the industry. So on behalf of Kyle Mountsier, Michael Cirillo, and myself. Thanks for joining us today on Auto Collabs we make me laugh.

Unknown: 22:31

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