Upstart's AI Drives Loan Growth, Pilots Servicing Tools and Demonstrates Cross-Lending Vertical Portability

Upstart Holdings, a consumer lending company, leverages AI to automate 92% of loan approvals, driving sharp improvements in conversion rates and originations. In Q2 2025, originations surged 154% YoY to $2.8 billion, and conversion rates improved to 23.9% from 15.2% YoY. The company is also piloting AI-based servicing tools and exploring AI-driven recovery suggestions to improve collections and borrower outcomes. Other fintechs like PayPal and Intuit are also leveraging AI to redefine digital commerce and financial services, with PayPal investing in AI-driven "agentic commerce" experiences and Intuit launching a virtual team of AI agents.

Upstart Holdings, Inc. (UPST) is at the forefront of the consumer lending industry, leveraging artificial intelligence (AI) to automate 92% of loan approvals. This deep automation has led to significant improvements in conversion rates and originations. In the second quarter of 2025, originations surged 154% year-over-year (YoY) to $2.8 billion, while conversion rates improved to 23.9% from 15.2% a year earlier [1].

The company's latest underwriting upgrade, Model 22, marked a significant leap by embedding neural networks into the top "meta" layer of decision-making. This enhancement improved separation accuracy by roughly 17 percentage points compared to traditional credit models, boosting risk prediction and underwriter confidence [1]. These improvements have boosted take rates and reduced acquisition costs, strengthening contribution margins at 58% [1].

Beyond underwriting, Upstart is piloting AI-based servicing tools that help reduce delinquencies and is exploring individualized recovery suggestions to improve collections and borrower outcomes [1]. The company is also demonstrating the portability of its AI across lending verticals. Auto originations grew 87% sequentially to $114 million, while Home equity originations climbed 67% sequentially to $68 million [1].

Internally, Upstart’s adoption of generative AI is palpable: 60% of developers are active users of LLM-powered tools, with 700+ custom GPTs created. On the borrower side, AI is powering explainability features and enhanced customer support. These tools not only streamline operations but also lay the groundwork for future AI-driven customer interactions [1].

Other fintechs like PayPal and Intuit are also leveraging AI to redefine digital commerce and financial services. PayPal is investing in AI-driven "agentic commerce" experiences in partnership with Anthropic and Salesforce, along with expanding crypto integration through its PYUSD stablecoin and "Pay with Crypto" option [1]. Intuit’s launch of a virtual team of AI agents marks a significant innovation push, with millions of customers already engaging since launch [1].

Upstart's stock performance has been robust, with shares climbing 43.7% in the past three months, outperforming the Zacks Financial – Miscellaneous Services industry’s modest 7.7% gain [3]. The company's recent earnings performance is encouraging, with revenues up 102% YoY and loan originations soaring to $2.8 billion, the highest in three years. Upstart achieved GAAP profitability a quarter earlier than expected, with net income of $5.6 million compared with $54.5 million loss a year ago [3].

From a valuation perspective, Upstart shares are currently overvalued, as suggested by the Value Score of F. In terms of forward 12-month Price/Sales (P/S), Upstart is currently trading at 5.94X, which is at a premium to the industry average of 3.44X [3].

References:
[1] https://www.nasdaq.com/articles/upst-stock-buy-hold-or-sell-after-its-437-three-month-rally
[2] https://www.marketscreener.com/news/upstart-holdings-insider-sold-shares-worth-343-059-according-to-a-recent-sec-filing-ce7d59d8df80fe25
[3] https://www.nasdaq.com/articles/upst-stock-buy-hold-or-sell-after-its-437-three-month-rally