Fintech firm Upgrade is getting into buy now, pay later with short-term installment loans

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  • Upgrade, the fintech start-up founded by former LendingClub boss Renaud Laplanche, is working on a buy now, pay later-style product.
  • Fast, a start-up backed by payments giant Stripe, is also planning to offer BNPL as a payment method through its platform.
  • This highlights the growing interest of companies large and small in the $100 billion BNPL market.

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US fintech start-up Upgrade is set to enter the increasingly crowded buy, pay later market.

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Upgrade, which was founded in 2016 by former LendingClub boss Renaud Laplanche, is a digital banking start-up that provides payment cards to people with personal lines of credit.

Unlike a credit card, which lets consumers rotate their balance, Upgrade takes all purchases made in a month and creates an installment plan to pay off debt. Payment plans are generally of longer duration, ranging anywhere from six to 36 months, and charge a fixed interest rate.

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Now, the upgrade plans to start buying now, a pay-after-style product that lets users pay off their debt in four months without earning any interest. Laplanche told Businesshala that the company expects to launch the new service in the coming months.

“We are working on a version of the Upgrade card that is better suited for small spends,” Upgrade CEO said in an interview. “In that case, we don’t need to charge interest as it is a small amount.”

Buy now, pay later, or BNPL, has grown rapidly to become a $100 billion industry, thanks in large part to the coronavirus pandemic that has fueled the growth of online shopping.

BNPL services allow buyers to split the cost of their purchases over three or four months. BNPL companies make their money by charging a small fee from merchants on each transaction instead of charging consumers.

The product of the upgrade will be different from those offered by firms such as Klarna, Affirm and Afterpay. Instead of adding a checkout option on merchants’ websites, the upgrade will bundle together purchases made with a user’s card and invoice them over a four-month period.

“What we like about embedding the product into the card is the wide acceptance,” Laplanche told Businesshala. “BNPL often relies on partnerships with merchants.”

“It’s starting to get mainstream online,” he said. “But not so much in-store.”

Prior to launching the upgrade, Laplaunch helped grow LendingClub into the world’s largest peer-to-peer lending platform, connecting investors with borrowers through its marketplace. However, he was ousted in 2016 amid irregularities with lending practices and Laplaunch’s alleged lack of disclosure on individual investments.

Last year, LendingClub shut down its peer-to-peer lending platform and signaled a push into banking with the acquisition of US lender Radius.

Laplaunch has come a long way since exiting LendingClub, with the upgrade reaching a valuation of $3.3 billion in August. The French-born entrepreneur said it will take some time before the upgrade goes public, but wants to make sure the company is ready for an IPO in the next 18 months.

“We clearly have the size,” he said. “We’re growing very fast. We’ve been making a profit for over a year now, which is rare for a company that’s growing so fast.”

“Hopefully we can be ready sometime in the next 18 months. Then we’ll decide at that time what’s best for our shareholders and our team members.”

Fintech jumps into BNPL

Upgrade isn’t the only fintech jumping on the BNPL bandwagon. FAST, a start-up backed by payments giant Stripe, is planning to offer BNPL as a payment method through its platform. CEO and co-founder Dom Holland told Businesshala that the firm, which lets users buy items in a single click across a range of websites, aims to roll out the feature in the first quarter of 2022.

“It’s a payment method that we need to support because a certain amount of consumers want to use a certain percentage of it,” Holland said. “For me, this is a way to address a large portion of the wallet for our merchants.”

In the UK, digital bank Monzo has started offering a BNPL-like product called Flex, which lets customers split payments into monthly installments, either interest-free for three months or 19% for six to 12 months. at the rate of. Rival firm Revolut is also planning to introduce a BNPL feature.

This highlights the growing interest of companies large and small in the fast growing BNPL market. PayPal introduced its version of the service last year called Pay in 4. Meanwhile, Twitter CEO Jack Dorsey’s payments processor Square struck a deal to acquire Australia’s Afterpay for $29 billion, and Mastercard jumped into the space this week with an tranche program for banks and fintechs.

Nevertheless, the BNPL sector has become the subject of much scrutiny recently. The British government is planning to impose strict regulatory scrutiny on the fast-growing industry, amid concerns that services like Klarna are encouraging buyers to spend more than they can afford. The UK Treasury Department is expected to issue an advisory on the reforms next month.


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