Upgrade CEO Renault Planche will speak at a conference in Brooklyn, New York in 2018.
Alex Flynn | Bloomberg via Getty Images
Fintech startup Upgrade in the US is now poised to enter the fast-growing buy-and-then market.
Founded in 2016 by former LendingClub boss Renaud Laplanche, Upgrade is a digital banking startup that offers payment cards to people with personal credit lines.
Unlike credit cards, where consumers can rotate their balances, Upgrade creates an installment plan to receive all purchases and pay off their debt in a month. Payment plans are usually of longer duration, ranging from 6 to 36 months and charge a fixed interest rate.
Currently, Upgrade is planning to launch a purchase and postpaid product that allows users to repay their loans in four months without earning interest. Laplanche told CNBC that the company plans to launch a new service in the coming months.
“We are working on a low-cost version of the upgrade card,” Upgrade CEO said in an interview. “In that case, you won’t have to charge interest because the amount is small.”
Buy now, pay later, or BNPL has rapidly grown into a $100 billion industry thanks to the coronavirus pandemic that fueled the growth of online shopping.
BNPL service allows buyers to spread their purchase cost over 3 to 4 months. BNPL companies make money by receiving a small commission from the merchant for each transaction instead of charging the consumer.
Upgrade products differ from those offered by companies such as Klarna, Affirm, and Afterpay. Instead of adding a checkout option to the seller’s website, Upgrade bundles the user’s card purchases and charges the amount to be paid over four months.
“What we like about embedding products on cards is that they are widely accepted,” Laplanche told CNBC. “BNPL often relies on partnerships with merchants.”
“It’s starting to become mainstream online,” he said. “But there aren’t many in the store.”
Prior to launching the upgrade, LendingClub grew LendingClub into the world’s largest peer-to-peer lending platform, connecting investors and borrowers to the market. However, he was exonerated in 2016 on charges of unregulated lending practices and lack of disclosure of Laplanche’s personal investments.
Last year, LendingClub shut down its peer-to-peer loan platform and gave banking a push with its acquisition of US lender Radius.
Laplanche has come a long way since leaving LendingClub. The upgrade reached a valuation of $3.3 billion in August. A French-born entrepreneur said it would take some time for the upgrade to go public, but he expects the company to be ready for an IPO within the next 18 months.
“We clearly have a shape,” he said. “We’re growing very fast. We’ve been in profit for over a year. It’s unusual for a company that’s growing so fast.”
“We expect to be ready within the next 18 months. We will then decide at that time what is best for our shareholders and team members.”
Fintech jumped into BNPL
The upgrade is not limited to fintech, which is on the rise of BNPL. Fast, a startup backed by payments giant Stripe, is planning to introduce BNPL as a platform-based payment method. The company, which allows users to purchase items on various websites with a single click, aims to roll out the feature in the first quarter of 2022, CEO and co-founder Dom Holland told CNBC.
“It’s a payment method that we need to support because a certain number of consumers want to use it at a certain rate,” the Netherlands said. “For me, it’s a way for our merchants to deal with the bulk of the wallet.”
In the UK, digital bank Monzo has launched a BNPL-like product called Flex. It allows customers to split their payments into monthly installments interest free for 3 months or at the rate of 19% for 6-12 months. Rival company Revolut is also planning to start BNPL celebrations.
This highlights the growing interest of companies large and small in the fast growing BNPL market. Last year, PayPal launched a unique version of the service called Pay in 4. Meanwhile, Twitter CEO Jack Dorsey’s payments processor Square has signed a deal to buy Afterpay in Australia for $29 billion, and Mastercard jumped into the fray with an installment this week. Payment programs for banks and fintechs. ..
Nevertheless, the BNPL sector has been the subject of several investigations recently. The UK government plans to impose stricter regulatory scrutiny on fast-growing industries, amid concerns that services such as Klarna are encouraging buyers to spend beyond their capacity. HM Treasury will announce reform talks next month.
Source Link Fintech companies upgrade and start buying now and pay for products later