Credit Card Start-Up “Upgrade” Jumps 83% In Value to $6.28 Billion
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Upgrade, the fintech start-up that turns your credit card balances into installment loans, has closed a fundraising round that has valued the start-up at around $6.28 billion.
The start-up has raised to the tune of $280 million in its Series F funding round, which was spearheaded by new investors Coatue Management and DST Global. That is an 83% leap from a previous round this year that valued the company at $3.43 billion, CNBC reports.
Upgrade’s revenue has also grown exponentially, increasing by 70% between July and October, the two fundraising periods.
How is “Upgrade” Different from Traditional Credit Cards?
Upgrade’s main product is a card that turns your purchases into a fixed-rate instalment loan, making the start-up the latest company to benefit from the “buy now, pay later” trend in the fintech industry. Traditional credit cards offered by traditional banks such as JPMorgan Chase and Citigroup usually charge an annual interest of more than 18%. Interest on Upgrade cards starts as low as 8.99%, according to Laplanche, Upgrade CEO. This has made Upgrade one of the fasted growing credit-card companies in the US, according to the Nilson Report, a fintech industry newsletter.
In a Zoom interview with CNBC, Laplanche stated that consumers were increasingly looking for products that offered them benefits and the convenience of credit cards without pushing them deeper into debts. He said:
Consumers are discovering the benefit of a product that gives them all the convenience of a credit card but doesn’t push them further into debt. Traditional credit cards are a really bad consumer product with very high interest rates and lots of fees. They’re really designed to keep people in debt as long as possible.”
Credit card services are still controlled by traditional lenders such as banks, who, according to Laplanche, have little incentive to adopt the more consumer-friendly approaches used by fintech companies as they wouldn’t want to reduce profits from their massive card loan portfolios.
Fintech companies which focus on the ever-growing U.S. consumer credit market include “buy now, pay later” fintech firms such as Affirm. Others include more diversified industry players such as SoFi and Lending club, which was co-founded by Laplanche.
Like any other fintech company, Upgrade has started branching out as a digital one-stop shop for consumer finance. Among its products are checking accounts, a 2% cash-back debit card and a credit card that pays rewards in bitcoin – which make about 10% of new cards issued by the start-up.
Upgrade is preparing to go public as early as 2023, intimates Laplanche. “We are growing fast and being profitable,” he said. “We are working on being ready in about 18 months from now.
