LENDTECH
UP and away... again! Renaud Laplanche and his team have a track record in building groundbreaking, credit-based businesses. And, as Upgrade becomes his second to smash unicorn status, he’s using nimble tech to make sure it stays ahead – even in a pandemic Living within your means is undoubtedly a sensible – if perhaps boring – motto to live your life by. But the COVID-19 pandemic has really driven it home for many consumers who have either lost work or are concerned by the prospect of a falling income. So, it’s really no surprise that many are cutting up their credit cards or paying down debt. Bank of England data showed that, in April, UK consumers collectively reduced credit card balances by £5billion, smashing a record set only the previous month of £2.4billion. Meanwhile, in the US, the Federal Reserve said Americans cut their credit card debt by $76billion to $820billion in the second quarter – the highest amount since records began in 2003. Of course, we’re living through unusual times. But there are other options for consumers wanting to reduce their reliance on easy credit, including a new payment products specifically geared to shrinking personal debt – the Upgrade Card.
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It was launched in the US in October last year by fintech 'godfather' Renaud Laplanche, and it has helped Upgrade, his latest startup bank, achieve unicorn status with a $1billion valuation in three years. Built on the principles Laplanche developed with his previous unicorn, credit marketplace business Lending Club, the Upgrade Card can be used for both purchases and consolidating existing unsecured debt. But, unlike a credit card, the balance at the end of each month is wrapped up into a repayment plan so borrowers have a clear target for achieving a zero balance, similar to an unsecured loan. No more rolling debt over month after month and incurring endless interest costs. “We are changing the way people look at consumer debt. The ethos is that spending should be driven more by necessity than impulse,” says Laplanche. “We help customers really think about their credit, and learn about their finances, so that they make better decisions. That is a complete departure from the way the credit card industry, and much of the lending industry, has operated so far. “If you look at the make-up of credit card debt, much of it is new purchases, and a lot of that is electronics, and other non-essential purchases. Too many people spend more than they earn and, in the best case, pay their credit card debt off once a year when they get their bonus. But overall, people are accumulating too much high-cost, unsecured debt.” Laplanche’s crusade against the credit card debt trap began in 2007 with Lending Club, where loans were pitched as vehicles
for consolidating and paying down credit card borrowing. He, along with several members of the senior team, left the business in 2016, and began to work almost immediately on creating Upgrade, which has delivered more than $3billion in consumer credit through cards and loans since 2017. Based in San Francisco with an operations centre in Phoenix, Arizona, and a technology centre in Montreal, Upgrade’s loan funding is sourced by Cross River Bank, which also originates loans for Lending Club. Customers of the Upgrade Card can borrow from $500 to $20,000 to fund purchases or have the cash transferred to a bank account. Debt is repaid over terms from 24 to 60 months with no early redemption fees. www.fintech.finance