Personal loan fintech Upgrade to enter auto finance

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Upgrade, a personal loan and credit card service fintech, plans to jump into the auto financing market after a $40M Series D funding round from Santander InnoVentures that saw the company’s valuation rise to $1 billion. 

“We plan to penetrate auto lending and release our new mobile banking app in the coming quarter,” said Renaud Laplanche, chief executive and co-founder of Upgrade. “We plan on offering auto financing on our platform by the end of August, but plans might change according to market conditions,” he added, citing the coronavirus pandemic as a possible factor in the decision.

Upgrade has more than 10 million users, with total personal loan and credit card originations exceeding $3 billion. The fintech is on target to process $2 billion in personal loans and $1 billion in lines of credit by yearend.

“It’s difficult to say what our volume would be for auto loans, but we are expecting it to be over $1 billion within the first year of launching the product,” Laplanche said. 

While Upgrade is one of the first banking fintechs to position itself as an auto lender, the fintech does not have a bank charter and requires its banking partner, Cross River Bank, to underwrite, originate and service the loans. 

Cross River Bank has been originating and servicing other types of loans for Upgrade since its inception in 2017, and will do the same for auto loan originations, Laplanche said. The New Jersey-based bank also provides back-end banking for major fintechs like Affirm, Coinbase, TransferWise and Stripe.

Also read: With $40M of fresh capital, Upgrade lines up bank account launch 

San Francisco-based Upgrade has been through multiple funding rounds, raising nearly $200 million, and has recorded more than $100 million in annual revenue. The online lender also plans to begin offering mortgages in 2021. 

Santander InnoVentures is a $200 million corporate venture fund that invests in fintech and similar verticals. The fund has invested in more than 30 companies since its inception.

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