Upgrade’s $100M Deal for Uplift Brings BNPL for Travelers Into the Fold

The build vs. buy debate is a perennial one in technology, and in payments.

For neobank Upgrade, in the bid to extend its credit, mobile banking and payment products to more consumers, and to broaden its own portfolio of payment options — specifically in the red-hot buy now, pay later (BNPL) space — the decision falls squarely in the “buy” camp.

Thursday (July 27), Upgrade said it is paying $100 million in cash and stock to buy Uplift, a provider of BNPL payment and credit options focused on travel.

Renaud Laplanche, co-founder and CEO at Upgrade, told Karen Webster that the travel vertical serves as a runway to expansion, adding to Upgrade’s installed consumer base of 2.5 million. Uplift already reaches 3.3 million customers in partnership with over 300 of the largest airlines, cruise lines and hotel chains in North America.

“It’s a great addition for us,” he told Webster, “and the demographics are almost identical.” The typical Upstart/Uplift customer, he said, is in their late 30s, or early 40s, with a 700 FICO score and an income higher than the national average.

The initial road map is to make travel more affordable for consumers, and the sector already is marked by $450 billion in annual consumer spending, said Laplanche. But the larger greenfield opportunity is to extend BNPL — eventually — into other verticals where Upgrade already has a presence, such as home improvement.

The deal, Laplanche said, also opens up new distribution channels for the Upgrade OneCard launched a year ago, where the single card’s Pay Now feature is tied to everyday expenses, while earning credit card rewards, while the Pay Later option enables installments over time.

In terms of mechanics, the Uplift offerings extend 0% financing to consumers. Uplift performs credit bureau reporting, allowing users to keep up their good credit score as they make monthly payments.

Upgrade, it should be noted, launched as a neobank in 2017, and its credit platform might be viewed as a direct competitor to BNPL. But this is no case of the would-be disruptor of banking being disrupted, and capitulating to the burgeoning demand for BNPL.

In Laplanche’s telling of it, Upgrade, instead, sees travel financing and BNPL in general as forms of “complimentary credit,” while broadening Upgrade’s scale and total addressable market as its network of 220 partner banks fund the loans and the BNPL receivables. The positive ripple effect is that the broad financing network in place will make BNPL even more affordable to consumers, as the average Uplift transaction is about $1,200 — a bit more for airlines, a bit more for cruises.

“BNPL is a great way,” he said “to reach out to the customer who might not be responding to a direct [credit] offer … but they may be attracted to 0% financing or offers available on our partners’ websites.”

In eyeing the expansion into the travel industry, if Upgrade were to have gone it alone to enter the vertical, “it would have taken us years,” Laplanche said, to replicate Uplift’s network. Upgrade already had the financial firepower in place to do the deal, having raised hundreds of millions of dollars in funding through the pandemic. The company’s also profitable, Laplanche said, “So we’ve had a significant treasure chest.”

The two firms’ channels will co-exist once the deal is closed, adding to the point-of-sale financing solutions developed by Upgrade in the home improvement and auto businesses over the past couple of years. The average credit line for Upgrade, at least initially, has been about $5,000, with the average personal loan at $10,000 and the home improvement financing lines coming in at $15,000 or more. The value proposition, Laplanche said, lies in converting balances into installments and then offering rewards based on responsible repayment.

The Uplift users represent attractive new entrants into Upgrade’s more traditional credit offerings, as delinquencies are already low.

The Uplift consumer base, he noted, is populated with individuals who easily could have afforded the trips on their own, but are attracted to the 0% financing. They’re opting to use BNPL as a strategic tool, a strategy that has been illuminated by PYMNTS’ own research that shows BNPL’s appeal as a payment option that helps with budgeting.

“Many of the Uplift customers,” he said, “will want to have access to Upgrade’s products,” ranging from no-fee checking to high-yield savings accounts.

“If we do this well,” he said of the Uplift acquisition, “there are ways to deliver tons of value to consumers.”