With the emergence of the COVID-19 pandemic and the onset of faster digitization in banking, banks, other depositories and institutional investors have expanded their ALM strategy to include purchasing third-party consumer loans for a variety of reasons. Through a fintech partnership, banks may find a more flexible and agile path to managing the balance sheet, interest income, and technological capabilities.

A partnership between a bank and a fintech company can be structured to be a successful and mutually beneficial relationship.

Upgrade, Inc. has helped bring about a digital transition in the consumer lending experience. Today, Upgrade offers personal loans, personal credit lines, and auto loans to mainstream consumers. In turn, these loan products are funded by a growing number of financial institutions. Upgrade also recently launched a deposit program; loan buying partners can participate in the deposit sweep program and receive ultra-low-cost deposits in exchange for loan purchases.

Partnering with Upgrade Has Benefits

Upgrade can offer banks several benefits as a fintech partner:

• Reputation— years of fintech experience including previous periods of tight credit
• Best-in-Class digital consumer credit platform
• Prime and super prime consumer assets through custom credit overlays (custom buy box)
• Robust regulatory compliance processes and procedures
• Multi-product approach with volume across multiple yielding assets
• Track record with 150 (and counting) bank/credit union loan buying partners
• Average onboarding timeline ~30 days
• Dedicated account management team
• No account minimums or term commitment

Upgrade’s Asset Purchase Program

Upgrade facilitates consumer loans, more than $15 billion to date, which are in turn purchased by loan buying partners through a flexible asset purchase program, structured to work with a bank’s existing ALM strategy. Upgrade has chosen to partner long-term with stable funding partners such as banks and credit unions to focus on longevity versus an auction-style trading desk or securitization focus.

While many loan buyers buy loans for balance sheet diversification goals, other buyers find the flexibility of Upgrade’s program meets liquidity management needs or declines in fee income. Flexibility means purchasing as needed, stopping, and restarting as needed. There are no minimums or purchase commitments with Upgrade.

One of the more popular benefits to loan buyers is that Upgrade’s asset purchase program utilizes a multiproduct
approach, with facilitated personal loans, personal credit lines and auto refinance loan volume available to institutional buyers.

Personal Loans

Upgrade’s personal loans, which are fully amortizing, fixed-rate loans, are one type of loan buyers can fund. As part of the digitization trend in banking, consumers can complete an application, check rate estimates, view a sample loan payment, and find answers online, with additional resources available through email or phone. The predominant use case is refinancing high-cost credit card debt.

Unsecured Line / Card

Another type of loan buyers can fund are loans converted from Upgrade card balances to installment plans. As a result, the installment plan encourages balance repayment and promotes more responsible payment behavior. Upgrade Card (Visa®) is an unsecured line of credit with point-of-sale access device and offers rewards for loan repayment, either
Bitcoin or cash.

As a chip-enabled, contactless card for no-touch payment, and accepted by many merchants, the Upgrade Card by Upgrade, Inc. was named in the top 50 U.S. card issuers by Nilson Report in 2022.

Auto Refi Loans

Finally, loan buyers can also purchase Upgrade facilitated, fixed rate fully amortizing auto refinance loans. Loans are available to consumers using an online application process for cars and passenger trucks with a mileage limit, and registration and insurance requirements.

Credit First Approach
As part of a major strategic focus, Upgrade has invested in state-of-the-art technology across the company including digital customer acquisition, more efficient investor account opening, and enhanced credit research models.

Upgrade’s Chief Credit Officer, Myles Reaz, has 20+ years of leadership experience in strategy, risk, and P&L management, including product and pricing at several major banks. Previously while at these banks, Myles successfully managed a portfolio of HELOC loans from the 2008 global financial crisis.

The Credit Research Team is always working with a “continuous improvement” mindset, and recently released CCR2, a second-generation machine learning, credit card research model. The model utilizes Upgrade card loan performance using an improved machine learning technique with a scalable, decision tree library.

Upgrade’s digital acquisition setup provides some detail on the average profile of the consumer taking out loans. With an average FICO over 700, average age over 40, average income over $100,000 and approximately 50% homeowners, these prime borrowers take loans primarily to consolidate debt or to pay off existing credit card obligations through Upgrade’s Direct Pay feature, which automates ACH debit payment transactions.

Regarding Upgrade’s investor account opening process, Upgrade has a history of collaborating with many vendors and technology providers of choice to optimize a bank’s own process when onboarding a new loan buyer. With streamlined procedures in place, and a reputation of compliance, Upgrade has also successfully cleared many state and federal audits on behalf of our bank partners.

Upgrade, Inc.

Upgrade, Inc.’s management team pioneered consumer fintech in 2006 with a lasting impact on the industry and issued $8 billion in loans annually while at Lending Club. With this experienced team of fintech and banking innovators, Upgrade facilitated $7.5 billion in loans in 2021 alone. Currently, Upgrade has a $2.5 billion loan facilitation quarterly run-rate.

Upgrade has 1,100 employees across three office locations, including a large operations center in Phoenix, Arizona. Recently, Upgrade, Inc. was listed among the Best Places to Work in FinTech in 2022 by American Banker.

As a platform, Upgrade facilitates loans and credit lines, issued by Cross River Bank, a New Jersey State Chartered Commercial Bank, and Blue Ridge Bank, a nationally chartered commercial bank. Upgrade Card is issued by Sutton Bank, pursuant to a license from Visa U.S.A. Inc.