The company Upgrade has become the latest FinTech to pursue becoming a bank.
About Upgrade’s Application:
This week, Upgrade revealed that it has submitted an application to the Nevada Financial Institutions Division to become an industrial loan bank. The FinTech also applied with the Federal Deposit Insurance Corporation (FDIC). If approved, Upgrade Bank would be established and operate as a wholly owned, Nevada-chartered, subsidiary of Upgrade Inc.
In anticipation of this, the company has named Virginia Varela (who currently serves as Head of Banking Strategy for Upgrade) CEO of Upgrade Bank. Previously, Varela was president and CEO of Golden Pacific Bank, staying on as an officer at SoFi Bank when SoFi acquired Golden Pacific. It’s also planned that the Upgrade Bank board of directors would feature Varela and Upgrade co-founder/CFO Jeffrey Bogan, as well as independent directors Raymond Specht, Daniel Quan, and Dalibor Snyder.
According to Upgrade, the proposed Upgrade Bank would be added to the firm’s existing bank partnerships. Currently, Upgrade partners with Cross River Bank for loans, while Bancorp Bank issues the Upgrade Visa. The company has also previously partnered with Blue Ridge Bank, Sutton Bank, and WebBank for various products.
Starting as a personal loan provider in 2016, today, Upgrade offers a variety of products, including a credit card, deposit accounts, and more. Since launching, the company says it’s delivered more than $53 billion in credit to over 8.5 million customers.
What They’re Saying:
In a short statement about the application, Varela said, “We are excited at the prospect of establishing a new bank that will advance Upgrade’s mission of bringing responsible and affordable credit to consumers.”
My Thoughts:
This is at least the third FinTech to apply to become a bank in recent months, following Revolut and Klarna. The difference is that both of those companies are seeking national bank charters while Upgrade is looking to become an industrial loan bank. That leaves out the step of needing to apply with the Office of the Comptroller of the Currency. It also explains why Upgrade would be seeking to keep some of its banking relationships in place even after their proposal is approved.
I’m sure there’s a good reason why the company thought that this was a better route than going for a national charter… yet I won’t pretend to know what it is. Perhaps this route will be faster (I have to imagine it would be), but we’ll have to see whether that proves to be true.
