The credit card startup upgrade climbs 83% to $ 6.28 billion in just four months

Upgrade, the fintech start-up that converts credit card balances into installment loans, has completed a fundraising round that has valued the company at $ 6.28 billion, CNBC has learned.

The company has raised $ 280 million in its Series F round led by new investors Coatue Management and DST Global, according to Upgrade CEO Renaud Laplanche. That’s an 83% increase from a previous round this year that valued upgrade at $ 3.43 billion, he said.

Most of that increase was due to the San Francisco-based company’s strong top-line growth, which rose 70% between June and October, the two fundraising periods, Laplanche said in a Zoom interview.

Upgrade’s main product is a card that converts purchases into installment loans with a fixed rate of interest. The start-up is the youngest company to benefit from the “buy now, pay later” trend in the fintech sector. While traditional cards charge more than 18% interest annually, the upgrade card starts at 8.99%, Laplanche said. According to the industry newsletter Nilson Report, this makes it one of the fastest growing maps in the country.

“Consumers are discovering the benefit of having a product that gives them the convenience of a credit card but doesn’t drive them further into debt,” said Laplanche. “Traditional credit cards are a really bad consumer product, with very high interest rates and a lot of fees. They’re really designed to keep people in debt for as long as possible.”

Fintech companies targeting the vast US consumer credit market include the “buy now, pay later” fintech affirm, as well as more diversified players such as SoFi, Goldman Sachs’ Marcus brand and Laplanche’s co-founded Lending Club.

But consumer credit is still dominated by credit card giants at traditional banks like JPMorgan Chase and Citigroup. They have little incentive to copy some of fintech’s more consumer-friendly features as that would diminish profits from their massive card loan portfolios, Lapanche said.

“They have no interest in changing this behavior,” he said. “The upgrade card is an innovation that should have come from the banks, but it didn’t. It’s less profitable than a traditional card because the balance goes down faster, but it’s a better deal for consumers.”

Like other fintech players looking to eventually become digital one-stop shops for consumer finance, Upgrade has started to branch out. It offers checking accounts, a 2% cash back debit card, and a credit card that pays out rewards in Bitcoin. About 10% of the new cards issued by the start-up are bitcoin reward cards, Laplanche said.

The company is preparing to go public as early as 2023, he said.

“We are growing fast and are profitable,” said Laplanche. “We’re working on it in about 18 months.”