Financial giant buys Buy Now, Pay Later service Uplift for $100 million dollars.
In a significant move, Upgrade, a six-year-old neobank, has acquired Uplift, a buy now, pay later (BNPL) company specializing in travel. The deal, worth $100 million in cash and stock, marks Upgrade's entry into the growing BNPL space.
The acquisition more than doubles Upgrade's customer base, adding 3.3 million users to its existing 2.25 million. Most of these users share similar demographics with Upgrade's current customer base, being in their early 40s with an average income of about $100,000 and an average FICO score of about 700.
The acquisition is a significant milestone for Upgrade, which became profitable in 2021 and raised $280 million at a $6 billion valuation the same year. The company has been adding to its funds every month with two years of profitability.
Uplift offers installment loans for vacation packages and has a network of 300 airlines, cruise lines, and hotel chains. The acquisition is expected to lower the cost of credit for people financing their travel expenses.
The downturn in the fintech market, characterised by a global slump in venture funding, presents an opportunity for well-capitalized firms like Upgrade to take advantage of lower valuations. René A. Laplanche, founder of Upgrade, expects more consolidation in the fintech industry due to this trend.
In 2019, Uplift was on track to hit $1 billion in loans, according to TechCrunch. However, higher interest rates and a global economic slowdown have cooled the demand for venture investing, causing global investments in fintech startups to fall 48% for the second quarter to $7.8 billion.
The second-quarter funding level this year was the lowest since the fourth quarter of 2019, with overall U.S. venture funding decreasing 27% to $31.3 billion compared to the first quarter. Despite this, Upgrade has continued to thrive, selling loans to a network of 220 partner banks and credit unions.
The acquisition of Uplift also allows Upgrade to offer its customers a high-yield savings account by sweeping funds into partner banks that are hungry for deposits, similar to some of Upgrade's existing offerings like home improvement financing.
The deal comes as BNPL can be thought of as financing at the point of sale, similar to some of Upgrade's existing offerings. The acquisition is expected to strengthen Upgrade's position in the fintech industry and provide a promising future for both companies. The Uplift team will remain with Upgrade after the acquisition.
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