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New Upgrade Card Could be a Game Changer

A new kind of card launches today from Upgrade combining the best features of personal loans with the utility of a credit card

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When Renaud Laplanche started Upgrade in 2017 there were high expectations that the fintech pioneer would be breaking new ground with his second startup. After leading LendingClub from inception through IPO to the leading personal loan provider in the country everyone wondered what he had up his sleeve with Upgrade.

At his LendIt Fintech USA keynote in 2018 Renaud first teased us with his idea of the revolving personal line of credit. And he then confirmed earlier this year in his 2019 LendIt keynote that an Upgrade card was coming. Today is the day, the Upgrade Card has officially launched and it could be a game changer for the industry.

I caught up with Renaud earlier this week to discuss this new card and what it means for Upgrade and for the future of credit cards. He first pointed out that the concept of minimum monthly payment, that is a feature for most credit cards, is such a bad idea for consumers. It is detrimental to consumers’ financial health because it can take decades to pay off a credit card balance and result in a total payment often more than double the original amount.

He argues that this kind of credit card is fundamentally flawed and that a new approach is needed. He said:

I am genuinely more excited about this product than when I first launched online personal loans over a decade ago. We have refinanced tens of billions of dollars in credit card debt but still the overall outstanding balance keeps increasing. It feels good to get to the heart of the problem and create a more responsible card.

How Upgrade Card Works

You can think of Upgrade Card as a cross between a traditional credit card and an installment loan. Once they pass underwriting a customer is approved for a credit limit as you would expect. The difference is how the outstanding balance is paid back. Also, to be clear Upgrade is not calling this a credit card, it is simply Upgrade Card because they want to position it as a better alternative (an upgrade if you will) to a credit card.

[Read more…]

The Superior User Experience of the New Apple Card

I share my experience applying for the new Apple Card and where I think it breaks new ground

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I just signed up for the Apple Card. I have been fascinated by this partnership between Apple and Goldman Sachs ever since we learned about it last year. So, when it went live earlier this month I knew I had to get it.

While I may not be a true Apple fanboy I use many of their products including a Mac, iPad and iPhone. The Apple Card is designed to work seamlessly with the iPhone, in fact you must have an iPhone 6 or later to be able to apply for the Apple Card. There is no web-based application, you have to do it from inside the Wallet app.

I like to play the mileage and points game so I have several Chase and Amex credit cards and I regularly (2-3 times a year) apply for new cards. It never ceases to amaze me that, despite all the credit cards these companies issue, the online application process always feels clunky and unfriendly. They could and should make it much more simple.

The Card Application Process Felt Like Visiting the Future

This is what Apple has done. The user experience in the application process is simply superb. They have clearly thought long and hard about ways to reduce friction, especially considering you are applying on your phone. Here are some screenshots of the process: [Read more…]

LendUp Splitting Personal Loans and Credit Card Businesses

LendUp will house the company's personal loan business while a new company, Mission Lane will focus on the credit card business.

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One of the companies the LendIt Fintech team has always held in high regard is LendUp. They are tackling a difficult problem, access to credit for the underserved, by leveraging the latest technology. This involves a whole different set of challenges than serving the prime and super prime market. They have offered short term loans and more recently a credit card for the non-prime market.

Today, LendUp announced that they are splitting the business in two. LendUp will focus on the company’s more established and profitable personal loan business which also includes consumer education. A new company has been formed called Mission Lane which will hold the credit card business, and that business’ portfolio, IP, and technology platform. The credit card business includes the popular Arrow and L cards. These cards have received high accolades from customers compared to other subprime credit cards which often are coupled with high fees.

Mission Lane is receiving a capital injection from Invus Opportunities and LL Funds LLC who are leading the investment along with participation from QED Investors. LendUp launched their card business more recently and the new capital structure will allow this segment of the business to grow. The companies will have separate technology platforms and it remains to be seen whether the customers of each will be cross marketed to.  Along with these changes is a shuffling of staff between the two businesses.

Here are a few of the major changes:

  • Anu Shultes, previously GM of LendUp will be appointed LendUp CEO.
  • Sasha Orloff, LendUp’s co-founder and CEO is stepping down, but will remain a board member of LendUp and will be involved in Mission Lane as an advisor.
  • Vijesh Iyer, previously LendUp’s COO has been named interim CEO of Mission Lane as they search for a permanent CEO
  • Other previous LendUp executives including LendUp co-founder Jake Rosenberg, Eric Nelson (operations) and Leonard Rosemen (data science) will also be joining Mission Lane.

While this news was just announced, the Mission Lane webpage gives us a glimpse of what the new brand will look like. We wish everyone from LendUp and the newly formed Mission Lane the best of luck as they move forward as separate entities.

Goldman Sachs Said to be Partnering With Apple on a New Credit Card

The new credit card will carry the Apple Pay brand and will be the first foray into credit cards for Marcus by Goldman Sachs

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On stage last month at LendIt Fintech USA 2018 Omer Ismail, the Chief Commercial Officer for Marcus by Goldman Sachs, said that one of the new products his firm was looking at was credit cards. Not that surprising, really, for a company working hard to grow their consumer finance business.

Earlier today the Wall Street Journal broke the story that Goldman Sachs would be partnering with Apple on a new credit card. When I was thinking about potential ways Marcus would launch a credit card, a partnership with Apple was not what came to mind. It points to the many advantages that Marcus has over pretty much every other fintech company. They have the Goldman Sachs name behind them and have deep relationships with some of the largest companies on the planet. That opens doors that are simply not available to even the more established fintech platforms.

So how will this partnership work? I reached out to Goldman Sachs but not surprisingly they had no comment, so we will have to go with the information in the WSJ article:

The planned card would carry the Apple Pay brand and could launch early next year, people familiar with the matter said. Apple will replace its longstanding rewards-card partnership with Barclays, the people said.

Apple has had a card relationship with Barclays going back to 2005 so this is a significant move on Apple’s part as well. Given this is going to be an Apple Pay branded card Apple is clearly focused on building that part of the business. The WSJ states that the economics of any Apple Pay transaction would be significantly improved with this new Marcus card. [Read more…]

Upgrade Announces New Personal Credit Line Product at LendIt Fintech USA 2018

This first of its kind product combines the benefits of a personal loan with the ease and convenience of a credit card

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While the personal loan has been around for centuries and the credit card has been around for decades they have never been combined into one product before. Until now. On stage at LendIt Fintech USA 2018 today Renaud Laplanche, the CEO and co-founder of Upgrade, will announce this groundbreaking new product.

I chatted with Renaud last week to get the latest news on Upgrade and to talk about this new product. He immediately wanted to start talking about financial health. As an industry we should be doing more to help the overall health of consumers and not just sell them a personal loan.

At Upgrade they are trying to do just that. They have released a broad suite of free tools to help consumers understand their credit health. They have credit monitoring tools like many other vendors but what Upgrade has done that is new is create a credit score simulator. This tool will show you a couple of dozen “what if” scenarios personalized to your own situation that are very practical and useful. There are also many articles and short videos to help people understand credit more. Having both credit monitoring and loans under one roof also provides benefits to users with a tighter integration between the two products.

There is more to discuss here but let’s get back to the focus of this article: Upgrade’s new Personal Credit Line.

How This Personal Credit Line Will Work

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Is Marcus Going to Launch a Credit Card?

Goldman Sachs has acquired the talent from a recently defunct credit card startup

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Ainsley Harris reported in Fast Company today that Goldman Sachs is acquiring the employees who built Final, a credit card startup based in Oakland. Final offered a unique kind of credit card, one that would create a different virtual card number for every merchant, thereby reducing the risk of credit card fraud. The company announced in December that they were shutting down.

According to Fast Company:

Goldman gains about a dozen engineers and product managers with experience building a consumer finance product from scratch. When they arrive at Goldman in the spring, they will join a growing roster of consumer-oriented employees, all part of the bank’s new Consumer and Commercial Banking division.

It has been a busy couple of years for Goldman Sachs when it comes to their consumer facing business. This latest deal follows a long list of acquisitions for Goldman recently:

  1. Acquisition of GE Capital Bank – this jumpstarted GS Bank giving it a huge deposit base.
  2. Acquisition of Honest Dollar – the digital retirement savings app was acquired in March 2016.
  3. Launch of Marcus with debt consolidation loans.
  4. Acquisition of Genesis Capital – not really consumer facing but could add a real estate development arm to the bank.
  5. Bond Street – employees of the online small business lender moved to Goldman Sachs.
  6. Addition of home improvement loans to the Marcus offerings.

Marcus to Offer a Full Suite of Banking Products?

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Are We Seeing the First Signs of the Next Recession?

Disclosures by Lending Club as well as many of the leading banks this month have indicated delinquencies are increasing.

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Lending Club made news earlier this month when they announced they were increasing interest rates again. But what they also shared was that this was partly due to an increase in delinquencies in particular at the higher risk end of the credit spectrum.

Grades E, F and G at Lending Club are at the highest interest rates ever with the top rate for a G5 rated loan now at 30.99%. The interest rates on these higher risk loans have been steadily increasing for many years. I have a screenshot I took back in October 2010 when a G5 loan had an interest rate of 21.14%. Today, a loan with that interest rate would be rated D5 at Lending Club

So, does this mean that the G5-rated borrower of today is more risky than the G5 of 2010? Certainly the expected loss for the 2016 borrower is far more than this same person in 2010. But while interesting I don’t think this says much about the possibility of a recession in the near future. It simply means that Lending Club is targeting a higher risk borrower.

Having said that, the reality is that there has been higher than expected delinquencies in the higher risk portions of Lending Club’s portfolio. Here is a paragraph from their 8-K released last Friday:

Consistent with observations earlier this year, we have continued to observe higher delinquencies in populations characterized by high indebtedness, an increased propensity to accumulate debt, and lower credit scores. Although the trend can now be observed across grades, it is less notable in lower risk grades and more notable in higher risk grades, particularly grades E, F and G, which account for approximately 12% of platform volume. Higher delinquencies are more evident in 2015 and early 2016 vintages, which coincides with an uptick in consumer indebtedness in the U.S.

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Revolving Credit Card Debt Down But Interest Rates Now at Record Levels

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There was good news last week for the nation’s credit card holders. The total revolving consumer credit card debt continues to fall along with default rates.

According to Forbes.com default rates were down at four (Discover, American Express, Chase, Bank of America) of the top six credit card issuers. Only Citigroup and Capital One saw increases. Is this because people are spending less? Quite possibly.

One reason consumers are able to keep up with their payments is that balances have dropped sharply since the height of the recession. Lower balances translate to lower minimum payments.

The Federal Reserve says that total revolving credit balances has dropped from $958 billion at the peak in 2008 down to $793 billion in July of this year. Charge-off rates have declined as well from a high of 10.96% in the second quarter of 2010 to just 5.6% in the second quarter of this year. [Read more…]

Late Payments Improving for Credit Cards and P2P Lending

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Yesterday, the Huffington Post reported that last quarter late payments on credit card balances fell to their lowest level in 15 years. This is good news for credit card companies and it could also bode well for investors in peer to peer lending.

Here is an excerpt from the article:

Nationwide, the rate of payments 90 days or more past due on bank-issued cards dropped to 0.74 percent in the first quarter, down from 1.11 percent a year ago.

The delinquency rate is the lowest level since the third quarter of 1996, TransUnion said. It peaked in the first quarter of 2009 at 1.32 percent.

So, we have the rate of delinquent credit cards dropping significantly from 1.32% in 2009 down to 0.74% today. This is despite continued high unemployment and an economy that is growing at an anemic pace. It seems that in general people are more conscious of their debt now than in a long time. [Read more…]

Why ReadyForZero is the Future of P2P Lending

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Last month ReadyForZero, a free online financial tool, launched with little fanfare. But this brand new startup may well be a key player in the peer to peer lending space within a year or two.

The biggest problem that peer to peer lending has from an investor perspective is the lack of verifiable information on borrowers. Even if Lending Club does an income and employment check, we still know very little about the spending habits of the borrower. Sure the credit report contains some information, which is useful, but it doesn’t provide enough insight to really understand the borrower.

From a borrower perspective, there are many people who would love a debt consolidation loan from Lending Club or Prosper but because of a low credit score they are ineligible. We all know that about 90% of borrower applications are rejected. But with a little guidance many of these borrowers may well be accepted on to the platform.

What is ReadyForZero?

[Read more…]

ABOUT LENDIT FINTECH NEWS

LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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