American Startup Upgrade Is Venturing Into Buy-Now-Pay-Later Services Following The Sector’s Boom

If there’s any financial sector that’s currently booming, it’s the buy-now-pay-later sector. The sector is receiving a lot of attention at the moment and startups, companies and investors are trying all they can to leverage the unending opportunities in the sector.

American fintech company Upgrade is set to launch its buy-now-pay-later services and join the continually increasing list of companies providing the service.

Thanks to the coronavirus pandemic and other minor factors which boosted online shopping as well as payments, the buy-now-pay-later sector has boomed to become a major industry valued at at least $100 billion. The industry is so huge that leading financial companies in the world have ventured into providing these services. Jack Dorsey owned Square reached a deal to acquire AfterPay – Australia’s biggest buy-now-pay-later service – for $29 billion. PayPal has a buy-now-pay-later service called Pay in 4, and has been operational since last year. The opportunities that lie in the sector are endless, Mastercard also launched an instalment program for fintechs and banks this week, launching it into the space.

Upgrade was founded by Renaud Laplanche in 2016. The company is a digital banking startup that provides customers with payment cards alongside personal lines of credit. What the company does is that it allows customers to revolve their balance – it takes into account all the purchases a customer makes in a month and creates an instalment plan which is usually long term for them. The time period varies between 6 to 36 months and the company charges a fixed interest rate.

As common with buy-now-pay-later services, Upgrade plans to launch a buy-now-pay-later product that will be free from interest. What makes its product stand out from other providers of the service is that the company will let users pay off their debt in four months, completely free from any interest. CEO of the company, in a statement, said that “we are working on a version of the Upgrade Card that’s better suited for smaller expenses. In that case, we don’t need to charge interest because it’s a smaller amount”.

What this means is that Upgrade’s buy-now-pay-later product is completely different from that of other companies, both in the time frame for repayment and how it will work. Unlike how companies like Afterpay and Klarna operate, Upgrade will pull all the user’s card purchases and send them an invoice of what they owe over a four-month period instead of adding a checkout option at merchant’s websites. “What we like about embedding the product into a card is the broader acceptance. BNPL often relies on partnerships with merchants. It’s starting to get mainstream online, but not so much in-store”, Renaud Laplanche said.

He also stated that Upgrade’s IPO will take a while as the company has to get read and is looking at a period of 18 months to do so.  “We clearly have the size. We’re growing very, very fast. We’ve been profitable now for more than a year, which is rare for a company that is growing that fast. We can hopefully be ready sometime in the next 18 months. Then we’ll make a decision at that time on what’s best for our shareholders and our team members”, he said.

Other fintech giants in the world are looking at venturing into the buy-now-pay-later sector. Stripe is looking at offering the service through its platform and is looking to roll out the service in the first quarter of 2022. “It’s a payment method that we need to support because a certain amount of consumers want to use it a certain percentage of the time. For me, it’s just a way of addressing a larger share of wallet for our merchants”, CEO and co-founder Domm Holland said.

Although it is currently a booming sector, the buy-now-pay-later sector has been subject to regulatory scrutiny of late.