Upgrade is latest fintech to seek ILC charter

Upgrade, a major player in the fintech and consumer lending space, is applying for an industrial loan company (ILC) charter in Utah. For retailers and operators who offer financing, this move signals a major shift in how your lending partners might operate in the future. Currently, most fintechs have to partner with third-party banks to originate loans. By getting its own charter, Upgrade would essentially become its own bank. This allows them to cut out the middleman, potentially lowering their cost of funds and giving them more control over the types of credit products they offer your customers. For your business, this could lead to more stable financing programs and faster innovation. When a lender owns the bank, they aren't at the mercy of a partner bank's shifting risk appetite. However, this move comes at a time when federal regulators are increasing scrutiny on 'neobanks.' If Upgrade succeeds, they join the ranks of companies like Square (Block) and SoFi, moving from tech startups to heavily regulated financial institutions. This ensures long-term viability but also means more compliance oversight that could trickle down to the merchant level. Keep an eye on this as it may prompt other lenders you work with to seek similar charters to stay competitive.

Source: American Banker — Top News

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