LendUp got another $47 million to fight big banks against their credit card monopoly
If a poor lose, then it is always a win for the bank. Credit cards are a good example of this winning and losing because people get in debt because of that and keep paying more money to banks because of late fees and interest. Due to this kind of exploiting behavior banks lost their credibility against fintech startups that are willing to reduce their profit with better software and LendUp is an excellent example for this.
LendUp is working on a simple philosophy of providing better banking services to the customer with less profit. Because of this strategy, this start-up was not only able to build a better banking brand with compassion for excellent services, but it was also able to raise $47.5 million in its recent round of funding. This funding was led by Y Combination’s growth fun. CEO Sasha Orloff said that C series value was much higher for Company compared to the last time it raised fund in January 2016. Needless to say, it was a notable achievement for the company as they started the fundraising very late that too in a very rough season.
LendUp is planning to use the cash to increase the range of its L card, which is a credit card that does not have any kind of hidden fees in it and offer a flexible schedule for the payment. Along with that, L card has a number of modern features as well that allow the user to do shopping via the app and if lost or stolen, then one can block it instantly using the mobile app. Other than this user can also know more about the remaining credit and other details with a native mobile app. The most fantastic thing about LendUp is that thousands of people are signing up monthly for the service, even when this company is not doing any kind of aggressive marketing at this time.
Orloff says, they do not have the interest to keep people in debt. They do understand that if they punish customer with late payment fees and similar other charges, then they may get more money for the bank, but they will also get hate from people. Unfortunately, people had almost zero alternatives until this time, and that is why they had to use what was available for them. But thanks to the risk assessment process on the basis of data, and no overhead charges LendUp was able to penetrate into this market with ease. And the company was able to do that by making an excellent App instead of making several Bank branches. They are loan dolphins, not Loan sharks.
Talking about the company, it was founded in 2011, and initially this startup attacked payday loans that are nothing but the complete scam in most of the cases. The company practically stole all the customers that were going to cash advance companies for their ad hock needs. Most of these customers were people that had low or zero financial education, and low income and LendUp helped these people to get financials education to get rid of cash advance companies.
Needless to say, credit cards market is 100 times bigger compared to cash advance, and it is much more organized, deeply penetrated in all income group people. However, the company was able to get $100 million earlier and recently in series B round of funding, and LendUp secured $50 million funds. Although the company still had a lot of money in its pocket, it decided to go for the third round of funding and got $47.5 million in this round. In this round of fundraising, Y Combinator Continuity was the biggest investor. Other than this, Google Ventures, QED Investors, Thomvest Ventures, Susa Ventures, Bronze Investments, Data Collective, SV Angel, Radicle Impact, and other angel investors also participated.