Upgrade’s Debit Rewards Product Takes New Approach

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There is no shortage of digital-only banks offering a smoother onboarding process, a slick mobile interface and fee waivers in an effort to tempt consumers to leave their traditional bank.

Which, in a sense, makes Upgrade’s announcement today (Jan. 14) that it is jumping into the world of mobile banking with the launch of a debit rewards product somewhat eye-catching.

“We think mobile banking is going to be a big part of our future,” CEO and Founder Renaud Laplanche told PYMNTS’ Karen Webster, “and I think we’ve crafted an offering that delivers more value to consumers than really any other offering that exists today.”

The introduction of this unique mobile banking solution marks that next step, moving away, Laplanche said, from being an alternative credit platform, into the financial services ecosystem for its clients.

It also comes on the heels of what Laplanche described as a great year for the firm. Upgrade, a financial services platform that offers personal loans and an installment credit product tied to a credit limit, grew by 75 percent in 2020 as it achieved profitability with a $160 million annual revenue run rate.

Thinking Differently About Monetizing Mobile Banking  

While every mobile bank is different, there are some features common to the current set of options. Everyone is offering some variation of fee-free service, and so is Upgrade, LaPlanche said, because it has become “mostly table stakes to remove the fees.”

Also common is access to a paycheck a day or two early or savings accounts that have higher than average return rates associated with them. Upgrade didn’t incorporate those two features, he said because he didn’t see them as useful for consumers.

“Upgrade serves a very mainstream customer base who is about 42 years old and on average brings home around about $90,000, $95,000 individual income,” Leplanche said. “It’s not the underbanked population; it’s not the younger populations that have lower income or lower credit quality. It’s really sort of a very broad swath of the population that are not  anxiously awaiting the next paycheck.”

What Upgrade is instead offering is a debit product that rewards consumers for everyday spend — actually quite generously — something almost unheard of since the passage of the Durbin Act in 2010, which more or less shuttered the notion of debit rewards. Consumers with an Upgrade mobile bank account get 2 percent back on everyday expenses like grocery, drugstores, restaurants, deliveries, gas, as well as monthly subscriptions like cable or their streaming services of choice when they use the upgrade debit card.

He said the goal is to build rewards that are relevant and reward the behaviors of a financially responsible consumer. In much the same way that users of Upgrade installment credit product are rewarded with cash back when they make a loan payment rather than when they make a purchase, consumers are rewarded when they use funds on hand to cover everyday expenses. It also means that mobile banking, as a standalone part of the Upgrade platform, won’t drive profits for the firm but instead be thought of as a “breakeven product” to attract consumers to the platform who use other Upgrade products.

“The goal is to get as many customers as possible to treat their Upgrade account as a primary checking account, ” Laplanche said. “It’s designed so that the more a consumer uses it, the more they earn, and we think that’s going to be key to driving adoption and create that the primary account relationship.”

Moving Consumers Into The Larger Ecosystem

And as 2021 is getting off the ground, Upgrade continues to consider how it can expand the reach of its products in the future. Mobile banking done better, he noted, is a big priority.

Its current product under construction — a secured credit card offering for those who don’t meet Upgrade’s lending criteria — is the current project under development set to launch in 2021, he told Webster.

“Some people might be new to credit and don’t have a lot of credit history and can’t really qualify for [an] unsecured card,” Laplanche said. “We want to give them the ability to start with a secured card so they can show that they can handle it responsibly and they earn a credit score.”

Laplanche also said he has short-term goals for the next few months. He wants to maximize value for his customers, get personal loans, credit cards and mobile banking to work as seamlessly as possible and make it easy for customers to benefit from all three products.

“It all works together for creating an environment where our customers get rewarded for doing the right thing and get to a better place,” Leplanche said.

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NEW PYMNTS DATA: THE DECEMBER 2020 SUBSCRIPTION BUNDLING REPORT 

About: The PYMNTS Subscription Bundling Report, surveyed a census-balanced panel of 2,962 U.S. consumers to gauge how their attitudes toward bundled subscription services have changed during the pandemic, especially those offered by companies in the streaming sector. The report also examines how the knowledge that a COVID-19 vaccine will soon be available throughout the U.S. could affect their perceptions.



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