Upgrade, Inc. has applied to establish and own a bank. The San Francisco consumer lender has filed with the Nevada Financial Institutions Division and the FDIC to set up Upgrade Bank, a proposed Nevada-chartered industrial loan bank that would operate as its wholly owned, FDIC-insured subsidiary.
The company announced the filings on October 12. Upgrade, Inc. itself would not become a bank. If both regulators approve, Upgrade Bank would be a separate subsidiary with its own governance and internal controls, giving the parent another way to fund the credit it extends.
Upgrade is not walking away from the banks it works with today. It says the new bank would complement its existing bank partners and loan buyers rather than replace them. Its products span five lines: mobile banking, buy now pay later, personal loans, credit cards and auto financing. Since its founding, the company says it has delivered more than $53 billion in credit to more than 8.5 million customers.
To run the bank, Upgrade has picked Virginia Varela, currently its head of banking strategy. She brings more than 35 years in banking supervision and financial services, including roles at SoFi Bank and as president and CEO of Golden Pacific Bank. She has held CEO, president or board positions at four banks, among them a director role at the Federal Home Loan Bank of San Francisco.
Varela said she was “excited at the prospect of establishing a new bank that will advance Upgrade’s mission”.
The proposed initial board has five members. Alongside Varela sit Jeffrey Bogan, Upgrade’s co-founder and CFO, and three independent directors: Raymond Specht, Daniel Quan and Dalibor Snyder.
Upgrade cautioned that the applications remain subject to regulatory review, with no guarantee that either will be approved and no timing for a decision.
Herald View
Read the application through its people, not its press language. Upgrade has put a CEO with decades in banking supervision in charge of the proposed bank and given independent directors three of its five board seats. That is a filing built for the regulator’s desk, designed to answer governance questions before anyone asks them. The commercial logic is just as plain. Every loan funded through a subsidiary bank Upgrade owns is margin that no longer goes to a partner bank or loan buyer, however politely the company calls the bank a complement. If the FDIC signs off, Upgrade’s partners keep the relationship for now but lose their leverage over it.
