Upstart Holdings Seeks Bank Charter to Transform Business Model
Written by Emily J. Thompson, Senior Investment Analyst
Updated: May 19 2026
0mins
Source: Fool
- Bank Charter Application: Upstart Holdings has recently applied for a bank charter to lower funding costs and expand its business, aiming to become 'the first bank built from the ground up on AI,' which could transform its business model and boost its stock price.
- Loan Holding Strategy: Although Upstart initially did not hold any debt, it has started holding some loans on its balance sheet and has entered into an agreement with Fortress Investment Group to purchase $1.25 billion in consumer loans over the next 15 months, raising concerns in the market.
- Diversified Funding Sources: By obtaining a bank charter, Upstart will gain access to new funding sources through deposits, reducing reliance on wholesale loan resales, allowing it to secure funds at lower rates and hold loans longer to accrue interest income.
- Competition and Challenges: In an increasingly crowded digital banking landscape, Upstart faces pressure from companies like SoFi and Nu Holdings; while its transformation may help lower funding costs, it must also navigate stringent government regulations and market competition challenges.
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Analyst Views on UPST
Wall Street analysts forecast UPST stock price to rise
13 Analyst Rating
7 Buy
4 Hold
2 Sell
Moderate Buy
Current: 30.620
Low
20.00
Averages
56.73
High
80.00
Current: 30.620
Low
20.00
Averages
56.73
High
80.00
About UPST
Upstart Holdings, Inc. is an artificial intelligence (AI) lending marketplace. The Company’s platform includes personal loans, automotive retail and refinance loans, home equity lines of credit (HELOCs), and small dollar loans. It applies artificial intelligence models and cloud applications to the process of underwriting consumer credit. Its AI marketplace connects consumers with its lending partner. Its consumers can access Upstart-powered loans via Upstart.com, through a lender-branded product on its lending partners’ own websites, and through auto dealerships that use its Upstart Auto Retail software. Its platform enables lenders provide a product their customers want, rather than letting customers seek loans from competitors. Its cloud-based software platform incorporates technologies and software development approaches to allow for development of new features, such as cloud-native technologies, data integrity and security, and configurable multi-tenant architecture, and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Reminder for Upstart Holdings Class Action
- Class Action Notice: Rosen Law Firm reminds investors who purchased Upstart Holdings securities between May 14, 2025, and November 4, 2025, that they must apply to be lead plaintiff by June 8, 2026, or risk losing their right to compensation in the class action lawsuit.
- Fee Arrangement: Investors participating in the class action will not incur any upfront costs, as attorney fees will be collected through a contingency fee arrangement, thereby lowering the financial barrier for investors to seek compensation without out-of-pocket expenses.
- Lawsuit Background: The lawsuit alleges that Upstart made false and misleading statements during the class period, particularly regarding the accuracy of its Model 22 risk-separation process and inflated loan approval rates, which resulted in investor losses when the truth was revealed to the market.
- Law Firm's Strength: Rosen Law Firm is renowned for its successful track record in securities class actions, having recovered over $438 million for investors in 2019 alone, and was ranked first in 2017 for the number of securities class action settlements, demonstrating its expertise and resource advantages in this field.
See More
Shareholder Class Action Filed Against Upstart Holdings
- Class Action Initiated: Bernstein Liebhard LLP announces a class action lawsuit on behalf of investors who purchased Upstart Holdings, Inc. (NASDAQ: UPST) securities between May 14, 2025, and November 4, 2025, alleging misrepresentations regarding the company's loan approval rates, revenues, and growth, which may have led to investor losses.
- Key Filing Deadline: Investors must file papers by June 8, 2026, to serve as lead plaintiff, representing other class members in directing the litigation, while those who choose not to participate will be considered absent class members and may not share in any recovery.
- Fee Structure: All representation is on a contingency fee basis, meaning shareholders incur no fees or expenses, which reduces the financial burden on investors and encourages more affected shareholders to participate in the lawsuit.
- Law Firm Credentials: Bernstein Liebhard LLP has recovered over $3.5 billion for clients since 1993 and has been recognized multiple times in The National Law Journal’s “Plaintiffs’ Hot List” for its success in litigating hundreds of class actions, showcasing its strong reputation and expertise in securities litigation.
See More
Upstart Launches AI-Powered Credit Assessment Algorithm
- AI Algorithm Innovation: Upstart's AI-powered algorithm analyzes over 2,500 data points, gradually enhancing its predictive capabilities, which significantly improves credit assessment accuracy and efficiency compared to the traditional FICO scoring system, potentially transforming the lending industry.
- Loan Origination Growth: In Q1 2026, Upstart originated 425,356 loans, a 77% increase year-over-year, with 91% of loans processed fully automated, indicating widespread application of its AI technology in credit approvals, enhancing customer experience and market competitiveness.
- Record Revenue: Upstart generated $308 million in revenue during Q1, representing a 44% year-over-year growth, and despite a net loss of $6.6 million due to increased operating expenses, the adjusted EBITDA of $40 million highlights its profitability potential.
- Broad Market Outlook: Upstart forecasts $1.4 billion in revenue for 2026, with expectations to exceed $2.5 billion by 2028; if AI fully replaces traditional credit assessments, Upstart could tap into a $1 trillion annual revenue opportunity, underscoring its strategic significance.
See More
Upstart's AI Algorithm Fuels Credit Growth and Revenue Surge
- Significant Revenue Growth: Upstart generated a record $308 million in revenue during Q1 2026, representing a 44% year-over-year increase, showcasing the effectiveness of its AI algorithm in credit assessment, with expectations of reaching $1.4 billion in revenue for the year, further solidifying its market position.
- Surge in Loan Originations: The company originated 425,356 loans in Q1, a 77% increase from the previous year, with personal loans making up the majority, indicating strong demand and rapid growth potential in the credit market.
- Efficient Approval Process: Upstart's AI system enabled 91% of loan applications to be fully automated, reducing approval times from days to minutes, significantly enhancing customer experience and strengthening competitive advantage in the market.
- Future Growth Outlook: Management forecasts a compound annual growth rate of 35% through 2028, potentially exceeding $2.5 billion in revenue, indicating substantial long-term growth potential for Upstart in the global credit market.
See More
Financial Comparison of Upstart and LendingClub
- Upstart's Financial Recovery: In FY 2025, Upstart achieved approximately $1.1 billion in revenue, reflecting a nearly 58.9% year-over-year growth, alongside a net income of $53.6 million, marking a return to profitability after significant losses in 2024, showcasing its robust recovery in the digital lending market.
- LendingClub's Stable Performance: LendingClub generated nearly $1.3 billion in revenue for FY 2025, representing a growth rate of about 15%, with a net income of approximately $135.7 million and a net margin of 10.2%, demonstrating its effective management of interest costs and enhancing its market position in the competitive fintech landscape.
- Risks and Challenges: Upstart faces risks from fluctuating economic conditions that may reduce borrower demand, particularly during recessions, where its AI models might fail to accurately predict defaults, potentially leading to funding pullbacks from lending partners and impacting business stability.
- Market Competition Dynamics: As a digital bank, LendingClub funds a portion of its loans using low-cost member deposits, which, despite challenges from interest rate volatility and regulatory changes, allows it to maintain an advantage over traditional banks due to its stable revenue model.
See More
Upstart and LendingClub Compete in Digital Lending Market
- Upstart's Business Model: Upstart connects borrowers with banking partners through an AI marketplace, achieving approximately $1.1 billion in revenue for FY 2025, reflecting a robust 58.9% growth, although it faces customer concentration risk with its top three partners contributing 61% of total revenue.
- LendingClub's Financial Performance: LendingClub generated nearly $1.3 billion in revenue for FY 2025, with a growth rate of about 15% and a net income of roughly $135.7 million, indicating effective cost management amidst interest rate fluctuations and demonstrating stable profitability.
- Risk Analysis: Upstart is exposed to risks from economic fluctuations that could reduce borrower demand, and if its AI models fail during a recession, it may see partner pullbacks, while LendingClub faces threats from interest rate volatility and regulatory changes that could impact its core product profitability.
- Valuation Comparison: Upstart trades at a forward P/E of 12.5x, indicating optimistic market expectations for future growth, while LendingClub's 9.1x P/E reflects a more conservative market position, suggesting investors should choose based on their risk tolerance.
See More
Reminder for Upstart Holdings Class Action
- Class Action Notice: Rosen Law Firm reminds investors who purchased Upstart Holdings securities between May 14, 2025, and November 4, 2025, that they must apply to be lead plaintiff by June 8, 2026, or risk losing their right to compensation in the class action lawsuit.
- Fee Arrangement: Investors participating in the class action will not incur any upfront costs, as attorney fees will be collected through a contingency fee arrangement, thereby lowering the financial barrier for investors to seek compensation without out-of-pocket expenses.
- Lawsuit Background: The lawsuit alleges that Upstart made false and misleading statements during the class period, particularly regarding the accuracy of its Model 22 risk-separation process and inflated loan approval rates, which resulted in investor losses when the truth was revealed to the market.
- Law Firm's Strength: Rosen Law Firm is renowned for its successful track record in securities class actions, having recovered over $438 million for investors in 2019 alone, and was ranked first in 2017 for the number of securities class action settlements, demonstrating its expertise and resource advantages in this field.
See More
Shareholder Class Action Filed Against Upstart Holdings
- Class Action Initiated: Bernstein Liebhard LLP announces a class action lawsuit on behalf of investors who purchased Upstart Holdings, Inc. (NASDAQ: UPST) securities between May 14, 2025, and November 4, 2025, alleging misrepresentations regarding the company's loan approval rates, revenues, and growth, which may have led to investor losses.
- Key Filing Deadline: Investors must file papers by June 8, 2026, to serve as lead plaintiff, representing other class members in directing the litigation, while those who choose not to participate will be considered absent class members and may not share in any recovery.
- Fee Structure: All representation is on a contingency fee basis, meaning shareholders incur no fees or expenses, which reduces the financial burden on investors and encourages more affected shareholders to participate in the lawsuit.
- Law Firm Credentials: Bernstein Liebhard LLP has recovered over $3.5 billion for clients since 1993 and has been recognized multiple times in The National Law Journal’s “Plaintiffs’ Hot List” for its success in litigating hundreds of class actions, showcasing its strong reputation and expertise in securities litigation.
See More
Upstart Launches AI-Powered Credit Assessment Algorithm
- AI Algorithm Innovation: Upstart's AI-powered algorithm analyzes over 2,500 data points, gradually enhancing its predictive capabilities, which significantly improves credit assessment accuracy and efficiency compared to the traditional FICO scoring system, potentially transforming the lending industry.
- Loan Origination Growth: In Q1 2026, Upstart originated 425,356 loans, a 77% increase year-over-year, with 91% of loans processed fully automated, indicating widespread application of its AI technology in credit approvals, enhancing customer experience and market competitiveness.
- Record Revenue: Upstart generated $308 million in revenue during Q1, representing a 44% year-over-year growth, and despite a net loss of $6.6 million due to increased operating expenses, the adjusted EBITDA of $40 million highlights its profitability potential.
- Broad Market Outlook: Upstart forecasts $1.4 billion in revenue for 2026, with expectations to exceed $2.5 billion by 2028; if AI fully replaces traditional credit assessments, Upstart could tap into a $1 trillion annual revenue opportunity, underscoring its strategic significance.
See More
Upstart's AI Algorithm Fuels Credit Growth and Revenue Surge
- Significant Revenue Growth: Upstart generated a record $308 million in revenue during Q1 2026, representing a 44% year-over-year increase, showcasing the effectiveness of its AI algorithm in credit assessment, with expectations of reaching $1.4 billion in revenue for the year, further solidifying its market position.
- Surge in Loan Originations: The company originated 425,356 loans in Q1, a 77% increase from the previous year, with personal loans making up the majority, indicating strong demand and rapid growth potential in the credit market.
- Efficient Approval Process: Upstart's AI system enabled 91% of loan applications to be fully automated, reducing approval times from days to minutes, significantly enhancing customer experience and strengthening competitive advantage in the market.
- Future Growth Outlook: Management forecasts a compound annual growth rate of 35% through 2028, potentially exceeding $2.5 billion in revenue, indicating substantial long-term growth potential for Upstart in the global credit market.
See More
Financial Comparison of Upstart and LendingClub
- Upstart's Financial Recovery: In FY 2025, Upstart achieved approximately $1.1 billion in revenue, reflecting a nearly 58.9% year-over-year growth, alongside a net income of $53.6 million, marking a return to profitability after significant losses in 2024, showcasing its robust recovery in the digital lending market.
- LendingClub's Stable Performance: LendingClub generated nearly $1.3 billion in revenue for FY 2025, representing a growth rate of about 15%, with a net income of approximately $135.7 million and a net margin of 10.2%, demonstrating its effective management of interest costs and enhancing its market position in the competitive fintech landscape.
- Risks and Challenges: Upstart faces risks from fluctuating economic conditions that may reduce borrower demand, particularly during recessions, where its AI models might fail to accurately predict defaults, potentially leading to funding pullbacks from lending partners and impacting business stability.
- Market Competition Dynamics: As a digital bank, LendingClub funds a portion of its loans using low-cost member deposits, which, despite challenges from interest rate volatility and regulatory changes, allows it to maintain an advantage over traditional banks due to its stable revenue model.
See More
Upstart and LendingClub Compete in Digital Lending Market
- Upstart's Business Model: Upstart connects borrowers with banking partners through an AI marketplace, achieving approximately $1.1 billion in revenue for FY 2025, reflecting a robust 58.9% growth, although it faces customer concentration risk with its top three partners contributing 61% of total revenue.
- LendingClub's Financial Performance: LendingClub generated nearly $1.3 billion in revenue for FY 2025, with a growth rate of about 15% and a net income of roughly $135.7 million, indicating effective cost management amidst interest rate fluctuations and demonstrating stable profitability.
- Risk Analysis: Upstart is exposed to risks from economic fluctuations that could reduce borrower demand, and if its AI models fail during a recession, it may see partner pullbacks, while LendingClub faces threats from interest rate volatility and regulatory changes that could impact its core product profitability.
- Valuation Comparison: Upstart trades at a forward P/E of 12.5x, indicating optimistic market expectations for future growth, while LendingClub's 9.1x P/E reflects a more conservative market position, suggesting investors should choose based on their risk tolerance.
See More
