Uplift, a financial services vendor, has raised $123 million in a Series C equity round. Travel brands tap Uplift’s services and technology to help U.S. consumers pay for travel in monthly installments via the startup’s loans.
Madrone Capital Partners led the round. Past investors, such as Draper Nexus, Ridge Ventures, Highgate Capital, Barton Asset Management, and PAR Capital, also participated. Uplift previously raised about $23 million in equity, and about $75 million in debt financing through a credit facility. The company plans to use the fresh capital to expand its sales effort and create more travel-specific capabilities and services.
Travel companies hire the Menlo Park, California-based startup to help extend credit to U.S. consumers, enabling travelers to pay for their trips over time rather than up-front.
On Wednesday, the startup announced it has now signed Spirit AIrlines (slowly ramping up since June 2018) and Allegiant Air, which will be offering consumers installment plans for flight-only purchases via their websites.
Kayak, the price-comparison search site owned by Booking Holdings, confirmed that it has begun offering installment payments for flights booked on Kayak with select partners using Uplift’s services. In these cases of facilitated bookings, Kayak collects payment from the consumer rather than referring them elsewhere to book.
Until now, Uplift’s main clients were companies such as Apple Leisure Group that sell vacation packages on behalf of major U.S. airlines.
Uplift believes the full potential for the product has yet to be realized, said Rob Soderbery, Uplift’s president. For example, some airlines are exploring how Uplift’s data on customers successfully paying off their loans on time could be used for upselling those customers on co-branded airline cards.
“We can help give more knobs and levers to travel suppliers as they manage revenue, inventory, and pricing, which is the broader value proposition,” said Soderbery.
Uplift, which said it had more than 100 workers, will also expand its product offerings beyond vacation packages and flight-only offers to cruise, hotel, tour, specialty destinations, and other categories, Soderbery said. Clients include Highgate Hotels, Contiki Tours, AM Resorts, Pleasant Holidays, Ski.com, Cruisedirect.com, Flightsearch.com, and Norwegian Cruise Line.
For more than a century, businesses have extended short-term loans to consumers to buy products. But when it comes to North American online travel sales, such services have only existed for about three years. The new installment products — called layaway when paid off prior to trip and a loan if paid off after — have been common in some developing countries before now.
Uplift’s biggest competitor, though their services differ, is Affirm.
Founded in 2012 by PayPal co-founder Max Levchin, the San Francisco-based online lender claimed in an interview late last year that it was on track to do more than $2 billion in loans in 2018. While working with some travel firms like Expedia and CheapAir, Affirm has offered services to retail and other non-travel brands, and it has attempted to build up consumer recognition for its brand.
Those are two things that travel-focused, business-to-business company Uplift has chosen not to do.
In November 2018, Affirm said it was piloting a new product where consumers can pre-qualify for a 20-day period with a specific merchant to add on items as they build out their trips, such as flights, hotels, rental cars, and seat upgrades.
Other financial technology competitors offer services that overlap or are similar, including Airfordable, based in Chicago.
Companies such as Uplift need to not only check on borrowers’ credit scores, but also need to take other factors into account when tallying the ability of borrowers to repay travel loans. Otherwise, a surprise disruption such as the eruption of an Icelandic volcano or a global economic downturn could prompt defaults. By slicing data finely with computational tools, the companies believe they can manage the risk of setting up these non-traditional consumer loans and layaway plans.
Uplift can thrive in a recession, the company said. Tom Botts, chief commercial officer at Uplift, said, “The historical pattern has been that, when there is softness in demand, suppliers have to be more assertive in marketing and Uplift would be a new and different and effective tool for partners.”
Today, Uplift only serves trips originating in the U.S., partly for regulatory reasons. But it has international plans. It has signed Volaris, the low-cost carrier in Mexico, to offer installment payments for journeys involving domestic U.S. travel, while Lufthansa has the intention of tapping its services for U.S. originating traffic for flights abroad.
In a simplified model, Uplift’s returns are based on two multipliers, average transaction size and its conversion, or “take rate.” The consumers using the service have tended to be buying smaller trips.
Paying in monthly payments primarily appeals to consumers with average credit ratings who are willing to accept short-term, interest-based loans. But consumers with high credit scores are increasingly tempted into splurging on luxury trips if companies lend them credit on attractive terms, said Mohammad Gaber, head of growth and marketing at Uplift.
Consumer adoption is high, executives added.
“We’re seeing well over 10 percent take rates at some of our leading partner brands,” Soderbery said, “and we have one that is transacting almost 30 percent of total traffic through Uplift.”
Uplift has served 250,000 travelers with its loans, though multiple travelers may benefit from any individual transaction. It will lend about $1 billion to travelers in 2019, executives claimed.