Who loses when Upstart becomes its own lender?

• Key insight: Upstart expects to move most or all of its loan originations into the national bank it plans to open in early 2027, taking that work from the banks that serve as lender of record today.
• What's at stake: Upstart paid its originating banks $11.2 million in premium and trailing fees in the first half of this year, and it would not owe those fees on loans its own bank makes.
• Forward look: The early 2027 launch still depends on federal deposit insurance and Federal Reserve approval of the holding company, both of which are pending.

Overview bullets generated by AI with editorial review.

Upstart Holdings expects to pull most or all of its loan originations out of the hands of the banks that handle them today and move that work into a national bank it aims to open in early 2027.

Upstart, which today uses artificial intelligence to underwrite consumer loans originating at partner banks, had described the charter as leaving those relationships alone. Its assurances covered deposits and loan buying, not originating.

The replacement plan surfaced on the company's second-quarter earnings call Tuesday, when Rob Wildhack of Autonomous Research asked how Upstart Bank would operate once it launches.

"On the lending side, we expect pretty quickly to move the bulk to all of our originations through to Upstart Bank from the current partners that we're originating with today," said Andrea Blankmeyer, Upstart's chief financial officer.

An Upstart spokesperson confirmed the plan to American Banker.

"Upstart Bank will be the primary originator," the spokesperson said, "significantly simplifying the process of originating a loan compared to today."

Upstart has said since it announced the charter application in March that the new bank would not cost its partners business.

"One thing that is quite important to us is not to compete with our lending partners for their core banking relationship," Annie Delgado, Upstart's chief risk officer and the proposed chief executive of the bank, said in March.

Delgado was talking about deposits; she said the new bank would fund itself with brokered deposits and other retail offerings rather than chase the partners' local customers. Neither she nor the company said in March what would happen to the partners' origination work.

"Lending partners" is the term Upstart's quarterly report applies to the banks and credit unions that originate the loans; those are the ones Blankmeyer said the bank would take over from.

Asked to square the prior statements and the plan announced Tuesday, the spokesperson restated the new bank's authority to originate loans nationwide and did not address Delgado's comment.

Financial institutions do two different jobs for Upstart: originating and buying. The bank it is chartering will subsume only originating.

Originating banks and credit unions serve as the lender of record on loans that consumers take out through Upstart's website. This structure allows Upstart to operate nationwide without holding a license in every state.

Upstart's loan buyers are banks, credit unions and institutional credit funds.

The company keeps some of these loans on its own books, but not many. It held 8% of the principal its marketplace transacted in the first half of this year, according to the quarterly report, and outside institutions took the other 92%.

Those institutions will keep buying the loans, according to Upstart's July 23 announcement that it had won conditional approval from the Office of the Comptroller of the Currency.

Upstart's stock closed at $30.32 on Tuesday, before it reported a return to quarterly profit and 50% growth in loan volume. It opened Wednesday at $34.60 (its high for the day) then lost the gain, closing at $30.20.

What the originating banks stand to lose

Upstart's plan to charter a new bank cuts both ways for the company's partners, according to Stephens analyst Kyle Joseph. Upstart will keep selling loans to capital partners, so the new bank complements the business it already runs, he told American Banker.

But, "I think it will take economics from their conduit banks," Joseph said, referring to the banks that serve as lender of record on loans issued through the Upstart marketplace.

Those banks get paid in two ways, according to Upstart's quarterly report. First, on a loan the bank does not keep, Upstart pays a one-time premium once the bank has held it for a minimum period.

Second, it pays certain partners a monthly fee tied to what the borrower repays.

Those two kinds of payments totaled $11.2 million in the first half of this year, up from $8.1 million a year earlier. (The report counts those fees as a reduction in Upstart's own fee revenue.)

Upstart would not pay these fees on loans its own bank originates.

An Upstart spokesperson did not say which lenders originate loans on Upstart's platform today, nor how many there are.

The company's annual report gives a number without a name; Upstart's top three lending partners originated 83% of the loans made through the marketplace last year and generated 61% of its revenue, according to the 2025 filing.

Upstart said it views "the roles of these entities as largely interchangeable."

Cross River Bank, a New Jersey-chartered community bank, used to be a big originator on Upstart's platform. Upstart's annual report for 2022 said Cross River "originates a majority of the loans on our platform."

Cross River originated 51% of the loans made on the platform that year and 55% the year before, according to the annual filing for 2022. Fees from Cross River accounted for 45% of Upstart's revenue that year.

Cross River, which is privately owned, did not immediately respond to a request for comment when asked whether it continues to originate a large volume of Upstart's loans.

No Upstart filing since has named a bank as one of its originators.

The company's most recent annual report (for 2025) identifies the customer that generated a third of its revenue only as "Customer A," and does not say whether that customer originates loans or buys them.

Upstart's bank charter is not final. The comptroller's office granted conditional approval on July 23 after a 120-day review, and applications for federal deposit insurance and for Federal Reserve approval of the holding company are still pending.

The early 2027 timeline assumes Upstart receives every approval it needs, according to the company spokesperson.

The loan buyers keep their role

A charter would not disturb the other half of the business. Banks, credit unions and institutional credit funds will continue to buy the vast majority of loans made on the platform once the new bank exists, the July announcement anticipated.

The charter "does not change our strategy of funding loans primarily with third party capital," Chief Executive Paul Gu reiterated to investors during the earnings call Tuesday.

The main change happening on that side is timing; the institutional buyers that fund Upstart-powered loans increasingly commit the money in advance through so-called forward-flow arrangements that promise funding for years to come.

For example, Castlelake-managed funds agreed on July 29 to buy up to $4 billion of Upstart loans over as much as 24 months. It's one of three institutional deals Upstart has signed since May that together provide up to $5 billion in committed capacity.

This kind of committed capital now makes up more than half of Upstart's funding, according to a Tuesday note from John Hecht of Jefferies. (This is an increase in volume, not necessarily a diversification of providers.)

Institutional investors bought 61% of the loan principal Upstart's marketplace transacted in the first half of this year; lending partners retained or bought 31%; and Upstart kept 8%, according to the quarterly report released Tuesday.

For 2025 as a whole, the split was 64% institutional investors, 26% lending partners and 10% on Upstart's own balance sheet, according to the company's annual report.