<div id="readability-page-1"><div> <h2>Key Points</h2><ul><li>Upstart has applied for a bank charter, which would change its model from a platform to a lender, plus more.</li><li>Changing to this model has advantages in lower funding costs and access to deposits, another revenue stream.</li><li>It's a big change for the company and an entry into what's becoming a crowded market.</li><li>10 stocks we like better than Upstart ›</li></ul>Upstart Holdings (NASDAQ: UPST) stock has been humbled by years of middling performance amid a challenging macroeconomic backdrop. It has made some progress in recent quarters, but the market didn't embrace its latest quarterly earnings report. Headwinds remain, and the road back looks long and complicated.Management recently announced that it has applied for a bank charter. It sees that as an opportunity to lower funding costs and expand its business, and it envisions disrupting the banking industry as &#34;the first bank built from the ground up on AI.&#34; Could this change its story and boost its stock?Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an &#34;Indispensable Monopoly&#34; providing the critical technology Nvidia and Intel both need. Continue »<h2>The benefits of being a bank</h2>Upstart operates a credit evaluation platform that uses artificial intelligence (AI) and machine learning to more accurately identify good borrowers than the traditional credit score, which it sees as limited. When investors first discovered Upstart, one of the attractive features was that it doesn't actually hold any of the debt that it helps underwrite; it sells the loans back to institutional investors. Low exposure to bad debt was a major plus.The market didn't see it as a positive development when the company began holding some of the loans on its balance sheet, and it has raised several funding rounds to cover the loans even before they're written off. For example, it recently announced a deal with Fortress Investment Group to buy $1.25 billion of consumer loans over the next 15 months.<img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-dXJsPWh0dHBzOi8vZy5mb29sY2RuLmNvbS9lZGl0b3JpYWwvaW1hZ2VzLzg3MDAzMi9wZW9wbGUtc2hha2luZy1oYW5kcy1pbi1hbi1vZmZpY2UuanBnJnc9NzAw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-dXJsPWh0dHBzOi8vZy5mb29sY2RuLmNvbS9lZGl0b3JpYWwvaW1hZ2VzLzg3MDAzMi9wZW9wbGUtc2hha2luZy1oYW5kcy1pbi1hbi1vZmZpY2UuanBnJnc9NzAw"/>Image source: Getty Images. For now, Upstart's role is more of a middleman between the partner banks and credit unions that use its platform to identify good credit and the institutional investors that buy the loans. Becoming a bank would completely change its model from a platform to a lender, but being built on a foundation of AI, it would incorporate its machine learning models into its business to create something it envisions as the future of banking.Upstart benefits from the bank charter by gaining access to new and recurring funding sources through deposits. As a bank, it wouldn't need to rely on the wholesale reselling of loans to partnering funders. Deposits are seen as a cheaper way to get funds, since banks typically give a low interest rate on deposit accounts like checking and savings accounts. It would also be able to hold loans on its books for longer and accrue the associated interest charges.<h2>Will this change the banking landscape?</h2>Digital banking is becoming a crowded space. All the large banks have a strong digital presence, and disruptors like SoFi Technologies and Chyme are gaining momentum. Nu Holdings recently received a U.S. bank charter and also uses AI algorithms to identify good credit. SoFi has a partnership with Upstart competitor Pagaya Technologies, so Upstart's bank looks less like a groundbreaking initiative and more like a way to expand its business and lower its funding costs.That could still be beneficial, but there could be other complications with revamping its business into something else entirely. Besides the competition and figuring out a way to stand out, it would have to deal with rigorous government regulations.Upstart stock is down 33% this year, but it's not necessarily time to buy on the dip.<h2>Should you buy stock in Upstart right now?</h2> Before you buy stock in Upstart, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Upstart wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $483,476!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,362,941!* Now, it’s worth noting Stock Advisor’s total average return is 998% — a market-crushing outperformance compared to 207% for the S&amp;P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of May 19, 2026. Jennifer Saibil has positions in Nu Holdings and SoFi Technologies. The Motley Fool has positions in and recommends Nu Holdings and Upstart. The Motley Fool recommends Pagaya Technologies. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. </div></div>

UPST

UPSX

Upstart has applied for a national bank charter, transitioning from a platform to a lender, which could lower funding costs and provide access to deposits. This shift aims to disrupt the banking industry using AI. However, Upstart faces challenges in a competitive digital banking market and has seen its stock decline 33% this year. Analysts suggest caution before investing, as Upstart was not included in a list of top stock recommendations.

nasdaq

Upstart

Tradr 2X Long UPST Daily ETF

NVIDIA

Intel

Figma

Chime Financial

SoFi Tech

NU Holdings

Pagaya Tech

Netflix

S&P 500

NVIDIA Corporation

PAGAYA TECHNOLOGIES LTD C/WTS (TO PUR COM)

Upstart Just Applied for a National Bank Charter After a Tough Quarter. Could That Change the AI Lending Story?