Online lender LendUp is launching a digital banking and financial health platform that aims to serve emerging middle-class consumers, the San Francisco-based fintech announced Tuesday.

"Our customer aspires to be established in the middle class," said LendUp CEO Anu Shultes, who will also head a subsidiary called Ahead Financials. "They are not there yet." 

The challenger bank aims to solve for three key areas, Shultes said:

• Short-term liquidity through early access to paycheck and no cost overdraft protection
• Credit building through reporting rent and other bill payments
• Tools to improve financial health through gamification.

Ahead's target customer makes between $35,000 and $45,000 per year, has a family and a credit score of around 550, Shultes said. 

"Most mainstream banks don't want to work with a consumer below 620," she added. "Over a typical 12-18-month period in the life of our customer, they struggle with managing their cash flow and live paycheck to paycheck. Poor credit chases them, and they don't know what steps to take to get out of debt and save for their future. 

"This is fundamentally different from both the fully established and upwardly mobile, a solid ground or wealthier customer," she added. "Our customer continues to be marginalized by mainstream and digital banking companies alike."

Ahead, which is partnering with Ohio-based Sutton Bank to offer the Federal Deposit Insurance Corp. (FDIC)-insured accounts, boasts features common among other challenger banks, such as no monthly service fees, early access to paychecks, fee-free overdraft protection for up to $100 and access over 55,000 ATMs.

The digital bank's customers will also receive financial planning assistance through a personal financial trainer tool and can engage in credit-building actions to strengthen their credit scores over time. 

The company said it will announce additional programs and partnerships in the upcoming months.

The platform has received strong interest among LendUp's existing customer base, Shultes said. 

"Eighty percent of our customers tell us, for example, they are too often short $200 each month for their very essential everyday needs such as for their grocery lists, gas for their cars and other commuting expenses, utilities and more," she said. "There is a significant appetite for banking and cost savings solutions such as Ahead."

LendUp said it has originated more than $2 billion in small-dollar loans and served more than 1 million customers since forming in 2012.

Shultes said the company will initially prioritize its existing customer base and apply what it learns to expand and enhance Ahead Financials.

"We will then extend out to the general market in 2021 through a combination of digital marketing and also social movement-making and shared public interest actions around the importance of financial fitness, well-being and health," she said.

The pandemic has highlighted consumers' need for alternative banking options, Shultes said.

"Certainly the pandemic has brought significant challenges for customers — the key constituents we remain focused on every day," she said. "While our customer segment benefited from the CARES Act stimulus payment and unemployment benefits, things are uncertain again since the expiration of the benefits earlier this year.

"During the pandemic, our connection with our customers has only gotten stronger, and we plan to launch Ahead by offering it to our loyal customers to begin with," Shultes said.