What is Affirm?

Affirm underwrites installment loans averaging 3.5 years in duration, versus an industry average of roughly 6 weeks for buy-now-pay-later competitors.

“Three and a half years is a fairly long period of time relative to the average bailator which is like 6 weeks.”

Affirm: the only scaled BNPL provider underwriting multi-year installment loans using proprietary ML, with negative CAC, 50 million-plus users, and a strategic shift toward helping merchants guarantee demand rather than just fulfill it.

“One of the coolest things about a firm to this day is it has negative customer acquisition cost. I mean, it is paid to acquire a customer.”

Affirm grew 30%+ year-over-year for each of the last 10 consecutive quarters while remaining profitable.

“The last 10 quarters we grew 30 plus percent year-over-year or faster. So, it's like it's both very big, growing really well, still never charged a penny of late fees, never charged a penny of revolving interest.”

Beautylish saw an immediate 30% lift in conversion after surfacing installment payment options earlier in the shopping funnel, before checkout.

“They told their shoppers upfunnel basically as they were selecting their shampoos and perfumes that you could in three installments or 30 days later or whatever it is we were trying to sort of do. then and that had an instant 30% increase in conversion.”

Affirm's profitable growth without late fees or revolving interest refutes the banking industry assumption that such fees are necessary for lending profitability.

“We publicly trade it quite profitable. Have been profitable for a bunch of time. the last 10 quarters we grew 30 plus percent year-over-year or faster. So, it's like it's both very big, growing really well, still never charged a penny of late fees, never charged a penny of revolving interest.”

Max Levchin explains that long-term installment loans require genuine machine learning underwriting because shortcuts like FICO scores or social graph signals break down at multi-year loan horizons.

“We are the only company in the industry really there's plenty of competitors who are trying and some degree of success but mostly not really who will go into these longerterm loans and by longer I don't mean mortgage for you know 15 plus years but like three and a half years is a fairly long period of time relative to the average bailator which is like 6 weeks and to do that you have to underwrite like you can't shortcut the I'll just look at your FICO score or I'll just sort of you know I'll look at your Facebook friends like none of that works you actually have to do a real very sophisticated degree of machine learning work.”

Max Levchin on Affirm's negative customer acquisition cost model.

“One of the coolest things about a firm to this day is it has negative customer acquisition cost. I mean, it is paid to acquire a customer.”

Affirm, the BNPL pioneer, warrants watching as a rare fintech that sustains 30%+ growth and profitability with no late fees or revolving interest charges.

“We publicly trade it quite profitable. Have been profitable for a bunch of time. the last 10 quarters we grew 30 plus percent year-over-year or faster. So, it's like it's both very big, growing really well, still never charged a penny of late fees, never charged a penny of revolving interest.”

Affirm has never charged late fees or revolving interest since its founding roughly 15 years ago.

“Still never charged a penny of late fees, never charged a penny of revolving interest.”

Levchin frames offering long-term, hard-to-manage installment loans as the cost of gaining dozens of recurring billing touchpoints that enable upsell of additional financial services to consumers.

“These long-term loans, which are actually quite hard to manage and quite hard to maintain reasonable default rates and delinquency rates on, is the price you pay as a provider of financing to upsell consumers on more and more services.”