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Affirm Holdings, Inc.
Affirm Holdings, Inc. is an American technology company that provides financial services for shoppers and merchants.[3][4][5] Founded in 2012 by PayPal co-founder Max Levchin,[6] it is the largest U.S. based buy now, pay later lender.[7][8][9] As of 2024, Affirm reports 19.5 million users, processing $26.6 billion in payments annually.[10][11][12] Affirm offers unsecured installment loans at the point of sale through various methods. These include payment links at online checkout, payment options at self-checkout kiosks, integration into third-party digital wallets, and virtual or physical cards. The company generates revenue by applying a service fee to sellers, charging interest to borrowers, or both, and does not charge a late fee.[13][14][15] Affirm also offers a savings account and a debit card. The lender says its loan underwriting involves evaluating transactions by considering credit scores and other pertinent factors, while also incorporating machine learning.[16][17] Affirm's services are available in the U.S., Canada and the U.K.[18] History2012–2015: Early yearsAffirm was founded in 2012 by Max Levchin,[6] Nathan Gettings, Jeffrey Kaditz, and Alex Rampell[19][20][21] as part of the initial portfolio of startup studio HVF.[22] Levchin, who co-founded PayPal, became CEO of Affirm in 2014.[23] 2016–2019: Merchant partnershipsIn November 2016, Affirm announced the availability of its buy now, pay later (BNPL) service for retailers using the e-commerce platforms of “Kibo Commerce”, BigCommerce, “AspDotNetStorefront” and Zen Cart.[24] By that time, Affirm’s service was also available for the Salesforce Commerce Cloud, Magento and Shopify. According to Racked in November 2017, Affirm had launched an app which allowed consumers to take out loans for purchases at any retailer.[17] The company aimed at "building and perfecting a new underwriting system", powered by machine learning, to determine consumer creditworthiness. Racked added that the four retailers it spoke to reported "significantly higher sales and more frequent purchases, with Affirm customers". Affirm's use of machine learning in underwriting has also been claimed by the lender to generate "higher loan approval rate compared to its competitors", while ensuring the borrower can "comfortably repay".[25] In 2018, CBS News cited Affirm's BNPL service as an alternative to the traditional credit card, while expressing a caution about the interest rates charged by BNPL services.[26] Affirm announced a partnership with Walmart in February 2019. Under the partnership, the company’s service became available to customers at self-checkout kiosks in store and on the Walmart website.[27][28][29] 2020: Initial public offeringOn November 18, 2020, Affirm filed with the Securities and Exchange Commission in preparation for an initial public offering (IPO).[30] On December 12, 2020, it was reported that Affirm had postponed its IPO.[31] On January 13, 2021, Affirm listed on the Nasdaq with symbol AFRM, raising about $1.2 billion in its IPO.[32] By the next day, the price of shares had doubled, making Levchin's stake worth about US$2.5 billion.[33] 2021–2022: GrowthIn May 2021, Affirm acquired Returnly, a financial technology service company, for US$300 million.[34][35] In August 2021, Affirm announced a partnership with Amazon to make its BNPL service available for certain customers of the latter.[36] According to CNBC in October 2021, Affirm had partnered with Target, and also with Apple, to offer financing services.[37] In November 2021, Affirm announced the expansion of its partnership with Amazon, and said that it would be Amazon's exclusive BNPL partner in the United States up to January 2023.[38] In December 2021, the Consumer Financial Protection Bureau (CFPB) said that it was opening an inquiry into BNPL companies including Affirm, Afterpay, Klarna and others. The bureau said that it was particularly concerned about how these payment providers impacted consumer debt accumulation, what consumer protection laws applied and how the companies harvested data.[39][40] In response, many of the companies, including Affirm, said that they welcomed the CFPB's investigation.[41][42] In May 2022, Affirm signed a partnership with digital payments processor Stripe, Inc. to make its "adaptive checkout" service available to Stripe users in the US.[43] In June 2022, Reuters mentioned Affirm as the "biggest BNPL firm in the United States" while noting that the "rising rates" then would hurt BNPL firms and that Apple's entry to the BNPL sector created "more competition".[7] In the same month, according to a Los Angeles Times report, the "securitization packages" of Affirm's BNPL loans were falling in price for investors to buy while becoming more expensive to issue. This was said to happen at the time when rising rates and a cost-of-living crisis were casting a shadow over the BNPL sector. Additionally, the report cited Affirm as an unsecured loan lender which funded about a third of its business through securitizations.[44] In September 2022, Yahoo! Finance reported on the launch of Amazon's partnership with Affirm in Canada, and stated that Affirm's network served nearly 14 million customers and 235,000 merchants.[45] According to Payments Dive in October 2022, Bank of America Securities identified Affirm as the "most frequently used" BNPL app in the US with a 30% market share, while noting a slowdown in BNPL sector growth in the US and worldwide.[8] 2023–present: Layoff, other updatesIn February 2023, Affirm announced it would lay off 19 percent of its workforce as part of a restructuring plan and shut down its crypto unit.[46] In March 2023, U.S. News & World Report cited Affirm as a "lower-interest alternative to a credit card", available for both in-store or online purchases, while also stating that "it has downsides".[47] According to a Payments Dive article in May 2023, Affirm stated that it was partnering with data analytics company FICO to create a "BNPL credit-scoring model", while noting the CFPB's concerns around the "lack of information being furnished in the BNPL space". The article also cited Affirm as the "largest independent BNPL provider" based in the United States.[9] In May 2023, payment processor Worldpay launched a partnership with Affirm, enabling Worldpay merchants to use Affirm's payment services. The company reported over 17 million consumers and 279,000 merchants, and processed an annual gross merchandise volume (GMV) of $20.2bn for its fiscal year ending June 30, 2023.[48][49][50][51] Then, in September 2023, online travel platform Booking.com joined Affirm's payment network, which also included American Airlines, Cathay Pacific, CheapOair and Vacasa.[52] In November 2023, CNBC reported that Amazon was expanding its partnership with Affirm to allow small business owners who use Amazon's online store to lend Affirm's loans. The expansion was said to be aimed at sole proprietors, cited by CNBC as the most common form of business ownership in the U.S.[4] That same month, Affirm announced a similar partnership, this time with Best Buy,[53] and the launch of a spending account tied to its debit card. The company's President, Libor Michalek, stated that the account would offer savings account-type interest, ATM access and "direct deposit" capability.[54] According to Reuters in April 2024, Affirm had started offering buy now, pay later loans for elective medical procedures. Affirm stated that the share of transactions in this category at 0% annual interest was nearly half, a higher proportion compared to other categories.[22] In May 2024, the company reported having 18.1 million "active users" and 292,000 "active merchant clients".[55] That same month, the CFPB announced that it would apply some of the same consumer protection rules on BNPL lenders that applied to credit card companies. The new rule was said to require BNPL lenders including Affirm to investigate customer disputes, refund products that have been returned, and provide periodic billing statements — all requirements that credit card companies complied under the Truth in Lending Act. The CFPB added that the new rule was open to comments until August 1, 2024 and set to be "effective in 60 days".[56][57][58] May 2024 also saw Google announce the expansion of its partnerships with Affirm and Zip, following an initial pilot earlier in the year. These partnerships involved showing buy now, pay later options from Affirm and Zip when checking out online with Google Pay. The expansion included a roll out of these options to additional "merchant sites and Android apps" for the U.S. users.[59] In the same month, CNBC and Forbes respectively called Affirm's savings account the "Best For Simplicity" and the "Best For Mobile Banking".[60][61][62] In June 2024, Apple announced a partnership with Affirm, allowing U.S. users to apply for Affirm's loans through Apple Pay, and subsequently revealed plans to shut down its own "Pay Later" service.[63][64][65] According to CNBC, Affirm was slated to "surface" as an option for U.S. Apple Pay users on iPhones and iPads later in the year.[66] In the same month, the company also announced that its customers may have been affected by a data breach at partner bank Evolve Bank & Trust. Affirm adeed that its systems were not compromised and Affirm card holders could continue using their cards.[67] In August 2024, Affirm reported nearly 18.7 million users, 303,000 active merchants and $26.6bn in annual GMV for its fiscal year ending June 30, 2024.[1][11] In September 2024, the company's installment loans became available to shoppers using Apple Pay, as part of the previously announced partnership between Affirm and Apple.[68] In November 2024, Affirm launched its installment loans in the U.K. with interest-free as well as interest-bearing monthly payment options. Among the first merchants offering Affirm as a payment method in the U.K. were Alternative Airlines, the flight booking website, and payments processing firm Fexco.[18][69] That same month, the company stated in its quarterly report for July-September 2024 that its active user count and active merchant count were nearly 19.5 million and 323,000 respectively.[10][12][2] November 2024 also saw Affirm appoint Robert O'Hare as its Chief Financial Officer (CFO),[70][71][72] following an earlier announcement to promote Michael Linford, the then-CFO, to the new position of Chief Operating Officer (COO).[73][74] BusinessAffirm places its installment payment options in the checkout stage — either online or at self-checkout kiosks in physical stores or in a digital wallet — while determining the shopper's loan eligibility in real-time.[27][75][76] Additionally, Affirm provides a "virtual card" to consumers to pay for purchases in any online store as well as a physical debit card for use in any store, physical or online.[77][78][79] Affirm raises funding from banks, insurance firms and the capital markets to front up loans.[5] The company makes money by earning a commission from merchants and by charging interest on the loans opted for by the consumers.[13] The commission earned from merchants can sometimes be as high as 12.5%.[5] The interest rates and other loan terms vary, depending on consumers and the merchants they purchase from, according to Affirm. The annual percentage rates (APRs) for the loan interest range from 0% to 36%, the upper limit for the loan is $25,000, and the payback period ranges from 1 to 60 months. Although the lender does not charge late fees, late payments could prevent the borrower from obtaining future loans from Affirm and may also affect their credit score.[15] Affirm says it doesn’t charge compound interest and caps its interest.[13] Affirm states that it evaluates transactions by considering various factors beyond just credit scores, including the time of day and other nuanced details, to assess risk.[16] The company also says that it deters fraud by leveraging an "artificial intelligence-driven analytics system" which attempts to predict a given transaction’s likelihood of fraud based on past warning signs.[80] ProductsAffirm offers products for both merchants and consumers. Among these products is "Adaptive Checkout" which offers personalized payment options to online shoppers based on user profiles and shopping cart contents. Using real-time algorithms, it presents pre-approved payment plans with bi-weekly or monthly installments for the shoppers to compare and choose one from.[81][82] Affirm also provides a range of interest-free products to online shoppers. These include "Split Pay" which offers a bi-weekly "Pay in 4" option, a "Pay in 2" which allows to split the cost of a purchase into two payments, and a "Pay in 30" which allows to pay in full within 30 days of a purchase.[14][83] Affirm also provides an "Affirm Card" to consumers. This card is for use in both physical stores and online, like a regular debit card. It allows consumers to convert debit transactions ranging from $100 to $1,000 into installment payments within 24 hours through an app. The card is connected to the user's bank account, providing an alternative payment method.[16][78][84] Moreover, Affirm offers a savings account, called the "Affirm Money Account", to consumers. This account pays 4.35% annual interest and has no minimum balance or fee requirements. The account is FDIC insured up to $250,000 per depositor in the event of a bank failure, and is held by Cross River Bank.[60][61][62] References
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