Affirm Holdings

U.S. financial services company

Affirm Holdings, Inc.

Company type| Public

Traded as

* Nasdaq: AFRM (Class A)
* Russell 1000 component

Industry| Finance
Founded| 2012; 12 years ago (2012)
Founders|

* Max Levchin
* Nathan Gettings
* Jeffrey Kaditz
* Alex Rampell

Headquarters| 650 California Street,

San Francisco, California

U.S.

Area served

| USA, Canada

Key people

| Max Levchin
Products|

* Adaptive Checkout
* Split Pay
* Affirm Card

Services|

* Consumer loans
* Debit card
* Installment loan

Revenue|  US$1.59 billion (2023)

Operating income

|  US$−1.2 billion (2023)

Net income

|  US$−985 million (2023)
Total assets|  US$8.16 billion (2023)
Total equity|  US$2.53 billion (2023)
Members| 18.1 million consumers, 292,000 merchants (2024)

Number of employees

| 2171 (2023)
Website| www.affirm.com
Footnotes / references
Financials as of June 30, 2023[update][1]

Affirm Holdings, Inc. is an American financial technology company founded by PayPal co-founder Max Levchin in 2012.[2] It offers a buy now, pay later service for online and in-store shopping. Affirm tops the U.S. buy now, pay later sector,[3][4][5] reporting over 18 million users and US$20.2 billion annual GMV as of 2023.[6][7][8]

Affirm offers its consumer lending solutions through various methods, including a payment link at online checkout, a virtual card, or a physical card. The company generates revenue by applying a service fee to merchants, charging interest to consumers, or both.[9][10] Affirm states that its loan underwriting process involves evaluating transactions by considering credit scores and other pertinent factors, while also incorporating machine learning.[11][12]

## History

[edit]

### 2012–2015: Early years

[edit]

Affirm was founded in 2012 by Max Levchin,[2] Nathan Gettings, Jeffrey Kaditz, and Alex Rampell[13][14][15] as part of the initial portfolio of startup studio HVF.[16] Levchin, who co-founded PayPal, became CEO of Affirm in 2014.[17]

### 2016–2019: Merchant partnerships

[edit]

In 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.[18] 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.[12] 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".[19] 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.[20]

Affirm announced a partnership with Walmart in February 2019. Under the partnership, the company’s service became available to customers in-store and on the Walmart website.[21][22]

### 2020: Initial public offering

[edit]

On November 18, 2020, Affirm filed with the Securities and Exchange Commission in preparation for an initial public offering (IPO).[23] On December 12, 2020, it was reported that Affirm had postponed its IPO.[24] On January 13, 2021, Affirm listed on NASDAQ with symbol AFRM, raising about $1.2 billion in its IPO.[25] By the next day, the price of shares had doubled, making Levchin's stake worth about US$2.5 billion.[26]

### 2021–2022: Growth

[edit]

In May 2021, Affirm acquired Returnly, a financial technology service company, for US$300 million.[27][28]

In August 2021, Affirm announced a partnership with Amazon to make its BNPL service available for certain customers of the latter.[29] According to CNBC in October 2021, Affirm had partnered with Target, and also with Apple, to offer financing solutions.[30] 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 through January 2023.[31]

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.[32] 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".[3] 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.[33] 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.[4]

### 2023–present: Layoff, further expansion

[edit]

In 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.[34]

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".[35] 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 Consumer Financial Protection Bureau'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.[5]

In May 2023, payment processor Worldpay launched a partnership with Affirm, enabling Worldpay merchants to use Affirm's payment solutions. Then, in September 2023, online travel platform Booking.com joined Affirm's payment network, which also included American Airlines, Cathay Pacific, CheapOair and Vacasa.[36] In November 2023, CNBC reported that Amazon was expanding its partnership with Affirm to include small business owners who use Amazon's online store. The expansion was said to be aimed specifically at sole proprietors, or small businesses owned by a single person, which CNBC cited as the most common form of business ownership in the U.S.[37] The company reportedly served over 17 million consumers and 279,000 merchants, and processed an annual GMV of US$20.2 billion in 2023.[38][39][7][8]

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.[16] In May 2024, the company reported having 18.1 million "active users" and 292,000 "active merchant clients".[6] 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.[40] In the same month, CNBC and Forbes respectively called Affirm's savings account product the "Best For Simplicity" and the "Best For Mobile Banking".[41][42][43]

In June 2024, Apple announced a partnership with Affirm, allowing U.S. users to apply for loans through Affirm when using Apple Pay, and subsequently revealed plans to shut down its "Pay Later" service.[44][45][46] 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.[47]

In June 2024, the company announced that its customers may have been affected by a data breach at partner bank Evolve Bank & Trust.[48][49]

## Business

[edit]

Affirm places its logo on the checkout page of a partnering online retailer, and determines in real-time the shopper's eligibility to use Affirm for financing the shopping cart.[50] Additionally, to enable the use of its payment services in any online store, not necessarily that of a partnering retailer, Affirm also offers a "virtual card" to consumers.[51] Moreover, the company offers a physical debit card to consumers for utilizing its lending service to support purchasing at any store, physical or online.[52][53]

Affirm raises funding from banks, insurance firms and the capital markets to front up loans.[54] The company makes money by earning a commission from merchants and by charging interest on the loans opted for by the consumers.[9] The commission earned from merchants can sometimes be as high as 12.5%.[54] 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 10% to 36%, the upper limit on the loan amount is US$25,000, and the payback period ranges from 1 to 48 months. Affirm says it doesn’t charge compound interest or late fees, and caps its interest.[9][55][56]

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.[11] 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.[57]

## Products

[edit]

Affirm offers multiple products for online merchants and consumers. Among these products is "Adaptive Checkout" which offers personalized payment options to online shoppers based on their profiles and shopping cart contents. Using real-time proprietary algorithms, it presents pre-approved payment plans with bi-weekly or monthly installments for the shoppers to compare and choose one from.[58][59] 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, "Pay in 2" which allows to split the cost of a purchase into two payments, and "Pay in 30" which allows to pay in full within 30 days of a purchase.[10][60]

The company also offers an "Affirm Card" directly 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 US$100 to US$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 for purchases.[11][52][61]

In addition, Affirm offers a savings account, called the "Affirm Money Account", directly to consumers. This account pays 4.35% annual interest and has no minimum balance or fee requirements. The account is FDIC insured up to US$250,000 per depositor in the event of a bank failure, and is held by Cross River Bank.[41][42][43]

## References

[edit]

1. ^ "Affirm Holdings Form 10-K". U.S. Securities and Exchange Commission. August 25, 2023.
2. ^ a b Sen, Anirban (2021-01-06). "Fintech startup Affirm aims for over $9 bln valuation in U.S. IPO". Reuters.
3. ^ a b Howcroft, Elizabeth (2022-06-10). "Analysis: Buy Now Pay Later business model faces test as rates rise". Reuters. Retrieved 2023-11-06.
4. ^ a b Mullen, Caitlin (2022-10-14). "Affirm gains, Klarna slips in Q3". paymentsdive.com. Retrieved 2023-10-28.
5. ^ a b Mullen, Caitlin (2023-05-10). "Affirm, FICO to create BNPL credit-scoring model". Payments Dive. Retrieved 2023-11-06.
6. ^ a b PYMNTS (2024-05-08). "Affirm Credits Mid-Market With Q3 '24 Earnings Gains". PYMNTS.com. Retrieved 2024-05-09.
7. ^ a b Affirm Holdings, Inc. (2023-08-25). "FORM 10-K for the fiscal year ended June 30, 2023". www.sec.gov. Retrieved 2024-02-19.
8. ^ a b Zacks Equity Research (2024-01-15). "Here's Why You Should Retain Affirm (AFRM) Stock for Now". Yahoo Finance. Retrieved 2024-02-19.
9. ^ a b c Marek, Lynne (2022-12-02). "Affirm mulls consumer, merchant fee increases". Payments Dive. Retrieved 2023-11-06.
10. ^ a b Lazarony, Lucy (October 6, 2022). "Affirm vs. Afterpay vs. Klarna: Everything you need to know". Reviewed. USA Today. Retrieved 2023-11-06.
11. ^ a b c "Affirm: Smart Data Provides Edge in BNPL Space". www.pymnts.com. 2022-06-15. Retrieved 2023-11-06.
12. ^ a b Cagle, Susie (2017-11-29). "Would You Take Out a Loan for a Pair of Jeans?". Racked. Retrieved 2019-03-24.
13. ^ Kokalitcheva, Kia (October 27, 2015). "Lending company Affirm takes on bricks and mortar shopping". Fortune. Retrieved 2019-03-24.
14. ^ Friedman, Zack (May 5, 2017). "Is PayPal Co-Founder Max Levchin Making The Next Credit Card Killer?". Forbes. Retrieved 2019-05-08.
15. ^ "Analytics and Software". Founders Fund. Retrieved 2020-08-03.
16. ^ a b MacMillan, Douglas (2014-06-09). "PayPal Co-Founder Max Levchin Raises $45 Million for Startup Affirm". WSJ. Retrieved 2019-03-24.
17. ^ D'Onfro, Jillian. "PayPal Cofounder Max Levchin Is The New CEO Of A Finance Startup That Has Quietly Raised $45 Million". Business Insider. Retrieved 2019-03-24.
18. ^ "Affirm Supports Four More eCommerce Platforms". pymnts.com. 2016-11-30. Retrieved 2019-03-24.
19. ^ Veling, Jackie (2021-10-01). "Buy Now, Pay Later Is Everywhere. Should You Opt In?". Yahoo Finance (original publisher NerdWallet). Retrieved 2023-10-28.
20. ^ ""Buy now, pay later": Critics concerned about new online payment plans - CBS News". www.cbsnews.com. 2018-12-11. Retrieved 2023-10-28.
21. ^ Wack, Kevin (February 27, 2019). "Walmart teams with Affirm to offer point-of-sale loans". American Banker. Retrieved 2019-03-24.
22. ^ "Affirm's latest partnership brings its alternative financing to Walmart's US stores and website". TechCrunch. Retrieved 2019-05-08.
23. ^ Alex Wilhelm, Natasha Mascarenhas (November 18, 2020). "Affirm files to go public: Rising revenue, slimming losses amid an e-commerce boom". Retrieved August 4, 2021.
24. ^ "Affirm Postpones Its Initial Public Offering - WSJ".
25. ^ "Affirm Holdings prices U.S. IPO above target range, raises $1.2 billion". Reuters. January 12, 2021. Retrieved August 4, 2021.
26. ^ Jeff Kauflin (February 8, 2021). "Inside The Billion-Dollar Plan To Kill Credit Cards". Forbes. Retrieved August 4, 2021.
27. ^ "Affirm Completes Acquisition of Returnly". Press release. May 3, 2021. Retrieved August 4, 2021.
28. ^ "Affirm to Buy Returnly for $300 Million as Ecommerce Returns Spike During the Pandemic". Adweek. April 23, 2021.
29. ^ Mathews, Eva (2021-08-27). "Affirm soars on buy now, pay later pact with Amazon". Reuters. Retrieved 2023-11-04.
30. ^ Levy, Ari (2021-10-06). "Affirm shares surge 20% after online lender partners with Target ahead of holiday shopping season". CNBC. Retrieved 2023-11-06.
31. ^ "Affirm expands Amazon partnership as buy now, pay later surge lifts revenue". Reuters. Retrieved November 11, 2021.
32. ^ Lang, Hannah (2022-05-31). "Affirm partners with Stripe to expand offering of buy now, pay later services". Reuters. Archived from the original on 2022-05-31.
33. ^ Zadikian, Michelle (2022-09-22). "Amazon launching Affirm's 'buy now, pay later' option in Canada". Yahoo Finance. Retrieved 2023-11-15.
34. ^ Gomes, Nathan (February 8, 2023). "BNPL lender Affirm to cut about 19% of its workforce". Reuters.
35. ^ Kissell, Chris (2023-03-03). "Everything You Need to Know About Affirm". U. S. News & World Report.
36. ^ "Booking.com Joins Affirm's Network to Offer Installment Payments". www.pymnts.com. 2023-09-07. Retrieved 2023-11-06.
37. ^ Son, Hugh (2023-11-02). "Amazon unveils buy now, pay later option from Affirm for small business owners". CNBC. Retrieved 2023-11-30.
38. ^ Egan, Matt (2024-02-27). "The two-letter word helping this lender buck the delinquency storm | CNN Business". CNN. Retrieved 2024-02-28.
39. ^ "Affirm Holdings Inc (AFRM) Reports Accelerated Growth and Improved Profitability in Q2 2024". Yahoo Finance. 2024-02-08. Retrieved 2024-02-09.
40. ^ Wituschek, Joe (2024-05-23). "Apple needs to rip off at least one of these new Google Pay features". BGR. Retrieved 2024-06-14.
41. ^ a b Gravier, Elizabeth (2024-05-21). "10 best free savings accounts for stashing your cash". CNBC. Retrieved 2024-05-22.
42. ^ a b Dasko, Martin; Sherman, Emily (2024-05-05). "Best Student Savings Accounts May 2024 – Forbes Advisor". www.forbes.com. Retrieved 2024-05-22.
43. ^ a b Rowan, Lisa (2024-04-23). "Affirm Savings Account Review 2024 – Forbes Advisor". www.forbes.com. Retrieved 2024-05-22.
44. ^ Castillo, Michael Del (2024-06-13). "PayPal cofounder Max Levchin's network of tiny banks could help Apple with its Goldman Sachs issue". Fortune. Retrieved 2024-06-14.
45. ^ Gurman, Mark (2024-06-18). "Apple Shutting Down Pay Later, Its Affirm Rival, After One Year". bloomberg.com. Retrieved 2024-06-27.
46. ^ Pisani, Joseph (2024-06-17). "Apple Is Shutting Down Its Buy Now, Pay Later Service". The Wall Street Journal. Retrieved 2024-06-27.
47. ^ Son, Hugh (2024-06-11). "Affirm buy now, pay later loans will be embedded into Apple Pay later this year". CNBC. Retrieved 2024-06-15.
48. ^ @Affirm (2024-06-27). "As an Affirm Card user, we wanted to alert you of a recent cybersecurity incident at Evolve Bank and Trust, an issuing partner on the Affirm Card (not an originating bank partner for Affirm loans)" (Tweet). Retrieved 2024-08-03 - via Twitter.
49. ^ Franceschi-Bicchierai, Lorenzo; Azevedo, Mary Ann (2024-06-27). "Startups scramble to assess fallout from Evolve Bank data breach". TechCrunch. Retrieved 2024-08-03.
50. ^ Reid, Hilary (2020-08-13). "What's the Deal With Affirm, AfterPay, Klarna, and QuadPay?". The Strategist. Retrieved 2023-11-06.
51. ^ Statt, Nick (2017-10-23). "Affirm's new mobile app lets you borrow money for almost any online purchase". The Verge. Retrieved 2023-11-06.
52. ^ a b "Affirm to Release Debit Card With Installment Payment Functionality". www.pymnts.com. 2021-10-27. Retrieved 2023-11-06.
53. ^ Hardekopf, Bill (2023-09-08). "This Week In Credit Card News: Card Delinquencies Keep Rising; Buy Now Pay Later Continues To Grow". Forbes. Retrieved 2023-11-15.
54. ^ a b Singh, Medha; Oguh, Chibuike; Lang, Hannah (2023-11-28). "Affirm extends rally on Cyber Monday boost as BNPL lending surges". Reuters. Retrieved 2023-11-29.
55. ^ Hughes, John (2022-10-30). "Affirm Competitors Analysis - Business Chronicler". Retrieved 2023-11-06.
56. ^ DeVon, Cheyenne (2023-03-30). "Apple just launched its own buy now, pay later service—here's how it compares with Affirm, Afterpay, Klarna and PayPal". CNBC. Retrieved 2023-11-06.
57. ^ "Inside Affirm's ID Verification And Fraud Prevention Techniques". www.pymnts.com. 2019-11-06. Retrieved 2023-11-06.
58. ^ Apgar, Don (2021-09-23). "Affirm's Adaptive Checkout Provides Consumers with Payment Choice and Flexibility". PaymentsJournal. Retrieved 2023-11-06.
59. ^ Moin, David (2021-09-22). "Affirm Adapts Its Checkout System for Greater Flexibility". www.yahoo.com. Retrieved 2023-11-06.
60. ^ Smith, Paige (2024-06-06). "Affirm to Allow Buy Now, Pay Later Purchases in Just Two Chunks". www.bloomberg.com. Retrieved 2024-06-14.
61. ^ Marek, Lynne (2023-08-25). "Affirm takes slow approach to card". Payments Dive. Retrieved 2023-11-29.

## External links

[edit]

* Official website
* Business data for Affirm Holdings, Inc.:

* Bloomberg
* Google
* Reuters
* SEC filings
* Yahoo!