Founder Max Levchin was part of the team that helped launch PayPal in 1998. Levchin recently spoke with The Associated Press about the health of Affirm’s borrowers and its growing number of competitors. The interview has been edited for length and clarity.
Q: One notable thing in your revenue is the increased usage of your product. Customers have an average of three loans with you, up from two before. Why is this frequency increasing?
A: I think it really shows that we are reaching an unmet need and building customer loyalty. We’re now available at around 60% of e-commerce retailers, as well as places like Shopify and Amazon. We find that once you’ve used Affirm once, you’ll do it again and again. We expect this frequency figure to continue to grow.
Q: There are signs that consumers are financially stressed by inflation. What impact does this have on your borrowers?
A: I wouldn’t call it some sort of prelude to a potential slowdown, but it’s not the same kind of smooth sailing as it has been over the past 11 years. We’ve seen some stress (among those with the lowest credit scores), and those are starting to struggle.
Q: So does this impact your ability to lend?
A: Not at all. We’ve taken a much more cautious approach, but that doesn’t mean we don’t lend. We can estimate a borrower’s cash flow and hypothetically make a loan if the borrower makes a larger down payment, for example. Meanwhile, a number of our competitors who have traditionally been indifferent to underwriting are starting to apply the brakes. They were building a business model without pricing too low, underwriting loans with happy abandonment because growth is important. They are really starting to cut back their growth very, very aggressively. So we’re trying to take market share from them, underwrite better loans, and create a better experience for customers.
Q: There have been new competitors in the buy now, pay later space, including Apple. How does this affect your business?
A: These new market entries haven’t really impacted us, as you can see from our revenue. Plus, with customers using the service more often, there’s plenty of room for growth for everyone.