Deep Dive: Affirm

Affirm was founded in 2012 by the co-founder of PayPal Max Levchin, Jeffrey Kaditz and Nathan Gettings. Its headquarters are located in San Francisco, California. It has offices in New York, Pittsburgh, Salt Lake City and Chicago.

Products 

Source: Affirm 

Affirm’s merchant and consumer ecosystem has self-reinforcing network effects. According to Affirm, more merchants are drawn towards the platform as a customer onboarding resource due to its growing consumer ecosystem. An increasing number of consumers are also drawn towards the company based on its merchant integrations. 

Shop

Consumers can select Affirm as a payment option during checkout at more than 6500 Affirm affiliated seller stores. After inputting their personal information, consumers can select a payment schedule option for their loan such as 3, 6 and 12 month payment installment periods. Through the Affirm app and website, consumers are provided payment reminders ahead of their designated payment times. Payments are offered at the rate of 0 percent to 30 percent APR based on credit and are subject to an eligibility check. Payment options depend on purchase amount, and a down payment may be required

Affirm App and Marketplace

The Affirm app is available on the Apple Store and on Google Play. It allows consumers to discover exclusive discounts and offers from merchants based on individual consumer spending habits and retail preferences. Consumers can set repayment dates based on their monthly financial budgets. During the three months ended September 30, 2020, 32 percent of transactions occurred on the Affirm marketplace, and the Affirm app had been downloaded more than 4.8 million times in the U.S by the end of September of 2020.

Affirm Savings

Affirm’s savings accounts are available through the Affirm app. The company launched them to target millennial consumers as an affordable savings alternative to traditional bank savings accounts. Affirm’s high yield savings accounts are FDIC insured and are held by Affirm’s banking partner Cross River Bank. The savings account includes no minimums or fees, 0.65 percent APY and optional auto-deposit.

Affirm Virtual Card 

Consumers can apply at Affirm’s app and website and receive a single-use virtual card they can use digitally online and offline at merchants that accept Visa cards. This allows consumers to use BNPL solutions at merchants that are not integrated with Affirm.

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Affirm for Business

The Affirm app allows merchants the ability to provide consumers personalized offers based on their spending habits. Merchants can opt for either one or a combination of 0 percent APR and interest-bearing BNPL offerings. For interest-bearing financing, merchants can choose the specific range of interest rates to be paid by their customers. Large scale businesses have the option of working with Affirm and their suppliers on brand specific promotional 0 percent APR financing. Promotions are funded by suppliers and made available through merchants. Affirm charges merchants 2 to 3 percent of every transaction.

Merchant Dashboard, analytics and client success support

Affirm’s merchant dashboard allows merchants to access transaction data, manage charges and API keys. It is where merchants can actively manage and make changes to their Affirm account. Affirm’s client success team analyzes and interprets data on the merchant dashboard and provides customized recommendations.

Merchants have access to product performance and consumer spending data to support their customer acquisition and customer conversion processes.

Recent Mergers and Acquisitions

• Returnly
• Sweep
• Lendlayer
• PayBright 

Competitors

• Revolut
• Klarna
• Sezzle
• Square
• Splitit
• PayPal Credit
• Afterpay
• Quadpay

Business model 

Affirms earns fees from merchants for converting sales and supporting payments. Merchant fees are determined on the basis of Affirm’s individual merchant agreements and vary based on the terms of the supported products. Affirm earns higher merchant fees on 0 percent APR financing products. For Affirm’s fiscal year ending June 2020, 0 percent APR financing represented 43 percent of total GMV, facilitated through Affirm. 

On the consumer level, Affirm earns interest income on simple interest loans that Affirm acquires from its originating loan bank partners. Interest rates are charged to consumers based on transaction risk, creditworthiness of the consumer, the repayment term selected by the consumer, the amount of the loan, and the individual arrangement with a merchant. Affirm also earns a portion of an interchange fee upon transaction use of its virtual cards. 

Growth

Affirm’s GMV for the second quarter of 2021 was $2.1 billion which represents a 55 percent increase compared to the second quarter of 2020. The company had 4.5 million active consumers as of December 31, 2020 which represents a 52 percent increase when compared to the second quarter of 2020. Total revenue for Q2 of 2021 was $204 million, a 57 percent  increase when compared to Q2 of 2020. 

According to its latest fiscal year Affirm earned 50 percent of its revenue from its merchant network while 37 percent of its revenue came from interest income revenue. Peloton accounted for around 28 percent of Affirm’s total revenue for the fiscal year ended in June 2020 and around 30 percent of its total revenue for the fiscal year ended in September 2020. 

Customers

Affirm consumers are from a broad range of socio-economic and geographical backgrounds from America and Canada. The company aims to particularly target Millennial and Gen Z consumers due to their significant interest in BNPL products and services. Affirm merchants represent businesses of varying sizes from small scale businesses to large enterprises. Affirm merchants offer from a wide range of products, including sporting goods and outdoors, furniture and homewares, travel, apparel, accessories, consumer electronics, and jewelry.

Diversity

Affirm has a number of employee and community resource groups for the purpose of fostering a diverse and inclusive workforce. These include groups for Affirm’s Black, Asian, Latinx, LGBTQ, veteran and women employees. 

Source: Affirm

In 2020, Affirm reported 57 percent male employees and 43 percent female employees within its workforce. It also reported 42.8 percent of white employees, 31.3 percent of Asian employees, 4.4 percent of Black or African American employees, 7.8 percent Hispanic or Latinx employees and 0.4 percent of Native Hawaiian or Pacific Islander employees. 

Tearsheet Coverage

• Affirm is going public: Here’s a peek at some of the people behind the payment firm’s success
• What Affirm’s IPO and Chase’s new installment product say about the BNPL market
• With Gen Z taking notice, can buy-now-pay-later become the new favorite payment method?
• Affirm lands the granddaddy of retail partners, Walmart
• Affirm’s Max Levchin: ‘Walmart doesn’t get enough credit for its customer focus’
• Affirm now finances small-ticket items, signaling growing competition in payments
• Affirm’s big business for 2018 is marketing
• Loans at point of sale are poised to take off
• The growing trend of purchase financing