“Trust me to give you sound [financial] advice,” Max Levchin, founder and CEO of Affirm, said at The Wall Street Journal’s WSJ D.Live technology conference in Laguna Beach. “That’s where we’re headed to next.”
Levchin founded Affirm because, as he sees it, there is a serious “misalignment of goals” in a lot of lending that goes on — insofar as there are businesses whose entire model is built on fat late fees and a hope that their consumers will fail to managed their finances correctly enough to pay their loans on time. It’s a problem, Levchin has long noted, that there are banks whose main goal is to see their customers fail because their success conditions depend on it.
Affirm is premised on the idea that this does not necessarily have to be the case, even when lending to customers with low credit scores by traditional metrics.
Some borrowers are “mispriced” by their FICO scores and unable to get loans that they otherwise should, Mr. Levchin said.
Affirm does not use the FICO as its main determiner in its core business of underwriting, instead asking to get a look at a consumer financial accounts to get an idea of how much income potential borrowers have, and how much they spend.
Working with retailers — usually larger-ticket item sellers like Wayfair Inc., or travel website Expedia Inc. — Affirm offers customer installment loans to pay off their items — with all fees and costs disclosed up front to borrowers.
Levchin’s most well known entrepreneurial outing to date is as one of the founders of PayPal — but that may change as Affirm continues to expand both its platform and its purpose. The online lender has, as of the writing of this article in early October 2017, loaned out around a billion dollars to date, making average loans of about $1,000 each. It made its one millionth loan earlier this year.
And, according to Levchin, they want to do more, in the form of providing more financial services aimed at helping consumers “get over this hump” of too much debt.
“Here’s a button that we will power that you can use to pay off your debt, to reduce your interest payments,” he said, alluding to one possible service.