“The more I looked at retailer-sponsored finance, the more I realized people routinely end up paying atrociously more than they bargained for … This is not only morally outrageous, but it’s bad for business.” — Max Levchin, Founder & CEO, Affirm
When PayPal Co-founder Max Levchin launched Affirm in 2012, he had a specific target for disruption in mind: retailer-sponsored financing. Consumers, he noted, have spent decades agreeing to “free” or “zero interest” financing offers from retailers, only to find out the hard way that those offers were anything but true.
For consumers who make even the tiniest mistake, free quickly becomes expensive. Suddenly, the 0 percent APR jumps to 29 percent, with additional penalties and fees compounded all the way back to the day of purchase. If that mistake happens during the 70th month of a 72-month loan, it can be a very costly error.
Affirm’s flagship product — a point-of-sale (POS) installment lending solution focused on transparency — was created to take on that issue.
“We always want to underwrite the ability to pay. If this person can’t afford this, we won’t lend. The idea of spreading risk across the borrowers, we see that as long-term detrimental to the economy,” Levchin said. “But I think we can increase retail acceptance by 10 to 30 percent just by being smarter and using better data.”
Affirm never lends to consumers who can’t repay, and those who are approved are given a loan term and a monthly payment schedule without late fees or hidden interest charges. From the start of their lending experience with Affirm, consumers know exactly how much and over what period of time they will repay that debt.
It’s a product that has been very successful, Affirm’s Chief Product Officer Jack Chou told Karen Webster — so successful, he said, that Affirm has realized over the last year that there’s much more it can do for consumers across their retail journeys.
“The one thing we kept hearing from customers over and over again,” Chou said, “was that their trust in our brand went beyond that one loan that they got that one time.”
To meet that need, Affirm is launching a refreshed brand image and new consumer portal that Chou said will help consumers spend responsibly — and identify the merchants that, by accepting Affirm, have signaled their commitment to help consumers do that.
The New Affirm Brand
As with most brand refreshes, there is a new logo — one that looks quite different from what existed before. That new visual styling is accompanied by a host of new product features.
The Affirm app and website now contain a retail discovery tool to help consumers find retailers that accept Affirm, as well as those that have created unique offers for Affirm customers, which are individually tailored to a customer’s specific shopping habits. Building merchant-supported offers into the Affirm app, Chou said, is a natural expansion in a retail environment, where merchants have products they want to sell and customers who want to buy them don’t have the funds on hand to purchase at that moment of discovery.
“We view our role to make that purchase happen in a way that is both fair and transparent for both parties,” Chou explained.
Within the consumer portal, a customer can see how much they have been qualified for in total and to which merchants the funds have been allocated. Chou said giving that total view helps consumers track spending, and surfaces products for purchase that fit their budget. Knowing what deals they are getting, and that they are qualified to buy those items, helps consumers control spending, while making them feel more confident.
Furthermore, Chou added that if consumers understand what they can spend, then it’s less likely that they will overspend. With a median purchase price of $750, that’s particularly important for Affirm customers, and for the retailers that wish to serve them. This is where Affirm “excels,” Chou said: helping to make consumer purchases “considered purchases,” so that it’s easier for customers to bridge the gap mentally between “I’d really like to have this product” to “I’d really like to have this product and I feel confident in purchasing it.”
The Most Wonderful (And Expensive) Time Of The Year
Affirm’s new brand arrives on the consumer’s doorstep before the holiday season — the most wonderful and expensive time of year for most.
Chou told Webster that, going into holiday 2017, fewer than a quarter of Americans had a set holiday spending budget, 40 percent said they spent more than they planned and 50 percent reported taking on credit card debt as a result. In the end, he said, many consumers bought regrets, and even some bad feelings about using credit cards. Nearly 70 percent said last year’s debts make them nervous about spending this year.
It’s a nervousness that’s probably justified, given how easy it is to use credit cards and for consumers in the holiday frenzy to keep track of how much they have spent. Until, of course, the credit card bill arrives. That moment of reality is one that Affirm hopes to help consumers avoid, Chou noted, while still allowing them to make the purchases they want to make.
“I think we are really excited for what we are launching today — right down to the logo,” Chou said. ”So many consumers feel that their spending can get out of control and that their credit cards don’t help them feel more in control. And I think that is where we can shine this shopping season and beyond.”