New Products, New Retailers: Affirm is on a Roll

This has been a good year for Affirm, the lending startup established by PayPal co-founder Max Levchin. The San Francisco-based company, has made numerous strides, from issuing its millionth loan to expanding its retail partnerships; from preparing to launch new products in the fall to moving into a permanent office space.

“As of July, we got 1,000 retail partnerships. Being able to process simple-interest loans for 1,000 online retailers is a big milestone for us,” Ryan Metcalf, Affirm’s chief of staff and director of international markets, told Bank Innovation. “For some of these merchants, we are driving north of 40%, almost half their revenues, from online sales.”

Affirm’s roster of retailers include travel site Expedia, home goods retailer Wayfair, and luxury retailers like The Real Real, Rebecca Minkoff among others. It will soon announce more partnerships with fortune 50 companies, Metcalf said. He declined to disclose names.

In terms of products, the company is on the verge of launching a virtual everyday-use credit card. It will also be launching a new direct-to-consumer product this fall, Metcalf said.

While Metcalf would not disclose specifics about this new product, he revealed that it is related to the concept of addressing the merchants that aren’t among their 1,000 existing partners.

When it comes to industries, Affirm is looking at expanding into the home repairs space, Metcalf said. Right now, Affirm’s most popular verticals are luxury retail, travel, home goods and auto.

“Financing mattresses has also become very popular with our customers,” Metcalf said. (Mattress retailer, Casper, is one of their partners).

How does Affirm work? Typically, the retailer will provide the buyer with a financing option either at checkout or somewhere on their website. Affirm needs the buyer’s full name, date of birth, email and mobile number to run a “soft credit check,” and can underwrite a loan within seconds.

Established in 2012, Affirm was built on the premise of providing transparent point-of-sale loans that allow customers to finance purchases with its partnered merchants. They provide loans anywhere between $200 and $10,000. The average loan rate is typically $800, Metcalf said.

The company’s philosophy is ethical lending. In other words, lending with honesty and transparency. The company prides itself on only charging simple-interest, with zero added fees, no late charges, no deferred interest, or any kind of predatory costs, Metcalf said.

“The whole thesis of the company is to do underwriting better than the traditional banking system,” Metcalf said. “For the next 18 months, our goal is to reinvent consumer credit.”

“We only give loans that we know our customer can pay,” he said. “We are not incentivized on the customer’s inability to make payments on time.”

Affirm brands itself as a loan provider for millennials, however Metcalf explained their customer base covers “people who are typically underbanked, these are the people that are excluded under FICO. They can be students, emigrants or millennials.”

To demonstrate his point, Metcalf referred to Levchin’s recent tweet which stated Affirm, on average, approves financing to 126% more people than the industry average.

Right now, Affirm is partnered with New Jersey.-based Cross River Bank. Affirm buys back the loans that the bank underwrites, so as to “take all the risks,” Metcalf said.

Whether a banking charter is in their future, Metcalf couldn’t say.

“Right now, we are very happy with our banking partner” he said. “We pay attention to all regulatory frameworks, both state and national, but right now we are doing great with our arrangement with Cross River.”

On other fronts, come March 2018, Affirm will move to a new 80,000 square feet office building in San Francisco. The company is also on a hiring spree, looking to have 340 employees by next year. Right now, they have 250. In 2013, it had around 30 (Metcalf was one of them).

Since its establishment, Affirm has raised $425 million in debt and equity from Founders Fund, Spark Capital Growth, Jefferies, Andreessen Horowitz Partners, Lightspeed Venture Partners, Khosla Ventures, and Silicon Valley Bank.

“We’ve grown 240% year over year,” Metcalf said.