Affirm Holdings

Affirm Holdings, Inc. is an American listed company founded by PayPal co-founder Max Levchin in 2012. It is a fintech company with a buy now, pay later service for online and in-store shopping. Affirm tops the U.S. buy now, pay later sector,  reporting over 18 million users and US$20.2 billion annual GMV as of 2023.

Affirm offers its consumer lending solutions through various methods, including a payment link at online checkout, a virtual card, or a physical card. The company generates revenue by applying a service fee to merchants, charging interest to consumers, or both. Affirm states that its loan underwriting process involves evaluating transactions by considering credit scores and other pertinent factors, while also incorporating machine learning.

2012–2015: Early years
Affirm was founded in 2012 by Max Levchin, Nathan Gettings, Jeffrey Kaditz, and Alex Rampell as part of the initial portfolio of startup studio HVF. Levchin, who co-founded PayPal, became CEO of Affirm in 2014.

2016–2019: Merchant partnerships
In November 2016, Affirm announced the availability of its buy now, pay later (BNPL) service for retailers using the e-Commerce platforms of “Kibo Commerce”, BigCommerce, “AspDotNetStorefront” and Zen Cart. By that time, Affirm’s service was also available for the Salesforce Commerce Cloud, Magento and Shopify. According to RACKED in November 2017, Affirm had launched an app which allowed consumers to take out loans for purchases at any retailer. The company aimed at "building and perfecting a new underwriting system", powered by machine learning, to determine consumer creditworthiness. RACKED added that the four retailers it spoke to reported "significantly higher sales and more frequent purchases, with Affirm customers". Affirm's use of machine learning in underwriting has also been claimed by the lender to generate "higher loan approval rate compared to its competitors", while ensuring the borrower can "comfortably repay". In 2018, CBS News cited Affirm's BNPL service as an alternative to the traditional credit card, while expressing a caution about the interest rates charged by BNPL services.

Affirm announced a partnership with Walmart in February 2019. Under the partnership, the company’s service became available to customers in-store and on the Walmart website.

2020: Initial public offering
On November 18, 2020, Affirm filed with the Securities and Exchange Commission in preparation for an initial public offering (IPO). On December 12, 2020, it was reported that Affirm had postponed its IPO. On January 13, 2021, Affirm listed on NASDAQ with symbol AFRM, raising about $1.2 billion in its IPO. By the next day, the price of shares had doubled, making Levchin's stake worth about US$2.5 billion.

2021–2022: Growth
In May 2021, Affirm acquired Returnly, a financial technology service company, for US$300 million.

In August 2021, Affirm announced a partnership with Amazon to make its BNPL service available for certain customers of the latter. According to CNBC in October 2021, Affirm had partnered with Target, and also with Apple, to offer financing solutions. In November 2021, Affirm announced the expansion of its partnership with Amazon, and said that it would be Amazon's exclusive BNPL partner in the United States through January 2023.

In May 2022, Affirm signed a partnership with digital payments processor Stripe, Inc. to make its "adaptive checkout" service available to Stripe users in the US. In June 2022, Reuters mentioned Affirm as the "biggest BNPL firm in the United States" while noting that the "rising rates" then would hurt BNPL firms and that Apple's entry to the BNPL sector created "more competition". In September 2022, Yahoo Finance reported on the launch of Amazon's partnership with Affirm in Canada, and stated that Affirm's network served nearly 14 million customers and 235,000 merchants. According to Payments Dive in October 2022, Bank of America Securities identified Affirm as the "most frequently used" BNPL app in the US with a 30% market share, while noting a slowdown in BNPL sector growth in the US and worldwide.

2023–present: Layoff, further expansion
In February 2023, Affirm announced it would lay off 19 percent of its workforce as part of a restructuring plan and shut down its crypto unit.

In March 2023, U.S. News & World Report cited Affirm as a "lower-interest alternative to a credit card", available for both in-store or online purchases, while also stating that "it has downsides". According to a Payments Dive article in May 2023, Affirm stated that it was partnering with data analytics company FICO to create a "BNPL credit-scoring model", while noting the Consumer Financial Protection Bureau's concerns around the "lack of information being furnished in the BNPL space". The article also cited Affirm as the "largest independent BNPL provider" based in the United States.

In May 2023, payment processor Worldpay launched a partnership with Affirm, enabling Worldpay merchants to use Affirm's payment solutions. Then, in September 2023, online travel platform Booking.com joined Affirm's payment network, which also included American Airlines, Cathay Pacific, CheapOair and Vacasa. In November 2023, CNBC reported that Amazon was expanding its partnership with Affirm to include small business owners who use Amazon's online store. The expansion was said to be aimed specifically at sole proprietors, or small businesses owned by a single person, which CNBC cited as the most common form of business ownership in the U.S. The company reportedly served over 17 million consumers and 279,000 merchants, and processed an annual GMV of US$20.2 billion in 2023.

According to Reuters in April 2024, Affirm had started offering buy now, pay later loans for elective medical procedures. Affirm stated that the share of transactions in this category at 0% annual interest was nearly half, a higher proportion compared to other categories. In May 2024, the company reported having 18.1 million "active users" and 292,000 "active merchant clients". May 2024 also saw Google announce the expansion of its partnerships with Affirm and Zip, following an initial pilot earlier in the year. These partnerships involved showing buy now, pay later options from Affirm and Zip when checking out online with Google Pay. The expansion included a roll out of these options to additional "merchant sites and Android apps" for the U.S. users. In the same month, CNBC and Forbes respectively called Affirm's savings account product the "Best For Simplicity" and the "Best For Mobile Banking".

In June 2024, Apple announced a partnership with Affirm, allowing U.S. users to apply for loans through Affirm when using Apple Pay, and subsequently revealed plans to shut down its "Pay Later" service. According to CNBC, Affirm was slated to "surface" as an option for U.S. Apple Pay users on iPhones and iPads later in the year.

Business
Affirm places its logo on the checkout page of a partnering online retailer, and determines in real-time the shopper's eligibility to use Affirm for financing the shopping cart. Additionally, to enable the use of its payment services in any online store, not necessarily that of a partnering retailer, Affirm also offers a "virtual card" to consumers. Moreover, the company offers a physical debit card to consumers for utilizing its lending service to support purchasing at any store, physical or online.

Affirm raises funding from banks, insurance firms and the capital markets to front up loans. The company makes money by earning a commission from merchants and by charging interest on the loans opted for by the consumers. The commission earned from merchants can sometimes be as high as 12.5%. The interest rates and other loan terms vary, depending on consumers and the merchants they purchase from, according to Affirm. The annual percentage rates (APRs) for the loan interest range from 10% to 36%, the upper limit on the loan amount is US$25,000, and the payback period ranges from 1 to 48 months. Affirm says it doesn’t charge compound interest or late fees, and caps its interest.

Affirm states that it evaluates transactions by considering various factors beyond just credit scores, including the time of day and other nuanced details, to assess risk. The company also says that it deters fraud by leveraging an "artificial intelligence-driven analytics system" which attempts to predict a given transaction’s likelihood of fraud based on past warning signs.

Products
Affirm offers multiple products for online merchants and consumers. Among these products is "Adaptive Checkout" which offers personalized payment options to online shoppers based on their profiles and shopping cart contents. Using real-time proprietary algorithms, it presents pre-approved payment plans with bi-weekly or monthly installments for the shoppers to compare and choose one from. Affirm also provides a range of interest-free products to online shoppers. These include "Split Pay" which offers a bi-weekly "Pay in 4" option, "Pay in 2" which allows to split the cost of a purchase into two payments, and "Pay in 30" which allows to pay in full within 30 days of a purchase.

The company also offers an "Affirm Card" directly to consumers. This card is for use in both physical stores and online, like a regular debit card. It allows consumers to convert debit transactions ranging from US$100 to US$1,000 into installment payments within 24 hours through an app. The card is connected to the user's bank account, providing an alternative payment method for purchases.

In addition, Affirm offers a savings account, called the "Affirm Money Account", directly to consumers. This account pays 4.35% annual interest and has no minimum balance or fee requirements. The account is FDIC insured up to US$250,000 per depositor in the event of a bank failure, and is held by Cross River Bank.