11 February 2016

Former PayPal founder Levchin wants to upend consumer finance

10 July 2014  |  8534 views  |  4 buy and sell button

Former Paypal co-founder Max Levchin is looking to disrupt the payments market once again with the launch of a new service that lets online merchants advance credit to consumers at the point of sale.

The startup, dubbed Affirm, has announced the commercial release of 'Split Pay', which does away with inflexible credit scoring and enables online shoppers to make a purchase and pay across multiple months with financing fees a fraction of credit card interest rates.

"Consumers want and need an easy-to-use alternative to credit cards when they're shopping online, especially underserved populations like Millennials, enthusiasts, and the vast population of debit card users," says Levchin. "Consumer financing has been available to the largest online and many brick and mortar merchants for years. We're now bringing this powerful financing to all online merchants, large and small."

Started in 2012, Levchin has recruited a stellar line up of executives to run the business, including Nathan Gettings, co-founder of big data mining company Palantir and Jeff Kaditz, formerly chief data officer of gaming company, ngmoco. The business has so far attracted $45 million in VC funding.

Says Levchin. "Affirm is a simple, safe, transparent alternative to revolving credit for online shoppers who primarily use debit cards or are underserved - or not at all - by the currently FICO-based consumer lending system."

Affirm assesses consumer risk using a combination of social media profiling and purchase price to determine the rate and structured payment terms for consumers. Merchants receive their payments upfront from Affirm, with little downside risk.

Affirm charges merchants 2-3% percent of each transaction, and shoppers' fees start as low as six percent depending on their payment history, dollar amount being financed, and whether they commit to three, four, or five monthly installments.

Comments: (4)

A Finextra member | 10 July, 2014, 11:48

So paying on tick like in the 60's perhaps?

Give the recent issue with responsible lending and people, well not knowing when to stop.  Surely this is just another way of convincing people to buy things they can't afford, but instead of banks cutting their losses, shops lose money, stock...need I go on?

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A Finextra member | 10 July, 2014, 13:26

So i can use this or save up my pennies for 3, 4 or 5 months and buy it outright.... saving 6% on the purchase price (not clear if its APR or a 6% fee? if its 6% over 3 months its not cheap credit, over 5 months it is, but the value here is as much in the database and hooking the consumer who is probably home shopping!!!  its not pretty but its probably going to be very profitable.

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Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 11 July, 2014, 19:30

Affirm sounds similar to BillMeLater, a startup founded in c.2005 and subsequently acquired by PayPal's owner eBay a few years later for ~US$ 1B.

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A Finextra member | 14 July, 2014, 11:49

Plenty of similar services here in Russia. 

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