By Tanaya Macheel
The drumbeat for purchase financing got louder this week when Affirm, the point-of-sale lender led by PayPal co-founder Max Levchin, became available in 4,000 Walmart stores across the U.S., the same week U.S. banking giant Chase revealed its own plans to push into the growing POS lending space.
“It’s probably the greatest endorsement we’ll ever get,” Levchin told Cheddar. "Chase does not have to do anything, they're already the world’s largest credit card issuer … They're basically telling the world what [Affirm's] got is pretty valuable and important."
At JPMorgan Chase’s Investor Day this Tuesday, Jenn Piepszak, Chase’s head of cards, said this year it will begin offering a loan with a fixed monthly fee to Sapphire, Freedom, and Slate cardholders on purchases of at least $500.
Point-of-sale lenders haven't taken off in the U.S. to the extent they have in Europe, but many in the industry are looking to change that. Klarna, a European unicorn last valued at $2.5 billion, was a relatively no-name brand in the U.S. until about a month ago when it dropped a splashy national ad campaign featuring its latest minority shareholder, Snoop Dogg. Israeli-American company Splitit recently hired Klarna’s former director of business development to drive its North American growth this year.
Many are quick to dismiss Affirm and other buy-now-pay-later companies as the new debt trap for millennials, who are known for being credit averse and skeptical of financial institutions that have profited for decades on hidden fees, gotcha fees, and every other imaginable fee. Fintech companies broadly— marketplace lenders, investing apps, challenger banks —have innovated the model of customer experience, rather than technology or financial products.
Last week TransUnion reported fintech companies make up 38 percent of the personal loan market, compared to five percent just five years ago. In addition to faster and easier-to-use apps, fintech companies have pushed very hard on a promise of transparency — that includes Affirm.
"This notion of what-you-see-is-not-what-you-get is pervasive in the financial services industry and a huge part of our job is to lead the way and show that it can be done. You can lend money honestly by telling people exactly what they’ll pay and never changing that number even if they're late by a couple of days,” Levchin said. “The reality of it is the industry has been overcharging people and hitting them with unexpected fees and interest for many, many years and it’s hard to convince rightly skeptical consumers that we’re different.”
Affirm did more than $2 billion in loan volume in 2018. Founded in 2012, it now has more than 2,000 live merchants worldwide.
Affirm has raised a total of $450 million in funding over six rounds, the most recent being a Series E of $200 million in December 2017 that valued the company at almost $2 billion.
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