Affirm CEO details no-fee lending model: ‘alignment with our consumers’
In an interview with CNB’s Jim Cramer on Monday, Confirm CEO Max Levchin has reviewed his company’s strategy, suggesting that the buy now, pay later option offers the benefits of not charging customers late fees.
“We are in full compliance with our consumers. If they don’t pay us what we owe, we’ll just lose money,” Levchin said. “There is no magic involved in the business model, and that transparency completely aligns us with that person.”
According to Levchin, late fees aren’t necessary “if you get really good at insurance.”
He advocated for greater clarity and transparency in lending. He stated that he wished the industry would move towards simple interest, fixed maturity transactions, and suggested that these models reduce the likelihood of borrowers getting into serious debt.
Confirm hit on earnings and revenue when it released its quarterly report last month. Shares are currently up 7.82% year-to-date.
Levchin offered some insight into consumer behavior during the holiday season, saying Affirm has seen a huge increase in travel spending, especially among Generation Z customers. He also said his company has seen a “major rebound” in spending on sporting goods, a category that lagged last year.
Levin said more consumers are signing up for Affirm’s six-month payment plans, which is a good indication that people are shopping around and want to “extend their vacation money into next year.”
“Our credit numbers are pretty strong. So they’re paying back their bills, but they’re looking for ways to stretch their dollars,” Levchin said of Affirm users. “They’re price conscious. They’re looking for deals.”
