Affirm Holdings, Inc. provides consumers with a simpler, more transparent, and flexible alternative to traditional payment options.
The company is building the next generation payment network. By using modern technology, strong engineering talent, and a mission-driven approach, the company can reinvent payments and commerce. The company’s solutions, which are built on trust and transparency, are designed to make it easier for consumers to spend responsibly and with confidence, easier for mercha...
Affirm Holdings, Inc. provides consumers with a simpler, more transparent, and flexible alternative to traditional payment options.
The company is building the next generation payment network. By using modern technology, strong engineering talent, and a mission-driven approach, the company can reinvent payments and commerce. The company’s solutions, which are built on trust and transparency, are designed to make it easier for consumers to spend responsibly and with confidence, easier for merchants and commerce platforms to convert sales and grow, and easier for commerce to thrive.
Business
Legacy payment options, archaic systems, and traditional risk and credit underwriting models can be harmful, deceptive, and restrictive to both consumers and merchants. They are not well-suited for increasingly digital and mobile-first commerce, and are built on legacy infrastructure that does not support the innovation required for modern commerce to evolve and flourish. The company’s platform is designed to address these problems.
The company’s technology, underwriting, and risk management are key competitive advantages. The company’s proprietary technology’s ability to price and assess risk at a transaction level provides a unique advantage compared to legacy payment and credit systems. The company’s approach to risk management is core to the company’s business model and has led to lower fraud rates, higher approval rates compared to traditional credit underwriting models, and lower credit losses. The company’s models have been built on extensive data points, including data from approximately 215 million loans. Furthermore, the company’s risk management models are designed to continuously improve over time, becoming more precise and efficient with each transaction powered by the company’s platform.
What this means for consumers is increased purchasing power with more control and flexibility. By utilizing the company’s unique risk model predicated on sophisticated machine learning algorithms, proprietary data, and product-level underwriting, the company can serve consumers across the credit spectrum and price risk across transaction types. Consumers on the company’s platform represent a broad cross-section of society.
For merchants, Affirm’s commerce solutions help drive growth by enhancing demand generation and consumer acquisition. The company’s platform is explicitly designed and engineered to integrate with a wide range of merchants. This is a point of differentiation for the company, as the company can accommodate and partner with merchants to serve their payment needs across a wide variety of industries, size, average order value (‘AOV’), or consumer profile. As of June 30, 2024, the company had approximately 303 thousand active merchants, ranging from small businesses to large enterprises, direct-to-consumer brands, brick-and-mortar stores, and companies with an omni-channel presence. As used herein, ‘merchants’ may reference merchants and/or e-commerce platforms. The company’s merchants span a diverse range of industries, including sporting goods and outdoors, home and lifestyle, travel and ticketing, electronics, fashion and beauty, equipment and auto, and general merchandise.
The company has three main loan product offerings: Pay-in-4, 0% annual percentage rate (‘APR’) monthly installment loans and interest-bearing monthly installment loans. Pay-in-4 is a short-term payment plan with four biweekly 0% APR installments.
The company’s business model is designed to align with the interests of both consumers and merchants.
Platform
The company’s business transforms the way consumers and merchants transact by creating a powerful platform built upon honest financial products. The company started its business with its foundational pay-over-time solution at checkout, and have since continued to innovate and expand the company’s product suite by building and acquiring solutions that address the evolving needs of both consumers and merchants. The company’s platform comprises three core elements: point-of-sale payment solutions for consumers, merchant commerce solutions, and a consumer-focused app. The suite of solutions the company provides to its consumers and merchants is outlined below:
Consumer Features
Affirm at Checkout. When purchasing from one of the company’s partner merchants, consumers can choose Affirm as a payment method, giving them the option to pay over time with terms ranging from weeks to months. The company monitors merchants’ creditworthiness, consumer complaints and dispute rates, changes in consumer repayment behavior, and other data to give consumers the confidence that merchants integrated with Affirm are committed to delivering honest and delightful experiences.
Consumer First Borrowing. The company’s products make it easy for consumers to apply for a loan and be approved instantaneously. Consumers receive either 0% APR bi-weekly or monthly installments, where they pay no interest, or interest-bearing monthly installment loans, where they pay fixed amounts of interest that do not compound. The company underwrites each transaction individually and do not charge late fees. The company’s proprietary risk model has consistently outperformed traditional credit models, enabling the company to better help eligible consumers finance their purchases. Under this model, consumers do not pay more than what they agreed to at checkout, even if they miss or are late on a payment.
Affirm Marketplace. The company’s Affirm App and website provide tailored and exclusive offers from merchants based on consumers’ preferences. Consumers can apply at affirm.com or via the Affirm App and, upon approval, receive a single-use virtual card to use online or in-store. During the fiscal year ended June 30, 2024, 23% of the company’s transactions occurred on the Affirm marketplace.
Affirm Card. Affirm Card allows consumers to link a bank account to pay in full, or apply to pay over time through the Affirm App. Users can take advantage of an in-app post-purchase feature that allows them to instantly apply to convert any eligible debit transaction into an installment loan. Consumers can also apply for a pre-purchase installment loan via the Affirm App and, upon approval, use the Affirm Card online or in-store to complete their purchase. Consumers can transact either via a physical debit card or a virtual debit card.
Affirm Money Account. Through the Affirm app and in partnership with Cross River Bank, the company offers an FDIC-insured, high-yield savings account, with no minimum deposit requirements or fees.
Merchant Features
Affirm at Checkout. Through the company’s direct application programming interface (‘API’), designed for use by developers, merchants can easily incorporate Affirm into their payment and product pages, enabling merchants to achieve incremental sales, expand their target markets and increase customer conversion and loyalty by solving affordability for consumers. The company is also able to help merchants increase demand for higher net AOV items.
Flexible offerings that address a wider range of transactions. Merchants can offer either one or a combination of 0% APR and interest-bearing pay-over-time offerings. Offering 0% APR financing to their customers is a compelling revenue accelerator for merchants, who are able to solve affordability for their customers without resorting to discounts. Merchants have the ability to subsidize and determine the range of interest rates to be paid by their customers.
Brand-sponsored and Other Promotional Strategies. The company has the ability to work with manufacturers on brand-specific promotional financing offers. These promotions are funded by suppliers and then made available through the company’s merchants. The suppliers cover the costs of the lowered APR for their products, with no added costs to the company’s merchants. This gives the company’s merchants a powerful alternative to markdowns as they can increase sales with no impact to their margins. At the same time, suppliers can sell through additional volume. The company also partners with merchants to reach consumers with other promotional strategies and offers.
Merchant Dashboard. The company’s merchant dashboard provides a robust user interface through which each merchant can view transaction data, manage charges, access API keys, and manage and configure the merchant’s Affirm account.
Analytics. The company provides merchants with insightful analytics that help them understand how their various products are performing and other key insights to optimize conversion and consumer acquisition costs.
Client Success Support. The company’s high-touch client success team partners with the company’s merchants to analyze performance and provides custom recommendations to optimize AOVs and conversion rates.
Affirm App and Marketplace. Merchants also have access to Affirm’s app, which provides a marketplace that allows them to efficiently reach consumers through featured placements and personalized advertisements.
Affirm Website and Developer Documentation. The company’s website contains extensive and engaging developer documentation designed to make it easy for any developer to integrate via the company’s direct API or other integrations, and to maximize the benefit of all that Affirm offers to both merchants and consumers.
Affirm Prequalification. By giving consumers the ability to prequalify, Affirm’s offering can be integrated earlier in the consumer’s journey. This results in fewer abandoned carts and higher conversion rates. Prequalification also personalizes the shopping experience for consumers, once they are prequalified they may receive customized offers based on their approval amount.
Simple and Compliant Solution. The company’s direct API, designed for use by developers, allows for site integration with minimal merchant investment. Merchants can easily incorporate the company’s platform into payment and product pages, and the company provides a dedicated integration team to assist with issue resolution. Once a merchant has integrated the company’s API, the company handles the regulatory aspect of the loans facilitated through the company’s platform, irrespective of state, province, or jurisdiction.
Competition
The company’s primary competition consists of: legacy payment methods, such as credit and debit cards, including those provided by card issuing banks, such as Synchrony, J.P. Morgan Chase, Citibank, Bank of America, Capital One, Bread Financial, and American Express; technology solutions provided by payment companies, such as Visa and MasterCard; mobile wallets, such as PayPal; and other pay-over-time solutions offered by companies, such as Block and Klarna.
Growth Strategy
The company’s multi-pronged growth strategy is designed to build upon the company’s momentum and unlock opportunities to create even greater value for consumers and merchants.
Expand solutions for merchants and consumers
Innovate on New Consumer Product Solutions. The company plans to continue to innovate and bring new financial products to market for consumers.
Increase Merchant Feature Functionality. As the company continues to help merchants increase conversion rates, AOVs, and customer satisfaction, the company plans to build new tools to help them optimize their customer acquisition strategies and achieve even greater results.
Increase Consumer Transaction Frequency and In-store Usage
The company has demonstrated how its solutions can successfully enable and accelerate commerce for larger and considered purchases. The company intends to continue driving repeat use of its platform as the company serves consumers beyond their initial purchase via the company’s consumer-centric tools and offerings, and the increased diversity of merchants on the company’s network. Expanding into consumers’ daily and in-store spending will be key in driving repeat usage and will position the company to increase engagement with both consumers and merchants. Affirm Card is an important component of this strategy because consumers using Affirm Card to date often have a higher transaction frequency per user and greater in-store usage. If successful, this strategy will lead to increased transaction volume on the company’s platform, as well as the expansion of the company’s consumer and merchant network. As of June 30, 2024, the company had approximately 4.9 transactions per active consumer.
Expand Consumer Reach
The company will continue marketing to increase brand awareness with consumers and highlight the value of the company’s platform. This will attract new consumers to try Affirm as a payment option. As the company adds more consumers to its network, the company expects its models to become more efficient and robust, allowing the company to provide its platform (and the loans it facilitates) to a growing spectrum of consumers. The more consumers that the company serves, the better its systems understand how to identify responsible consumers, and the more consumers the company can acquire and approve.
Expand Merchant Reach
Deepen Penetration with Existing Merchants. Affirm transactions represent a small percentage of the total transaction volume for the company’s merchants. As more consumers become aware of the ease and transparency of using Affirm, and as the company proactively builds relationships with merchants through the company’s dedicated sales and customer success teams, the company can significantly increase its share of existing merchants’ overall transaction volumes.
Increase the Number of the company’s Merchant Partnerships. The company has the opportunity to significantly increase the number of integrated merchants on the company’s network through both its dedicated sales team and platform partner and merchant acquirer partnerships. Additionally, simple, direct API integration means bringing on new merchants can be a seamless process. As the company continue to generate results for merchants, more will join the company’s platform in order to offer Affirm as an option to their customers.
Expand to New Markets
The company’s platform is broadly available to merchants and eligible consumers in the United States and Canada. The company will continue to evaluate expanding the company’s platform to new markets, including the United Kingdom (‘U.K.’) where the company expects to begin facilitating loans by the end of fiscal 2025. Merchants and consumers anywhere can benefit from a more transparent, fair, and honest way to engage in commerce, and the company sees an opportunity to generate value in many new markets around the world through the company’s platform.
Sales and Marketing
The company’s marketing strategy includes brand marketing, communications, and co-marketing campaigns that the company collaborate on with merchants and partners. The company has historically relied on the strength of the company’s merchant relationships and positive user experience to develop the company’s brand and grow its network. The company has achieved significant merchant and consumer adoption without investing heavily in sales and marketing. The company is focused on the effectiveness of sales and marketing spending. The company also utilizes dedicated sales teams to grow its merchant base in the United States and Canada, and leverage strategic partnerships with other platforms to expand the company’s merchant and consumer base.
Seasonality
The company experiences seasonal fluctuations in its business as a result of consumer spending patterns, including Affirm Card, which the company expects to mimic the seasonality of its general business in the near term. Historically, the company’s GMV has been the strongest during the company’s fiscal second quarter (year ended December 2023) due to increases in retail commerce during the holiday season and the company’s loan delinquencies are at their lowest during the company’s fiscal third and fourth quarter, as consumer savings benefit from tax refunds.
Regulatory Environment
In addition to the U.S. and Canada, the company intends to provide a similar service in the U.K. through the company’s U.K. subsidiary, Skytech Capital Ltd (‘Skytech’). Skytech is authorized and regulated by the U.K. Financial Conduct Authority (‘FCA’) and carries out regulated activity in the U.K.
The company is also subject to data protection laws and regulations, such as the EU General Data Protection Regulation (‘GDPR’), Canada’s Personal Information Protection and Electronic Documents Act, the U.K.’s Data Protection Act of 2018 and similar state laws, such as the California Consumer Privacy Act (the ‘CCPA’), which includes limitations and requirements surrounding the use, disclosure, and other processing of certain personal information about California residents.
The company is also subject to regulation by the Consumer Financial Protection Bureau (‘CFPB’) under the Dodd-Frank Act and other acts described herein, and the company is subject to the CFPB’s enforcement authority with respect to the company’s compliance with these requirements as a facilitator, servicer, acquirer, or originator of consumer credit.
The company is subject to compliance obligations related to the U.S. anti-money laundering (‘AML’) laws and regulations due, in part, to the company’s partnership with its originating bank partners. With the company’s international footprint, the company is also subject to international AML laws and regulations.
The company’s AML program is also designed to prevent its products from being used to facilitate business in certain countries or territories, or with certain individuals or entities, including those on designated lists promulgated by the U.S. Department of the Treasury’s Office of Foreign Assets Controls and other U.S. and non-U.S. sanctions authorities.
The U.S. Foreign Corrupt Practices Act (‘FCPA’) prohibits offering, promising, authorizing or making payments to any foreign government official, government staff member, political party or political candidate to obtain or retain business abroad. Affirm is subject to the FCPA, as well as similar laws in other jurisdictions in which the company operates.
The company collects, stores, uses, discloses, transfers, and otherwise processes a wide variety of information, including personal information, for various purposes in the company’s business, including to help provide for the integrity of the company’s services and to provide features and functionality to the company’s consumers and merchants. This aspect of the company’s business, including the collection, storage, use, disclosure, transfer, processing, and protection of the information, including personal information, the company acquires in connection with its consumers’ and merchants’ use of the company’s services, is subject to numerous privacy, cybersecurity, and other laws and regulations in the U.S. and foreign jurisdictions, including the GLBA and its implementing regulations.
Intellectual Property
As of June 30, 2024, the company owned 23 registered trademarks and 2 trademark applications in the United States, 99 registered trademarks and 19 trademark applications in various foreign jurisdictions, and 22 issued patents, 39 pending patent applications in the United States, and 60 pending patent applications in various foreign jurisdictions.
History
Affirm Holdings, Inc. was founded in 2012. The company was incorporated in 2019.
