Affirm CEO details no-fee lending model: ‘alignment with our consumers’

In a Monday interview with CNB’s Jim Cramer, Affirm CEO Max Levchin reviewed his company’s strategy, suggesting the buy now, pay later outfit benefits from not charging its customers late fees.

“We have total alignment with our consumers. If they don’t pay us back, we just lose money,” Levchin said. “There’s no magic in the business model, and that transparency aligns us fully with that person.”

According to Levchin, late fees aren’t necessary “if you get really good at underwriting.”

He advocated for more clarity and transparency across the lending space. He said he wishes the industry would gravitate towards simple interest, fixed terms transactions, suggesting those models make it less likely that borrowers will fall into serious debt.

Affirm beat on earnings and revenue when it posted its quarterly report last month. Shares are currently up 7.82% year-to-date.

Levchin gave some insight into consumer behavior over the holiday season, saying Affirm saw a large increase in spending on travel, especially among Gen Z shoppers. He also said his company saw a “big rebound” in spending on sports goods, a category that lagged last year.

Levin said more consumers are enrolling in Affirm’s six month payment plans, which is a good indicator that people are shopping and looking to “stretch their holiday dollars into next year.”

“Our credit numbers are quite strong. So they’re paying their bills back, but they’re looking to stretch their dollar,” Levchin said of Affirm users. “They are price conscious. They’re looking for deals.”