Affirm CEO Max Levchin joins Yahoo Finance Live to discuss the company's latest ventures in debit cards, crypto, and plans for future growth in the buy now, pay later landscape.

Video Transcript

BRIAN SOZZI: Past few months have been absolutely sizzling for Affirm. Shares of the buy now, pay later platform have surged 80% in the last three months. And it's not too difficult to understand why. The company just scored a major deal with Amazon and will also become a much larger presence for purchases at Walmart. To spice things up just a little bit here, Affirm told investors this week at an event it's working to allow customers to buy and sell crypto directly from their Affirm savings accounts.

Let's check in with Affirm's founder and CEO Max Levchin. Max, good to see you here on this Friday morning. Look, every analyst on the Street that I have talked to, they have been salivating over the financial prospects of your new debit card. When does it launch, more broadly, to consumers? What does the pipeline look like?

MAX LEVCHIN: So one of the funny things about building things that actually exists in the physical world, you're rate limited by how quickly you can bring an awesome product to market. So for the uninitiated, Debit Plus is a card that works with your existing checking account. You don't have to switch your banking relationship. You get this new card from us. You swipe it. You use it the way you normally would.

And with our app, you get a notification every time you transact. If the transaction is eligible to become a buy now, pay Later one, you literally swipe left, and it gets split, and it becomes an Affirm transaction in real time. It's pretty amazing. I literally had dinner at my favorite hummus place last night in Palo Alto, did it, and it was like, ah, magical.

So that said, you have to print these cards. And so we will get, let's call it, several thousand out this year to our very large wait list now. And then starting next year, we'll try to get-- the waiting list is several hundred thousand people, close to a million, and so we'll get as many of those as we possibly can starting next year early.

JULIE HYMAN: Hey, Max. It's Julie here. So obviously a lot of excitement over that new product. Your initial product, of course, has to do with buy now pay later. You have a lot of competition in that space. It has been a very popular space. Why is that? Why has that been so appealing to consumers versus a more traditional credit card?

MAX LEVCHIN: That is a great question. And sort of, you'll see the connection between the Debit Plus card and sort of where the company came from. So first of all, Affirm is 10 years-- 10 years old. And about a decade ago, a bunch of us, but sort of yours truly as well, started to get this really clear sense that the generation that came of age during '08, '09 crisis was just moving away from credit cards because of lack of clarity, lack of sense of control, the infinite fees, gotchas, you know, things like deferred interest where you don't know exactly what you're going to pay. It looks like zero, but it's not.

And so there's this generational shift where people are very skeptical of the value they get from a credit card, and it's real. You bundle things like homewares, and couches, and bicycles into the same financial instrument as you would to buy lunch and a donut, and then you pay interest on everything. It makes no sense. And I think 30 years ago, you kind of get away with it, because people weren't tracking their finances as well. And now you can't.

So buy now, pay later is this unbundling of the credit card, where you get a very specific payment plan for every transaction. You can track. You can see it. And it lives on your phone. It lives online. And you can really tell when you're done paying it off, you know, exactly what you've paid and not a penny more.

In the case of Affirm, you don't even have late fees. And so I think that was the discovery, frankly, that the markets-- we'd like to believe we sort of introduced the category here. But over time, lots of other people realized that credit cards are going and this is coming.

JULIE HYMAN: Are they going entirely, I guess, is my next question? In other words, are we headed towards a post-credit card future? And if so, how quickly could it be here?

MAX LEVCHIN: You know, about five years ago, somebody would ask me this question. I would say, well, so here's the thing. Millennials, Gen Z, young folks, they don't even have a chance to get indoctrinated into this credit card religion. And they take on debit, and then they love it because it's so controlled and it's so simple. And then they realize they have to actually buy more expensive things they have the cash for.

And that's when we come in. And it's probably going to happen for them. But my mom, maybe she'll never give up her credit card. That is no longer true. We just surveyed our user base and people who are not yet aware of Affirm, and the general answer is about 50% of the general population-- so it doesn't matter if you're from the baby boomer generation or Gen Z, half the people are planning to use something like buy now pay later for their holiday shopping.

So it seems to have much broader appeal than even I had thought 10, 5 years ago. So my guess is it's happening very quickly. And we can see this in the growth of our products, and the usage, and the industry itself. Just to set the baseline here, if you look at the penetration of buy now pay later into the US e-commerce, not even regular in-store commerce but just e-commerce, it's less than 5%. And so you can expect it to go very quickly. But we're coming from a very low base, relatively speaking, so expect it to grow very fast as well.

BRIAN CHEUNG: Hey, Max. It's Brian Cheung here. So let's talk about your company's payment structure here. So my understanding is that you used to rely on warehouse lending to support what is essentially a loan through this buy now, pay later program and other products that you have.

Now you're doing a little bit more securitizations. Wouldn't it be easier just to have a bank charter and be able to use the deposits on your balance sheet to do all of this? Or is the challenges that comes with crypto, if you're a traditional bank, kind of something you want to do, which is the reason why you haven't gone down that path?

MAX LEVCHIN: So first of all, you're exactly right about our funding strategy. We started out literally funding out of equity where no one knew what this thing would be like and would it work. And so we put up our own money to fund these transactions. Over time, we got more and more market confidence, expanded into warehouse lines. We now securitize, and the market has given us excellent reception.

I think we think about all these things as enabling factors for product. Fundamentally, we're a product and engineering-led company. That means that when we think of things, you know, what do we do next, it's always in the context of what do we do for our partners, the merchants, and what do we do to delight consumers?

Once we know what that looks like, we ask the question, so what is the best, smoothest, frictionless, most way of bringing that to market? Ultimately, if that requires a different regulatory relationship or such, of course, we'll look at it. But it's never in the context of, well, let's go get regulated as this or not get regulated as that. I think those are-- that's sort of one way of thinking about the world.

From our point of view, at least, you should always figure out how to delight the customer the most, how to bring merchants the most value possible, figure the rest out later. You know, it's very early on our journey into crypto. Ask me again what the exact structure is, I'm excited by what we have to offer there. I think our job is to help our consumers not just spend, but also save money. And so we see crypto as a savings instrument. And we'll learn a lot once we bring it out.

BRIAN SOZZI: Hey, Max, on the topic of crypto, something you talked about at length about in your investor presentation this week, what's the timeline to roll that service out?

MAX LEVCHIN: You know, as a publicly traded company CEO, I have now been fully indoctrinated. I must not promise things that I have not announced broadly. But obviously, the fact that we held an investor event and showed all these screenshots and talked about it very openly, it's relatively nascent in terms of how soon.

BRIAN SOZZI: Fair enough. All right. Let me just end it on this one then. Does it make any sense, just given the competition in the industry, to loosen up some of your lending standards and go and grab and build more market share in this environment?

MAX LEVCHIN: So the short answer is no. Here's why. A big part of our brand promise to ourselves, to our customers, to our employees, to every stakeholder that we have is we're fundamentally going to lend you money. And you're totally right, these things, sometimes they're called buy now pay later, there's something called payment plans, installment loans, whatever you want to call them, it's a pay over time instrument.

You are paying the merchant now so the consumer can pay you overtime later. If you don't charge late fees, if you don't do deferred interest, if you don't sort of got your consumer into paying you a little extra, you are fundamentally aligned with the consumer. If they can't pay you, if they are late, if they're delinquent, if they go into default state, you are going to-- we are going to make no money. We're going to lose money.

And that is good. I see that as a strong positive for our company. That means we are completely aligned with the customer. If we believe you might not be able to make your payments back to us, we should not be lending you money, because we're getting you into trouble, and we would get ourselves into trouble too.

And so our risk management function is something we take enormous pride in. And you can see it in our performance, as disclosed now, is something that we manage very, very carefully and also quite separately from the idea of-- we don't put the gas pedal down and sort of figure it out later. One of the things about lending and about managing risk you learn is you make bad decisions today, you'll pay for them later on.

And so we are very, very thoughtful about it. You know, we do not use loosening of the credit box, as the banking folks might call it, as a way to grow. In fact, we try to track that as independently as we possibly can. That said, one, our numbers have performed extraordinarily well. You can see that in our results. And two, US consumer, at least vis-a-vis Affirm, has performed even better than expected. We are at really, really great levels, both secularly and as we manage them.