Yahoo Finance’s Brian Sozzi, Julie Hyman, and Brian Cheung speak with Affirm CEO Max Levchin about the company's new partnership with American Airlines, competition in the 'buy now, pay later' space, fintech regulation, and much more.
BRIAN SOZZI: Affirm is going deeper with its partner, American Airlines, for the holiday season. The buy now, pay later outfit has inked a deal that allows consumers to purchase American Airlines flights and pay over time with Affirm. Let's welcome back Affirm's Founder and CEO, Max Levchin. Max, good to see you again here. Walk us through this deal. How does this help Affirm?
MAX LEVCHIN: It's there to help travelers. Lots of people are going to try to go see family and get away, and not everyone is capable of paying for it instantaneously with cash. And a partnership with America will allow them to pay for their flights for over 3, 6, or 12 months.
We're proud to announce that's an exclusive deal with AA.com, and you'll see there. It's, as always with Affirm, has no hidden fees, no late fees, no deferred interest, nothing that should make you feel uncomfortable buying. And so, go out there and shake off, hopefully, the last of the pandemic.
JULIE HYMAN: Hey, Max. It's Julie here. We were just chatting amongst ourselves this morning, and I still think that even though buy now, pay later services have grown to such a degree, I think among consumers there's still not a full understanding. So, if you don't mind, when I, as a consumer, I'm looking at a buy now, pay later option versus a credit card option, is the main difference for my end that I won't have those fees and interest, for that matter, on these payments as I make them?
MAX LEVCHIN: So, it's a great question. I appreciate the opportunity to explain myself. Affirm is unique among the industry in a sense that we don't charge any fees, and that includes not charging late fees. I think majority of the providers can't quite boast that level of consumer friendliness, but generally speaking, buy now, pay later as an idea is that instead of taking a transaction, putting it on your plastic, and revolving on it if you need to pay for it over time, and basically, having compounding interest, you don't.
And in most cases, for example, roughly 1/2 of Affirm transactions have no consumer interest at all, and again, no fees of any kind. Even if there is interest, it's in, I think all cases, certainly in our case, simple, as in the interest doesn't compound into future interest. And again, in our case, it is disclosed and does not change. So, when you find out exactly what your payment plan is, the actual amounts stay the same. Even if you're late, in our case, the price doesn't change, et cetera, et cetera, which fundamentally is about control and sense of security for the consumer.
As consumers sort of decides what fits their budget, they very often think of it in terms of, what's my monthly cash flow impact? If I bring in this many dollars as I earn money, as I pay something over time, or multiple things over time, I want to know that the offsetting debits are not going to put me under. And with credit cards, it's nothing but impossible, just because the math is so complicated, and you're expected to revolve, you're expected to make the minimum payments and just kind of not worry about it too much.
With Affirm, our mission is to bring transparency to the whole idea of buying to pay for things over time and give consumers a sense of control. And that's what we've been doing for the last 10 years. We're sort of invented this industry many years ago now, and continue to deliver on it.
JULIE HYMAN: And Max, just to follow up on that quickly and talking about this partnership with American Airlines. A lot of the people who are still using credit cards are using them because they get additional benefits, right? They get miles, for example. Is there any plan on the part of Affirm or maybe you already offer this kind of a product already, I don't know, that offers additional benefits in addition to just the ability to pay, for example, without these additional fees?
MAX LEVCHIN: So, that's a fantastic question. At our most recent investor event, we actually announced that we are forging into consumer rewards. And so, you'll see us do a lot there. We have already tested cashback with our consumers, and much to good response, which may be unsurprising. So, we'll have a lot more to say on that front.
BRIAN CHEUNG: Hey, Max. Yeah, it's Brian. It's great to speak with you. I wanted to ask just about some of these offerings when you talk about cashback. I think a lot about the banks offering these types of things on their credit cards. What kind of helps buy now, pay later, I imagine, there's a lot of these partnerships, like the one that you're announcing with American Airlines.
But you've heard the likes of Jamie Dimon say that he's scared s-less, I can't say the word, about the buy now, pay later industry. What do you see as the interaction between you and your competitors with the traditional banking industry? Is this set for a crash course collision, at some point?
MAX LEVCHIN: I don't think it's set for a crash course, as I think the great framing just now about sort of buy now, pay later is in the overall industry, last I checked, we represent about 3 and 1/2, maybe now 4% of the overall e-commerce spent in the US. And so, there's a lot of road to go before we start running into both our competition, frankly among the startup universe, as well as traditional providers.
That said, I think traditional issuers of credit, typically revolving credit, are understandably threatened by this idea that you can build a popular new payment offering by way of forgoing late fees, deferred interest, compounding interest, all the sort of things that make credit cards so profitable, but not really great for consumers in the long term.
So, I think that part of Affirm and the entire buy now, pay later industry, has been the premise. Get more control, feel safer, pay fewer fees, don't pay late fees, if you're using it with Affirm. I think that is our competitive advantage.
BRIAN SOZZI: Max, it was an interesting week, I would say, for the card space. You had Bakkt and Mastercard team up for a crypto-linked card. American Express CEO told me he has no plans to come out with that type of card. Where do you see this? Do you see Affirm playing in crypto-backed cards? How do you see that shaking out?
MAX LEVCHIN: So, again, just recently at our investor event a couple of weeks ago, we announced that we actually have a plan to play in the crypto world. And we fundamentally work for ordinary Americans. So, we see ourselves as a toolkit for everyone, but from a point of view of what makes sense for anyone, like my mom and or my brother, neither of whom are in the internet industry. And therefore, our answer to crypto, sort of our foray into crypto, is really all about making it accessible, and easier, and more transparent, like we do with everything else.
So, what it would allow people to do is, we have a savings account-- or actually I should have started there. And you'll be able to store or hold crypto in your Affirm savings account, which I think is a great way of letting those who are crypto curious, who actually want to participate in industry, but don't know where to start, have a very convenient way of starting on that. And so, we'll go there.
I think the idea of building cards for crypto zealots and people who are really, really into it is very cool. That's definitely a much smaller population than that we're trying to serve, at least for now.
JULIE HYMAN: And Max, while we're talking to you about crypto, I may as well ask you where you are in your thinking on it. I know at one time, you were somewhat, if I'm reading correctly, you were more skeptical on crypto. What's your thinking on it, at this point?
MAX LEVCHIN: So, I think the thing that fundamentally changed, and I'm frankly very glad, and that makes the foundation of our strategy around crypto, is it's really transcended this esoteric, cool sort of a digital gold, don't know how it works, but I love the idea, which I think for a time was kind of a domain of crypto libertarians and the like, into something that you are run of the mill registered investment advisor might talk to you about.
Where, hey, you know what? You should put a 1% or 2% of your personal net worth into crypto, because that's a very rapidly appreciating asset. And let's take a little bit of risk there.
So, as crypto, especially kind of more established coins, like Bitcoin, become part of the vernacular in the retail investing industry, I think ignoring it as an asset class, as an investment opportunity, is sort of something you do at your own peril, as a financial industry participant. And so, that's what changed my point of view. I'm still fairly skeptical about a rapidly appreciating asset class being used as a medium of exchange.
So, I don't think it quite lives up to the currency name just yet. Although, you know, obviously, things are changing pretty rapidly, and it's gaining adoption across much wider group of people. So long as it's growing, and is as volatile, frankly, as it has been, I think it's hard to imagine being the primary medium of exchange. As an asset class, it's performed fabulously. And I think people are flocking to it because of that.
BRIAN CHEUNG: And Max, lastly here. What's the regulatory dialogue looking like right now? We know that there's someone new at the Consumer Financial Protection Bureau, Rohit Chopra, who was actually speaking to the House Financial Services Committee yesterday. Spoke a little bit on buy now, pay later.
But there's been some interest from the CFPB and maybe other regulators as well to look into that space. Have you engaged with those regulators? Are you optimistic, pessimistic about how they might approach this kind of new fintech technology?
MAX LEVCHIN: So, generally speaking, I'm a regulatory optimist, in a sense that we've engaged with our regulators, and we have many in every state, as well as federally, from the very inception of the company. I think we literally didn't have sort of fully solidified our name when we already started talking to the regulators trying to explain what is we're trying to do. We have a lot to be proud of.
As I keep on loving to mention, we don't charge late fees, we're fundamentally consumer centric. The thing about not charging late fees, just to make it-- why it's so important, it fundamentally aligns you with the end consumer. If they can't pay you back, we get nothing. And there's not really an opportunity to sort of sneak in a fee or two because we don't do that.
As a result, generally speaking, our regulatory relationships are very positive. We get to show up and say, 10 years, billions of dollars, $0 and 0 pennies of late fees ever, or deferred interest, or anything sneaky. So, having that conversation has been very positive for us.
I spent three years on CFPB's advisory board. We love engaging with smart people and regulatory world. And frankly, this is a new industry and it deserves to have thoughtful regulators paying attention to it, spending time with it. So, I generally look forward to engaging. I think it's been very positive for us.
JULIE HYMAN: Max, thank you so much for getting up early to talk with us this morning.
MAX LEVCHIN: Thanks. If I sounded hoarse. Thank you. Thank you for having me.
JULIE HYMAN: We're used to it ourselves, working these hours. Max Levchin, the Founder and CEO of Affirm. Thank you so much again for joining us.