How Affirm Helps Consumers
Some financial products have historically benefitted at consumers' expense: prolonging and maximizing time in debt and charging fees without also adding value. Affirm took a long, hard look at the old system and knew that there had to be a better way, so we built it.
Affirm empowers consumers by offering a transparent and flexible way to pay over time with no late or hidden fees. We provide consumers with increased purchasing power, and greater control over managing their finances. We enable consumers to pay at their own pace in biweekly or monthly payments, rather than entirely up front. Unlike many credit cards and other Buy Now, Pay Later options, Affirm doesn’t charge any hidden fees, not even late fees. The interest-bearing transactions we facilitate only include simple interest. This means that the interest is based upon a fixed percentage the consumer agrees to up front at checkout and it never compounds. Consumers who choose Affirm never owe a penny more than what they agree to at checkout, even if they're late or miss a payment.
How Affirm Helps Merchants
Affirm helps merchants of all sizes drive growth and better serve their customers. We’ve proven that we can increase sales and introduce new consumers to our merchant partners. That’s why our partners include household-name brands across home and lifestyle, fashion, beauty, travel, fitness, auto service and parts, and more. This network is further bolstered by the Affirm app, which gives consumers a convenient way to use Affirm as an omnichannel payment method, while providing a marketplace for merchants to reach consumers.
How Affirm Makes Money
Affirm’s success is fundamentally aligned with consumers and merchants. We win when they win.
- Affirm generally earns revenue from merchants when we help them facilitate a transaction. This is commonly referred to as our merchant discount rate.
- We generate revenue through the simple interest-bearing transactions we facilitate on our platform.
- Affirm earns interchange fees when consumers use our virtual card over established card networks.
- We also sell a portion of the assets originated in our platform to third-party investors and recognize a gain or loss on the sale of these loans.
- We make money, by providing loan services on behalf of third-party investors that have purchased consumer loans from us. Affirm never sells servicing rights to outstanding consumer balances so that we control the end-to-end consumer experience, even in delinquency.
- Because we don’t charge any late fees, our success is fundamentally aligned with consumers successfully managing their finances. Our partners are required to treat Affirm consumers with the same level of respect and quality of service that we maintain for ourselves.
Affirm by the Numbers
How it Works: Responsibly Expanding Access to Credit
Our underwriting models assess a consumer’s ability to repay before making a real-time credit decision. Our models consider data beyond just traditional credit scores, including transaction history and credit usage. This approach enables Affirm to responsibly expand access to credit to a wide segment of consumers, including those whose traditional credit scores may not fully represent their creditworthiness as a borrower.
The nature of credit cards makes it all too easy for consumers to fall (or get left) behind. So we flipped the model on its head. We underwrite each transaction individually and—by never charging late fees—we do not profit when consumers fall behind. Our success is fundamentally aligned with our consumers’ success.
- Affirm’s 0% APR offers have no deferred, hidden, or surprise interest or fees, ever.
- Affirm’s pay-in-4 solution, Split Pay, is always interest-free.
- We also enable eligible consumers at select merchants to pay over time at 0% APR from 6 weeks to 60 months.
- Interest rates range from 0–30% APR, below the 36% national military lending cap rate that has been supported by consumer advocacy groups and bipartisan members of Congress.
- Every transaction is underwritten individually. Payment options, including the length of term and interest rate, are determined by a combination of the merchant, the purchase amount, the pay-over-time program the consumer chooses, and our underwriting process.
- Facilitating simple interest-bearing transactions enables us to address more of our consumers’ and merchants’ needs responsibly. Simple interest means the interest is based on a fixed percentage that never compounds, so consumers never owe a penny more than what they agree to at checkout.
- All Affirm consumers to whom credit is extended receive Truth in Lending disclosures for all our products, even when it is not required. This ensures that consumers receive consistent and transparent disclosures.
Regulatory Oversight and Approach
Affirm was purpose-built from the ground up with core values of honesty, transparency, and putting people first. By aligning our interests with those of consumers, Affirm has strived for our policies to represent best practices in consumer protection and regulatory compliance since inception. Our approach of putting what is best for consumers first is embedded across our products and is an essential part of our company’s culture. Our founder and CEO, Max Levchin, was a member of the Consumer Financial Protection Bureau’s consumer advisory board from 2015 to 2018. We have actively engaged with regulators and policymakers as part of our mission to improve lives and meet the needs of consumers and merchants, while ensuring compliance with applicable laws and regulations.
Affirm is subject to regulatory supervision and oversight, both directly and indirectly, by way of our partnership with our originating bank partners and under federal and state laws and the laws of the states in which we operate. This also includes licensing in states that require licensing of our interest-free pay-in-4 product with no late fees, as well as servicing and collection licenses required of us and our vendors. For more information on our licenses, see: Licenses, Notices, and Related Disclosures.
The laws to which we are or may be subject to include but are not limited to:
- Truth-in-Lending Act and Regulation Z
- Section 5 of the Federal Trade Commission Act
- Section 1031 of the Dodd-Frank Act
- Equal Credit Opportunity Act and Regulation B Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, and Regulation V
- Fair Debt Collection Practices Act and Regulation F
- The Telephone Consumer Protection Act
- Gramm-Leach-Bliley Act and Regulation P
- California Consumer Privacy Act and other data protection laws and regulations, such as EU General Data Protection Regulation
- Holder Rule and equivalent state laws
- Electronic Fund Transfer Act and Regulation E
- Electronic Signatures in Global and National Commerce Act Military Lending Act
- Servicemembers Civil Relief Act
- The Coronavirus Aid, Relief, and Economic Security Act
Many states and local jurisdictions have laws analogous to, or in addition to, the laws listed above. We support efforts, including regulation, that promote transparency for consumers while providing the choice to utilize flexible and transparent solutions to pay over time. We are committed to engaging with all stakeholders as we continue to increase access to responsible financial products and meet consumer and merchant needs in the future.
Sustainably Advancing Our Mission to Improve Lives
Affirm strives to apply the same transparency and value we provide to consumers to our environmental, social, and governance (ESG) efforts. Since Affirm’s founding, our mission has guided our work to build a great, growing, sustainable business that stands the test of time. We are united by our commitment to improve the lives of consumers, to help our partners grow their businesses, and to deliver lasting value to the communities in which we operate, starting with our special team of Affirmers. To achieve our objectives, we embrace a set of values that guide how we work.
Affirm believes that access to responsible and affordable credit products is a key contributor to the financial health of consumers, and drives broad-based financial inclusion. Affirm offers products that promote access and opportunity for millions of Americans, especially low and moderate income (“LMI”) borrowers that would otherwise be left vulnerable to predatory lenders and high-interest-rate products. In fact, more than one-third of our overall volume for the 12 months ending December 31, 2021 has gone to LMI customers*.
By looking at consumers as more than just their credit score, our underwriting is able to responsibly expand access to credit to more people, including those whose traditional credit scores may not represent their worthiness as a borrower. This provides critical access to honest and transparent financing to consumers who need it the most, without ever paying for hidden or late fees. Importantly, Affirm underwrites each and every transaction individually in order to assess a consumer’s ability to repay. We do not extend access to credit to consumers that we don’t believe can be repaid because we do not profit from their mistakes.
*36% of total loan volume originated between 1/2021 and 12/2021 has gone to borrowers with a stated income lower than 80% of the median household income according to HUD FY2020 limits. Median household income is determined at the zip code level in metropolitan areas defined by HUD and at the state level for zip codes falling outside of these metro areas.
Social Impact / Affirm Cares Employee Foundation / Employees and Culture
We empower people, businesses, and communities by promoting financial health, literacy, and inclusion.
The Affirm Cares Employee Foundation is an Affirm employee volunteer-led 501(c)3 non-profit established by Affirm in late 2019. The Employee Foundation aims to make a positive impact in the communities in which we work and live by sharing our expertise and funding across three impact pillars: financial literacy and inclusion, technology training and education, and vibrant communities. Since its inception in late 2019, the Affirm Cares Employee Foundation has raised and awarded grants of over half a million dollars to local community non-profits. Read more here.
Diversity, Equity, and Inclusion (DEI) at Affirm
At Affirm, we believe that diversity, equity, and inclusion are vital. We embed DEI into all processes, programs, and structures at Affirm—from how we conduct business to how we hire, develop, advance, and retain talent.
- 75% of Affirm’s board of directors are from underrepresented groups
- 3 female directors, 2 male directors identify as Asian or Black
- 1 director identifies as LGBTQIA+
- 50% of Affirm’s executive leadership team are women
- Over 2,100 of Affirm’s merchant partners are certified as Women-, Veteran-, or Minority-Owned businesses, as of the quarter ending March 31, 2022
- Take an in-depth look at our workforce demographics, goals, accomplishments, and future plans in our 2021 DEI report
Vision, Mission, and Values
Vision: Affirm provides the best way to buy and sell.
Mission: Our mission is to deliver honest financial products that improve lives.
Investing in our People
We apply best practices that align with security industry standards for protecting personal information. Our policies safeguard the collection, use, and disclosure of information. We use a variety of methods to keep our network secure and data safe. More information can be found here.
When consumers share personal information, it’s transferred with TLS 1.2 or higher, a cryptographic protocol, then stored with AES 256-bit or higher encryption at rest.
We store encryption keys at an off-site facility. Access to customer data requires multi-factor authentication and is restricted to authorized personnel.
We actively manage our environmental impact across all areas of our operations. This includes practices and partnerships focused on addressing climate change, sustainably managing resources, and mitigating our environmental impact.
- Gold-certified LEED headquarters
- Certified Green Business of the City and County of San Francisco
- Requirements include: employee education, reducing waste footprint and increasing diversion rate, toxics reduction, green purchasing, and resource conservation
Sustainable Food Practices
- Saved over 19,000 pounds of produce that would have gone to waste and over 109,000 gallons of water, reducing our carbon footprint by +65,000 pounds of CO2e
- Partnered with Good Use juice to reduce waste by using only “ugly” and surplus fresh produce that otherwise would have been disposed of in a landfill
We prioritize company-wide engagement, including information sessions, volunteer events, panels, and regular updates to educate employees on the importance of sustainability in their daily lives. Prior to becoming a remote-first company, the vast majority of our sustainability efforts were focused on waste management and water conservation. Those efforts contributed to saving:
- +540 pounds of waste from going into landfills each year
- +500,000 disposable dishes from going into landfill
- +116,000 pounds of carbon dioxide from going into the atmosphere
- +80,000 gallons of water each month
- Increased our waste diversion rate from 80% to 90%
- Partner with TerraCycle to reduce waste ending up in landfill and to ensure proper recycling of food and beverage and PPE products in our offices
- Partnered with DishCraft to implement durable serviceware, replace compostables, and use grey water to clean dishes before they were run through a sanitation solution
Cautionary Note About Forward Looking Statements
This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. All statements other than statements of historical fact are forward-looking statements, including statements regarding: our strategy and future operations; our future financial position, gross market value, revenue, transaction costs, operating income, provision for credit losses, and cash flows; and general economic trends and trends in the industry and markets. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Risks, uncertainties and assumptions include factors relating to: our need to attract additional merchants and consumers and retain and grow our relationships with existing merchants and consumers; our need to maintain a consistently high level of consumer satisfaction and trust in our brand; the concentration of a large percentage of our revenue with a single merchant partner; our ability to sustain our revenue growth rate or the growth rate of our related key operating metrics; the highly competitive nature of our industry; risks relating to our agreement with one of our originating bank partners; the risk that our existing funding arrangements may not be renewed or replaced or our existing funding sources may be unwilling or unable to provide funding to us on terms acceptable to us, or at all; our ability to effectively underwrite loans facilitated through our platform and accurately price credit risk; the performance of loans facilitated through our platform; risks associated with changes in market interest rates; risks relating to our securitizations, warehouse credit facilities and forward flow agreements; the impact on our business of general economic conditions, the financial performance of our merchants, and fluctuations in the U.S. consumer credit market; our ability to grow effectively through acquisitions or other strategic investments or alliances; risks associated with expanding our operations internationally; the potential impact of any cyberattacks, misconduct, computer viruses, or physical or electronic break-ins that we might experience; risks associated with our business being subject to extensive regulation, examination, and oversight in a variety of areas; and other risks that are described in our Annual Report on Form 10-K for our most recently ended fiscal year and in our other filings with the Securities and Exchange Commission.
These forward-looking statements reflect our views with respect to future events as of the date hereof and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. The forward-looking statements are made as of the date hereof, and we assume no obligation and do not intend to update these forward-looking statements.
Payment options through Affirm are subject to eligibility and are provided by these lending partners: affirm.com/lenders
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