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Module 8: Digital Lending with Max Levchin, CEO Affirm

 
 
 

Module 8 Description

After experiencing tremendous success as a co-founder at Paypal and early stage investor in Yelp and numerous other startups, Max Levchin decided to once again fully commit himself to another financial industry opportunity, founding installment lender Affirm in 2012. To date, Affirm has originated loans to over 4 million consumers, with more than $7 billion of loan volume.

In addition to answering questions about his deep experience founding and scaling companies in consumer and small business finance, Max will also speak to us about the ongoing pressing issue of fraud in the financial industry.

 
 
 

Study Questions

  1. How is Affirm adhering to the “Finance via API” thesis of our class? How is it straying from it (hint: look at website!)?

  2. Affirm is building products for consumers, merchants, and by extension developers (who serve those merchants). If you were Max, which customer set would matter most to you, and why?

  3. When is a consumer better off in an installment-lending scenario than in a credit card scenario? When is the consumer worse off? Without building out a full model, remark on the key variables and tradeoffs.

  4. How might increased market traction of installment plans impact the credit card market in the long run? 

  5. What makes Affirm different? How would you define its core product innovation and competitive advantage relative to JPM and other large, established players? Does this innovation create the foundation for a long-term sustainable business, or will it simply be copied by larger existing players?

  6. Think about Affirm’s decision to fund its loans via warehouse facility (and eventually sell or securitize them), as hinted in the Techcrunch article. What are the benefits and risks of that funding model, especially in the wake of the financial crisis? Is that model sustainable? 

 
 

Reading List

Required

  1. Affirm.com “Homepage, How It Works, Where to Shop, About Us.”

  2. Caro-del-Castillo, Sharda, Letter to FDIC Re: Federal Interest Rate Authority – RIN 3064-AF21 (pages 1-2)

  3. Balogh, Shannen. “Buy Now, Paying Later Startups Are Surging. But Affirm CEO Max Levin Says the Industry Will See a Shakeout as the Pandemic Hits Borrowers.” Business Insider, MSN, 29 Apr. 2020.

  4. Roberts, Jeff John. “PayPal Founder Says Pandemic Will Hasten Decline of Cash.” Fortune, 10 May 2020. (Available behind Paywall)

  5. Clark, Kate. “Max Levchin's Affirm Seeks Capital amid Surge in Fintech Funding.” TechCrunch, 12 Sept. 2019.

  6. Armstrong, Robert. “Tech Start-Ups Go up against Big Banks on Point-of-Sale Lending.” Financial Times, 6 Mar. 2019 (Available behind Paywall).

  7. Megaw, Nicholas, and Chloe Cornish. “Buy Now, Pay Later - the New Debt Trap for Millennials?” Financial Times, 21 Sept. 2018 (Available behind Paywall).

  8. Andriotis, AnnaMaria, and Peter Rudegeair. “Eyeing That Sweater? It's Yours in Four Easy Payments.” The Wall Street Journal, Dow Jones & Company, 29 Sept. 2019 (Available behind Paywall). 

  9. Affirm Press Release. “Affirm Announces New App Enabling Consumers to Shop Anywhere and Split Payments.”