April 12, 2017: Affirm issued its 1 millionth consumer installment loan.
In contrast to traditional revolving credit products, where hefty fees come hidden in the fine print, and compounding interest can quickly cause a consumer’s finances to spiral out of control, Affirm lets shoppers pay for purchases over time with simple-interest loans that are free of any penalty fees – annual, late, deferred or otherwise.
The 1 millionth loan milestone caps record month-over-month loan volume in the quarter ending March 31, 2017. Volume of loans through Affirm more than tripled in 2016, growing to hundreds of millions of dollars. At the same time, the number of retailers offering Affirm’s services have grown from just 100 at the end of 2015 to over 900 today.
“Affirm’s growth validates a clear market demand for fair and honest financing,” said Levchin, Affirm’s co-founder and CEO. “Traditional lenders have profited from unfair practices for far too long. Deceptive products such as deferred interest actually hurt the most vulnerable of consumers and are preventing them from getting access to fairly priced and transparent options.”
Credit card fee income is expected to top $100 billion this year, up 6.5% from 2016, according to R.K. Hammer, a privately held bank card advisory firm. And CreditCards.com just announced that the average card annual percentage rate ticked up at the end of March to 15.63% — the highest it’s been since the company began tracking rates 10 years ago.
Meanwhile, recent studies on credit usage have depicted consumers – especially Millennials – as debit and credit card averse. For example, in a recent Affirm survey of more than 1,000 people between the ages of 22 and 44, 87% said they want a way to pay for purchases over time that isn’t a credit card.
That desire is driven primarily by the uncertainty that credit cards bring to shopping. Over 60% of respondents said they are moderately, very or extremely worried about getting into debt. Almost one-third stated that they are fearful of not knowing how long it would take to pay for their purchases. Nearly two-thirds said they have a general fear of being in debt. And three out of four who have carried a credit card balance said before they buy something with a credit card they worry about how much their purchases will actually cost.
And with good reason. According to a new CreditCards.com analysis, a person with the average card debt load — about $9,600 — making minimum monthly payments could end up paying more than $11,615 in extra interest over the term of a loan: more than they ended up borrowing in the first place.
For retailers, there is little risk in offering Affirm financing to customers, because Affirm pays retailers in full at the time of settlement, and takes full responsibility for fraud, chargebacks and loan defaults. On average, retailers that offer Affirm financing see order values increase by 75%, site-wide conversion rates increase by as much as 20%, and revenue per visitor increase of more than 10%.
“At Casper we pride ourselves on providing a transparent and gimmick-free shopping experience,” said Philip Krim, co-founder and CEO of Casper, the sleep company from whom the millionth Affirm loan was issued. “Affirm allows us to build on that with honest financing. We’re proud to have Affirm as our longstanding partner and to have issued their millionth loan.”
“What most surprised me after implementing Affirm were the comments in our net promoter score surveys,” said John Scrofano, CEO of Garmentory, an online marketplace connecting shoppers to emerging fashion designers and indie brick and mortar boutiques. “We send one after every purchase to understand what’s standing out, good and bad. No one ever used to mention payments. Now we get customers replying just to tell us how much they love the Affirm payment option. It’s amazing.”