Understanding Affirm’s merchant and product fit

Affirm’s flexible pay over-time financing solution is a sensible match for hundreds of thousands of retail business across the U.S., and while we try to make products accessible to as many as we possibly can, there are some businesses we simply may not be able to work with. The reasons vary widely, from business-centric decisions about risk to legal or compliance requirements. 

We understand that it can be frustrating for a retailer to learn we won’t be able to partner. While we want to serve as many merchants as possible, certain products just simply aren’t a fit for our financing company–and it’s important to us, as a company that values transparency to help educate the retail industry on how and why we make these decisions.

Legal and compliance-based decisions

Affirm operations must meet not only federal regulations but also the laws and standards of each individual state we operate in. This means that when individual states differ in how they allow financing to be used, we must operate consistently in accordance with the most comprehensive requirements—and decline to finance those products that are not approved across the board.

The first example of retailers or products Affirm isn’t able to finance is probably an obvious category: Illegal products. This includes things like illegal drugs or drug paraphernalia but also includes medical or recreational marijuana products, the legality of which vary from state to state. Other products that fall into this category that might not be as obvious are items that are counterfeit or pirated, including “knockoff” or lookalike brands, and even pirated music or video content. As part of our diligence process when vetting new partners, Affirm avidly looks out for products that clearly violate legality.

Another set of retailers that can be challenging to partner with are those operating in highly regulated industries. It can be difficult for us to work with businesses that sell products that come under heavy government scrutiny, where it would be difficult to scale legal and compliance verification. Examples of products and services in this space that we decline to support include alcohol, pharmaceuticals, and money services–significant and established industries but ones that just aren’t a fit for Affirm.

Understanding the role of risk in our partnership decisions

Part of Affirm’s success as a financial services company, and the value we add for our merchants is our ability to manage and mitigate risk in lending. The combination of our fraud prevention systems, underwriting technology, and customer service support helps us reduce risk at scale, but we also have to take risk into account when evaluating potential partners.

One such scenario is when we are approached by businesses that have evolving product availability or fulfillment practices, such as those that have yet to ship product, or those that frequently leverage pre-order campaigns.  Another area we avoid is where the likelihood of increased regulation that could impact the business is imminent, This doesn’t mean they aren’t legitimate and genuine businesses but our model isn’t equipped to deal with the possibility of unfilled expectations or a changing business practices. In an event where a business shuts down before delivering the product, Affirm would be obligated to fully refund all consumers who have financed a purchase with that business.

How Affirm’s values impact partnerships

We pride ourselves on being a customer-centric financial services company. Our core values, which include “It’s on us,” “Simple is better,” and “No fine print,” direct every part of our company and operations. They are the reason we don’t charge late fees or allow people to repay their debt with credit cards, and they also dictate the merchants we work with. For example, Affirm would have to decline a partnership if a business isn’t operating in good faith. We want to ensure we’re offering financing to companies that are doing right by their customers. Companies that are involved with high-profile lawsuits, have misrepresented their products, shipping or return policies, or engage in multilevel marketing aren’t the right fit for Affirm.

Similarly, there are a number of products that Affirm doesn’t have a moral objection to, but which we are not able to finance based on our banking partnership model. This could include gambling sites, weapons and ammunition, fireworks, and adult or intimacy products. We don’t pass judgment on anyone wishing to buy or sell these products as long as it is being done safely, legally, and with good intentions–but they aren’t the right match for Affirm as a payment option.

Financial services is a complex industry, governed by numerous (and important)  regulations. Our goal as a company is to build honest financial products that improve lives and to work with thousands of retailers to offer them at scale.  We work each day to make sure we’re doing this with the best possible variety of merchants for Affirm financing products.

About the Author

Daniel Hagemann

Dan focuses on minimizing the risk present in Affirm's merchant relationships. He partners with the sales and client success teams daily to ensure every merchant has an optimal and beneficial Affirm experience.

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