I’m sorry everyone, about Affirm

My comment that it is far too soon to be certain about affirm and its delinquency rates was poorly worded. The do in fact report them, and they are at the moment low. However, affirm’s business represents a new teat from which all grades of consumers can access credit, effectively outside of the ‘usual’ pipelines, which are designed to make it hard for marginal credit risk people to get access to funds.

Affirm has been able to hitch its wagon to the merchants’ neverending need to increase sales, now making it even easier for cash strapped people to spend. There have been many occurrences in the past (sub-prime mortgages, for instance) where similar dynamics were at work. It all seems like a good idea, and it works, until it doesn’t. This is one business where I am not convinced that it is a value add for society, but I emphasize this is a very personal opinion.


I just came across a Twitter thread provides a good overview of what Affirm does and why it has a competitive advantage in the BNPL space: https://twitter.com/InvestiAnalyst/status/144697679360539033…

The thread is posted by Francis-Analyst, who is followed by Muji, InvestingBear, Software Stack Investing, and others. (So presumably a reliable source.)

This thread includes the following description of Affirm from Founder and CEO Max Levin:

Affirm is “software-defined, data-preserving, vertically integrated network”
(Brooklyn 108 here: So it is a vertically integrated network that preserves the all the data the transfers through the network.)

[Summary of Max’s explanation:]
Compared to the existing payment networks

  • Other networks are almost entirely focused on message-passing
  • They are not preserving the transaction data as the payments move through the system.
  • The “data doesn’t stick to the transactions as they move through the system”
  • This is a great missed opportunity

The idea for Affirm:

  • The idea for Affirm has been to connect all the financial dots by preserving the data: from the very beginning when the consumer is forming an intention, through the transaction (when money changes hands), through fulfillment, repayment cycle, etc.
  • Max said:
  • “I think about Affirm as an operating system for applications.”
  • “There is a very large number of applications that can be built on this foundation [operating system]”
  • “…there is so much to build on this operating system.”
  • “There is no name for [this] yet. We think we are paving fundamentally new ground here”

Brooklyn108 here: I find this description much more helpful than the mission statement that is posted on the Affirm investor site. (See below.) I get the sense they are still figuring out how to explain what they are doing, what they plan to do. It seems like they are building a network that will give them a lot of optionality.

I like this description because to me Max is describing a technology company in the financial space, in which BNPL is the first major application. (Just my current understanding. I can relate more to the tech aspect than the banking/loan aspect.)

Another key point from Francis-Analyst:
“A huge part of $AFRM is the data preservation on every transaction that helps make their a) AI risk models better. Data for underwriting is unique to AFRM’s ecosystem b) Understand customer transactions c) better enables them to improved lead generation”

If the other BNPL networks are not preserving the data, then it follows that are not using AI risk models (because no data for the models). If this is the case, then Affirm is operating on a different level than its competitors. (If I am wrong about this, I would love to hear it.)

Max said that the other “payment networks” were not preserving the data. I assume this applies to the credit card networks as well.

Here is the mission statement from the Affirm investor website (https://investors.affirm.com/)::slight_smile:
“Affirm’s mission is to deliver honest financial products that improve lives. With that in mind, we are building the next generation platform for digital and mobile-first commerce, making it easier for consumers to spend responsibly and with confidence, easier for merchants to convert sales and grow, and easier for commerce to thrive.”

In the video that follows the mission statement, Max describes Affirm as “the first payment platform with a moral backbone and consumer-faced mindset.” With a goal to be “far more transparent and honest” than the legacy networks.

Thanks to Saul for sharing his doubts about this company, and for everyone for sharing their input. I am long AFRM, and this process has helped me to think through my conviction in this company. So far, the deeper I get, the more I like the company. The key for me is the big data/AI aspect. To me it seems like a tech company with a lot of optionality. Also, the Founder and CEO, (Max Levin) seems really solid.

I hope this is helpful.