Garnet Capital Advisors Blog

San Francisco-based startup Affirm Inc. is harnessing an innovative new approach to lending, which some believe could potentially disrupt loan markets as we know them.

Affirm provides instant credit
The company, which was founded in 2013, provides instant credit to online shoppers so they can make purchases, according to Bloomberg News. Affirm lends money directly to these consumers, so they don't have to use a credit card. Instead of putting it on plastic and potentially racking up fees and interest, individuals incur an upfront charge in exchange for getting the funding they need, the media outlet reported.

To determine how much risk the borrower carries, Affirm considers the cost of the item, personal data and social media profiles, the media outlet reported. This differs from the traditional reliance on credit scores used by most lenders. The startup adds an additional layer of security by sending text messages to potential borrowers' mobile phones.

Consumers who want to use the service can simply supply some basic information like their name and phone number, according to Bloomberg. After Affirm obtains approvals and verifications, it gives the user the needed funds.

Company built to last, says CEO
Max Levchin, CEO of the San Francisco-based startup, is very optimistic about his company. The entrepreneur, who co-founded PayPal and served as its chief technology officer, boasted that Affirm has lasting power, Bloomberg News reported. 

"Financial-services companies - for better or worse, they learned how to be here," Levchin stated during an interview at Bloomberg News headquarters in New York. "In aspiring to leaving a mark, you want something that sticks around."

He certainly isn't the only one who has faith in the startup, as Levchin said at Bloomberg's Next Big Thing Summit that Affirm recently raised $45 million. While that success lies in the past, the CEO also commented on the future.

Affirm wants to change world of lending
Levchin asserted that his startup could make drastic changes to consumer finance as we know it, according to the news source. He stated that Affirm could make it so consumers no longer need credit cards.

"It's an attempt to completely reinvent consumer finance," Levchin said at the Summit.

He is certainly not the only one who believes there is substantial room for innovation in lending, as RBC Capital Markets analyst Jason Arnold told Bloomberg News that more traditional financial services firms have not kept up with the needs of consumers who either don't meet specific criteria or have a low credit score.

Affirm may have another key consideration on its side, as Levchin emphasized that his company appeals to a wide range of young people, according to Bloomberg.

"Millennials love it," Levchin stated, the media outlet reported. "Sixty percent of Millennials say they don't trust their credit card. We think we've come up with a product to address that market."