Affirm’s CTO talks about the transparency and technology that makes BNPL possible

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BNPL not new concept; it just took off in recent years and became much more mainstream.

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“Buy Now, Pay Later” allows people to do exactly what its name suggests – buy something and pay for it later. The difference between BNPL and credit cards is that instead of charging the full amount of the purchase on the card, consumers can choose to pay for the item in installments.

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However, there are some who argue that BNPL is just another form of debt, which could lead to a debate about whether the companies that allow it do it responsibly. In the case of Affirm, one of the biggest players in the space is co-founder Max Levchin (who also founded PayPal). was vocal about what he describes as a “mission-oriented” approach.

Ukrainian-born Levchin founded Affirm in January 2012. The fintech company went public in 2021, and while it’s trading well below its 52-week high (what stock isn’t?), Affirm is valued at almost $9 billion today, and its executives remain optimistic about the company’s future.

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TechCrunch sat down with Libor Michalekpresident of technology at Affirm to understand how the company differs from many competitors, what makes its technology and strategy unique, and why he believes using BNPL is so much better than using a credit card to pay for purchases.

(Editor’s note: This interview has been edited for length and clarity.)

TC: I grew up in an installment era where you could pay for an item in installments but had to wait to take it home. So when I heard about the BNPL, I was intrigued. What do you think makes Affirm stand out?

We have an idea of ​​a vertically integrated stack where we can handle the entire point of interaction – this really gives us more visibility into the client in the transaction and allows us to accurately guarantee.

Libor Michalek: Our main task is to make sure that the client is right. And this is really embodied in this idea of ​​reconciling our interests with the interests of the client. Therefore, if they receive the unexpected or undesirable, then we share the negative consequences.

The second pillar for us is the creation of modern technologies that allow us to do this. How to deliver a financial product with no late fees, no gimmicks and deferred interest tricks? What it’s really about is being able to access real-time data, deliver it over the phone and do it on real-time e-commerce sites, and then put it all together to make real-time decisions and communicate those decisions to the customer. .

Another advantage is the scale of our sales network. We work with 170,000 merchants, expanding our ability to provide access to à la carte credit wherever the customer may want it and need it.

I recently learned that Affirm (and other BNPL players) sometimes charge interest, but often at a lower rate than traditional credit card providers. Tell us more about how these decisions are made – how do you decide who gets interest and who doesn’t?

For us, the most important and biggest difference is that, unlike a credit card, the customer knows how much interest in dollars he is going to pay for this purchase. They don’t have the option to pay more for this purchase, and they’ll know about it before they click.

We will make sure to inform them of this in the form of an interest rate, as required by law, but also in dollars and cents. Often people are surprised when I tell them that a $1,000 purchase at 15% is actually $83 due to depreciation schedules. BUT calculator on our website allows you to play with all these numbers.

I think the transparency part is pretty key because I feel like with credit cards you are really at risk – depending on how long it takes you to pay, or what your minimum payments are – how much you pay in interest, potentially varying over a wide range. We have a fixed amount, which is communicated to the client in advance.

And even if they miss a payment, there are no late fees and nothing is eliminated in any way that could lead to a different outcome. In fact, if they pay early, the number may be lower, but it will never exceed the figure we give them.

How many people can typically use BNPL through Affirm without being charged interest?

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