Affirm

Overview

Affirm is a U.S. buy-now-pay-later lender founded in 2012 by Max Levchin, a co-founder of PayPal, to offer small loans to people without credit histories or savings accounts (Reuters). It provides interest-free installment options at online checkout as well as personal loans and savings accounts, and by the time of its IPO it was working with more than 6,500 merchants including Shopify and Peloton, having recently expanded into Canada through the acquisition of PayBright (Reuters). Its investors have included Peter Thiel’s Founders Fund, Singapore’s GIC sovereign wealth fund, Spark Capital, Fidelity, Lightspeed Venture Partners, Khosla Ventures — and Shopify itself (Reuters).

The blockbuster IPO

Affirm went public on January 13, 2021, in what was then the largest U.S. listing of the year. It priced 24.6 million shares at $49 apiece — above its target range — raising $1.2 billion, and the stock closed its first day at $97.24, a 98% pop that valued the installment lender at over $23 billion (Reuters). Levchin framed the listing as a branding move as much as a financing one, telling Reuters the company had reached “the precipice of becoming a known brand among both the investor community, and consumers and merchants” (Reuters). The debut came as pandemic e-commerce was accelerating BNPL adoption: Affirm reported $174 million in revenue for the September 2020 quarter, up 98% year over year, though it still posted a $15.3 million loss (Reuters).

Months later, Affirm tied its checkout button to the largest e-commerce platform in the U.S. In August 2021 it announced a partnership with Amazon to make its buy-now-pay-later service available to select customers on purchases of $50 or more, with a broader rollout planned (Reuters via Gadgets360). Shares surged 43% on the news. The economics Reuters described are the core of the BNPL model: Affirm charges merchants a fee to offer point-of-sale loans that shoppers repay in installments (Reuters via Gadgets360).

From market darling to regulated lender

The regulatory arc arrived within months of the IPO. On December 16, 2021, the Consumer Financial Protection Bureau ordered five BNPL firms — Affirm, Afterpay, Klarna, PayPal and Zip — to turn over detailed information about their industry practices (PYMNTS). Director Rohit Chopra called BNPL “the new version of the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but gets the debt immediately too,” and said the bureau was concerned specifically with data harvesting, regulatory arbitrage, and accumulating debt (PYMNTS).

The inquiry’s findings, published the following year, gave the agency its ammunition. The CFPB found the five providers had originated a combined 180 million BNPL loans in 2021 totaling $24.2 billion — a more than 200% increase from 2019 — and flagged the lack of standardized disclosures, the risk of consumers becoming overextended across multiple providers, and the fact that BNPL data largely doesn’t reach credit bureaus (The Hindu). In September 2022 the bureau said it would issue guidance or a rule to align BNPL standards with those of credit card companies and begin supervisory examinations — a shift Chopra framed as defending the U.S. separation of banking and commerce as “big tech-style business practices” moved into payments (The Hindu). By then the market had already repriced the sector: Affirm’s shares were down more than 75% on the year (The Hindu).

What this profile does not claim

This profile does not claim current figures for Affirm’s merchant count, loan volume, revenue, or profitability — none were verified from fully-read independent sources at the research date. It does not claim the CFPB has finalized BNPL rulemaking or begun examinations since the September 2022 announcement. The Amazon partnership is described only as announced in August 2021; its current scope was not verified. Investor names are those Reuters reported at the time of the IPO and may have changed.