/UPENN-FT-01-HW

Affirm FinTech Case Study

Overview and Origin

  • Name of company Affirm

  • When was the company incorporated? Affirm was found/incorporated January 1, 2012

  • Who are the founders of the company? Max Levchin, Nathan Gettings, Jeffrey Kaditz, and Alex Rampell

  • How did the idea for the company (or project) come about? The idea for the company came about as many modern startups come about...the founders Max Levchine and Nathan Gettings were hanging out and chatting about how the FICO score is a poor representation of credit worthiness. So the thought was to build a better credit score system than FICO. They realized replacing FICO would be unlikely due to its entrenchment and how long it has been around. To do this they would have to build a credit product from the ground up that makes underwriting (quantifying risk) decisions. This process took them down the rabbit hole of ultimately creating product that allows consumers to afford purchases of a number of installments/payments (buy now, pay later) without late fees.

  • How is the company funded? How much funding have they received? The company was initially funded by the founders followed by angels, VCs and now they're a public company.

Business Activities:

  • What specific financial problem is the company or project trying to solve? A better credit score but ultimately their service became a tool to acquire customers for businesses and as a way for consumers to afford purchases over smaller payments.

  • Who is the company's intended customer? Is there any information about the market size of this set of customers? The company has 2 customers the business and the customer of the business. The market size is the size of the ecommerce market in additional to brick and mortar retailers.

What solution does this company offer that their competitors do not or cannot offer? (What is the unfair advantage they utilize?) Affirm has better underwriting models which allows them to make better predictions on which customer and business to extend credit to and how much.

  • Which technologies are they currently using, and how are they implementing them? (This may take a little bit of sleuthing–– you may want to search the company’s engineering blog or use sites like Stackshare to find this information.)

Landscape:

  • What domain of the financial industry is the company in? Consumer Lending & Merchant Financing.

  • What have been the major trends and innovations of this domain over the last 5-10 years? There have been a few trends and innovations in lending and financing. They include: 1. - Easier applications

  • More accurate and faster underwriting.
  • What are the other major companies in this domain? Klarna, AfterPay, QuadPay

Results

  • What has been the business impact of this company so far? The company is making significant strides in its domain with generating over $500M in revenue last year with further growth expected this year. Additionally, they've secured several key partnerships one being the exclusive Buy Now, Pay Later partner for Amazing until 2023

  • What are some of the core metrics that companies in this domain use to measure success? How is your company performing, based on these metrics? There are several metrics used to measure the success of companies in this domain:

  • Number of Customers
  • Number of Merchants
  • Total Revenue
  • Total Transactions
  • How is your company performing relative to competitors in the same domain? Affirm is relatively young in comparison to some of the other BNPL players in the market. Based on research they are 3rd or 4th largest player by revenue volume.

Recommendations

  • If you were to advise the company, what products or services would you suggest they offer? (This could be something that a competitor offers, or use your imagination!). I would recommend looking into creating a marketplace that combines all Affirm supported vendors in one site that provides a one stop shop for customers who want to utilize the BNPL in their transactions.

  • Why do you think that offering this product or service would benefit the company? This would benefit the company by allowing the consumer and client merchant to access more. In the case of the consumer they have more merchants thus products to purchase and in the case of the merchant they'll have access to more clients and purchase spillover.

  • What technologies would this additional product or service utilize? This service offering would require Affirm to develop a web/mobile platform. This can easily be accomplished with readily available technology. Ideally Affirm should use the same technology stack that they are currently using for faster development and launch time.

  • Why are these technologies appropriate for your solution? The suggestion to use the existing technology stack is to allow Affirm to have a faster to-market strategy for their Affirm Merchants Marketplace.