Max Levchin

So between the time we went into lockdown and government started printing stimulus checks, we were very much in this

what's going to happen to us?

Like, okay, so people obviously get to lose their jobs because restaurants are closing down or, you know, people are being told to stay home.

And so we have to plan for that.

And then 22 and then a little bit of the extreme hike in the interest rates had its consequences.

So we've had a bunch of blips.

And every single time, we didn't know what to expect, but we have two things to lean on, which has served us really well.

One is

Because we're so obsessed for good reason with transparency, every transaction is explicit.

You don't just get to swipe the affirm card or click and go.

You have to go through a full underwriting process.

Every transaction we write is fully underwritten in the moment in real time.

So we get a chance to say, hey,

we're really not sure it's a good idea for you to borrow and we'll do the best we can to say yes we'll ask you for additional information if we don't understand who you are we wouldn't just say no thanks we'll say could you please log into your bank account so we can see your cash flow so we'll go very far to say yes but the answer is no right now we will say no and so we're able to control as i say in lending our front book uh whatever difficult things are coming ahead we can adjust the front book coming in the thing about the back book which is always the you know you've made a bunch of loans and suddenly there's a recession and then you have three years to deal with it

The half-life or the average half-life of our loan is about four and a half months.

And so no matter what hits us on the front, there's not a whole lot of time it takes for us to make the back book basically be the front book.

And so as a result, because we have such a short duration in our loans,

We have the capacity to reshape the the back book quite quickly and are not worried about having to react.

So it takes monitoring, takes automation, takes good underwriting.

So all the things that make this kind of thing challenging are there and we have to be very good at it every day.