Affirm's Max Levchin Breaks Down How Buy Now, Pay Later Really Works
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Hello and welcome to another episode of the Oddlots Podcast. I'm Joe Wiesenthal.
And I'm Tracy Alloway.
Tracy, it feels like everybody, whether they want to come after the banks, right? There is this effort. So many of our episodes, whether we're talking about crypto, whether we're talking about private credit, whether we're talking about payments, it's this goal, this dream of like, let's chip away at some of these bank businesses or these businesses that were associated with some sort of legacy institutions. The banks, they mostly seem to be doing pretty well still, but there's this dream that they can all be sort of like disintermediated away or that each one of these functions that they do can be better done somewhere else.
Yeah. So let's see. I have been in financial journalism for almost 20 years now, which is kind of crazy. Makes me feel very old. But for as long as I can remember, someone has been trying to either reinvent bank lending or reinvent the payment space. And I guess I can see a few reasons. So like genuinely, some payment architecture is really old fashioned.
Yeah.
Especially in the US where, you know, sometimes you still have to write a check for something, which blows my mind. The US didn't get chips for a really long time, chips and credit cards and stuff like that. But also, if you think about the payment and lending and financial market just in general, it's one of the biggest out there, right? Like you're talking about all the economic activity, basically. And so if you can get a tiny slice of that through interchange or fees, then you can see how people, you know, people are really interested. Interested in that space.
No, completely. And we know that there are a lot of fintech companies for a long time. I mean, some of the most, you know, the earliest internet success stories, period. We're, you know, this is definitely nothing new. And of course, one of the first ever was PayPal, which recognized that with the internet was going to come all kinds of new opportunities for payments and sort of quasi-peer-to-peer, literal peer-to-peer transactions, et cetera. PayPal is still, of course, extremely important part of the payments infrastructure. But yeah, there's so much going on. But to your point, lots of companies have gotten those little slices. And made incredible fortunes.
Yeah, we also did an episode on Buy Now Pay Later a couple months ago. And there are clearly some interesting questions brought up by the expansion of that space. And you and I talked about how wherever you go on the internet nowadays, you get like, you know, probably at least two or three little buttons that offer you installment loans on your purchases. And obviously the concern is whether or not people are taking out credit that they shouldn't necessarily be. There's a big discussion about that and also the transparency of the credit that they're taking out.
Right. And we'll get into this. There are pros and cons, I guess, relative to credit cards. But one thing with credit cards is that there's decades and decades of data on them and we know how they're used and there's really good risk profiling and scores and all this, like credit scoring and all this stuff.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–5:08
2
What is the background and motivation behind Max Levchin founding Affirm?
5:08–21:42
3
How did Max’s early experiences with credit cards shape his view of BNPL?
21:42–35:40
4
What makes Affirm’s underwriting process different from traditional credit cards?
35:40–51:18
5
How does Affirm determine merchant fees and why are they often lower than credit‑card rates?
51:18–55:45
Speakers
7 identifiedMore from Odd Lots
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