10-MINUTE TAKE: Affirm

This is a compressed version of Scottish Mortgage’s interview with the buy-now, pay-later service’s chief executive and co-founder Max Levchin. Listen to the full episode here. Affirm offers shoppers a transparent alternative to credit cards. It tells consumers upfront what monthly charge they face, promises no late fees or hidden charges, and in many cases offers a 0 percent interest rate. Levchin tells Scottish Mortgage Investment Trust manager Tom Slater what drove him to create the business and why it has an edge over rivals. Background: Scottish Mortgage first invested in Affirm in 2019, when it was still a private company. Today, the listed business provides credit to millions of customers across the US, Canada and the UK when they make online and offline purchases. It now has its sights set on further expansion and is taking a greater share of business away from the incumbents in the credit card industry. In this podcast, Levchin reveals how he came to build Affirm after his prior success at PayPal, Affirm’s appeal to merchants and consumers, and why its underwriting technology gives it an enduring advantage. Timecodes: 00:02 Introduction 00:56 Max Levchin interview begins 01:03 A transparent alternative to credit cards 01:24 Lessons from PayPal 02:55 A painful credit card experience 05:50 How Affirm works 08:35 Underwriting data provides a ‘powerful moat’ Glossary (in order of mention): Point-of-sale lending: Credit offered at the moment a customer buys something, either online or in a shop. Network effects: The phenomenon whereby a product or service becomes more valuable as more people or businesses use it. Charge-off: When a lender writes off a debt as unlikely to be repaid, usually damaging the borrower’s credit record. Delinquent/delinquency: A loan or credit account becomes delinquent when the borrower is late making required payments. IPO: Initial public offering – the process by which a private company lists its shares on a public stock market. Accrued interest: Interest that has built up over time on a loan or balance. Underwriting: A lender's process of assessing whether to grant credit to a borrower, and on what terms Competitive moat: A durable advantage that makes it hard for competitors to copy or overtake a business. Check the podcast description to ensure this content is suitable for you. Your capital is at risk. Presenter: Claire Shaw Executive Producer: Leo Kelion Line producer: Jessica Rooney Broadcast Technician: Samual O’Hare Editor: Jody Black