What are credit cards all about? If you said, “Payments – duh,” you’re only half right. The whole point of buying things on credit, is to give individuals more control over their household cash flow by allowing them to buy the things they need and want to buy over time.
Affirm Head of Product Jack Chou, a recent transplant from Pinterest and formerly of LinkedIn, Google and Oracle, says that today, credit products must do better.
“If you think all the way back to how credit as an idea actually started,” said Chou, “it’s really about the merchant and the consumer not letting the cash the person has on hand today get in the way of a great relationship.”
Chou contends that over time, we’ve gotten away from that and in some cases, it seems that some iterations of modern credit too often serves the issuer more than it does the borrower. That can result in some consumers actually losing control of their financial situation, he believes, as a result of hidden fees and disclosures buried so deep that they never see them, much less understand what they mean.
“We think in many ways, that some credit products are really broken,” Chou said. “As a device to pay for things over time, they may not be aligned with consumers’ interests and can be set up to benefit from consumer missteps.”
Affirm was founded by Max Levchin in 2012 to help to remedy that merchant-consumer relationship by giving online shoppers an alternative to traditional credit cards and retailer-branded installment loans when shopping online. For the 1,000 merchants that have already integrated the product into their product and checkout pages, Affirm pays the total purchase amount to the merchant at the time of the sale, and the consumer then pays back Affirm in equal monthly installments – minus the ballooning interest fees that often accompany promotional financing offers.
Today, Affirm is taking it one step further with the release of its consumer-facing mobile app, available from both the Apple Store and Google Play. The app allows consumers to use Affirm on any eCommerce site they shop, regardless of whether the merchant has integrated with Affirm or not.
When shopping on the web, mobile app users can log onto the Affirm app, indicate the amount of the purchase they are making, and at what merchant they are shopping. Affirm will extend credit to that individual via a network-branded one-time use virtual card that the user can then use at that merchant’s web site for only that purchase. This is all done in a matter of a few seconds with a few quick swipes and taps.
Chou said that despite the ease of using the product, beta testers said that the experience felt very intentional and deliberate. There’s just enough friction to make them really step back and think about whether this is a purchase they want to make, Chou said, and if the answer is “no,” that’s a win for Affirm, too, he said.
Honest finance is about consumers also being honest with their comfort level in taking on additional credit. The entire point, said Chou, is to give control back to the customer, improving not only their financial health but the emotional and psychological wellbeing that are closely tied to it.
“Part of financial health is knowing when you can’t afford to make a purchase,” Chou emphasized.
The mobile app, Chou said is Affirm’s first foot into being a direct to consumer brand – something that felt like a natural step given the brand affinity that users have with Affirm and the opportunities they say Affirm has given them to buy what they want in a way that feels authentic and transparent.
It’s also not likely to be its last.
Chou said Affirm doesn’t want to be just a platform or a service. Improving financial literacy is the company’s true mission, which each product and service along the way must support.
For instance, the company is working on a redesign over the coming weeks to help customers understand how much it is wise to spend based on their credit history and helping consumers answer basic question such as the implications of using credit and the impact to their financial lives if they do.
“There’s a lot we want to do besides lending,” said Chou. “We’re building this company for the long term, and in the long term the aim is to really help people with their personal financial lives. Some of that involves lending them money in a way that is more transparent. Other aspects of that will be built out over time.”
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