Affirm CEO On Fixing America’s Broken Credit System

**SPEAKER_1** (0:00)
Welcome back to The Rundown, interview edition. Today, we are talking to the founder and CEO of a firm, Max Levchin. Max Levchin was a former PayPal executive, part of the famous PayPal mafia, and he founded a firm back in 2012 as an alternative payment option to credit cards. Fast forward to today, the company has grown to over 26 million users, doing over $13 billion in transactions, according to their most recent quarter. So in today's episode, I asked Max why a firm has become so popular, the difference between a firm and credit cards, if a firm is just yet another debt tool with better marketing, and other topics like the health of the consumer. This was a really fun conversation. We had some good back and forth. I think you guys are really going to enjoy it. All right, let's get into it.
Max Levchin, thanks so much for hopping on The Rundown this morning.

**Max Levchin** (0:52)
Thank you for having me.

**SPEAKER_1** (0:54)
Of course. I'm really excited for today's conversation. You know, you are the CEO of Affirm, which is one of the leaders in the buy now, pay later space. I want to start there. You know, buy now, pay later has become very, very popular over the last few years. I want to start with what problem do you think that Affirm is solving? Just big picture, and then we can kind of dive into the details.

**Max Levchin** (1:16)
Sure. Yeah, so I started the company almost 15 years ago, and there's a little bit of a personal and a little bit of a business observation that went into it. And so, 100 years ago, prehistoric times, I started PayPal, and when we took the company public, did really well, went to buy a car, my car loan application was rejected on the spot because my credit score was too low. And that's not an accident. I started a bunch of other companies before PayPal, screwed my rating up, credit rating very badly, by being spotty with my credit card payment. And the thing is, I had no idea it would catch up to me a decade later. And two, I didn't really know at the time that I was doing damage to my credit score because I never really read the fine print. And so this latent memory of credit cards aren't your friends, they feel good on the coming in, but then they can really mess you up going out, sort of stayed with me. And then 15 years later, actually, I was reading a study that showed that the next generation really did not trust banks. It was, I forgot the name, but it was a Viacom-sponsored study that showed that millennials hate all sorts of industries, but they really hate banks because they blame banks, consumer bank products for the collapse of 2009 and the fact that their parents had to really take it on the chin. And so the idea that will, okay, I remember this vividly 15 years prior to this, but I remember what it's like to get run over by a bank product. What if we started a company that just built a more honest, more transparent mousetrap when it comes to consumer borrowing? And so that's the origin story of a firm. And initially, we just had this idea that what if we built a score that would keep up? That when you went from being an irresponsible college student to being a reasonably well-to-do entrepreneur, the credit score would say, oh yeah, like this guy's cool now and auto loan is okay. And we did that, didn't work, because everyone in the industry I talked to would say, yeah, but if you have a cool credit score, why don't you go lend your own money, and then we'll see if it's any good. And so nothing, you know, it's like catnip to entrepreneurs, go lend your own money, find out if you're any good, like never tried, definitely gonna find out. And so we started a company on this premise that we think we can be better at underwriting. We think young people do not want to suffer at these indignities of confusing, weird terms of credit cards, and it might just work. And so at the beginning, it was like, why would anybody use you at the point of sale instead of a Visa MasterCard? And then we would introduce it, and we'd really just market it by saying, hey, we're also available here, you've never heard of us, but we don't do late fees, we don't do compounding interest, every price is upfront, everything you see is what you get, try us. And people would, they're all very young people, they're all millennial consumers. And then our merchant partners in the very beginning of the beta would come back and say, wow, like you guys just added 30% to my sales. And so that was like, okay, clearly this hunch that young people want a better alternative to credit cards wasn't made up, like it wasn't a fever dream. That's, you know, that was about 12 years ago, and now we'll do, you know, on the order of $50 billion, plus or minus of buy now, pay later volume.