Affirm, a lending startup led by PayPal cofounder Max Levchin, wants to make it easier for millennials to get credit when they’re actually shopping in stores. The company is rolling out real-time credit scoring to let customers borrow money on the spot to make a one-time purchase.
Essentially, Affirm customers will be applying for microloans. Using a variety of data sources, from traditional FICO scores to social media profiles, Affirm hopes to make better lending decisions. As well as cutting down on bad debt, that means it can also offer decent interest rates, in some cases, as low as 6% rising to 30% for its riskiest customers.
If this sounds a lot like credit cards, that’s because it is. Affirm says that a major difference between it and credit card companies is its focus on transparency. In an interview with Fast Company, Affirm’s director of marketing Ed Lin said that Affirm makes it explicit how much the customer will have to pay overall and per month. What’s more, it doesn’t charge late fees.
Affirm’s been offering instant credit in partnership with e-commerce retailers since 2014, but a new partnership with First Data subsidiary Clover, a digital cash register, allows it to bring the technology to physical retail stores too.
Affirm’s new product is trying to bridge the gap with a generation that is just not that interested in credit cards. Creditcards.com says that 36% of Americans between 18 and 29-years-old have never had a credit card. A recent study from mobile banking startup Chime said that 7 out of 10 millennials prefer debit cards over credit cards. Affirm’s own data says that millennials prefer debit cards and even cash before using a credit card. Meanwhile, students are finding out that their credit scores just aren’t good enough for credit cards, thanks, in part, to their student loan debt and lack of credit history.
Investors are certainly buying it. So far, Affirm has raised $320 million since it was founded in 2013 from a who’s who of venture capitalists, including Andreessen Horowitz and Khosla Ventures.