Affirm's Max Levchin Breaks Down How Buy Now, Pay Later Really Works

Max Levchin probably knows as much about online payments as anyone. He was part of the original "PayPal mafia" before going on to become co-founder and CEO of Affirm, the $22 billion player in the Buy Now, Pay Later industry that's hoping to disrupt the incumbent credit card companies. While BNPL is booming, there is still a lot of confusion about how it works, how it makes money, and how transparent its activities are. On this episode, we speak with Max about why he started his company, and why he believes that BNPL offers a superior product to traditional forms of payment and credit. We also discuss the current state of the economy, AI, and what he sees as the role of crypto in payments.

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.

Speaker 2 (00:18):
Hello and welcome to another episode of The Odd Laws podcast.

Speaker 3 (00:21):
I'm Joe, wasn't Thal.

Speaker 4 (00:23):
And I'm Tracy all the way Tracy.

Speaker 2 (00:24):
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.

Speaker 5 (00:46):
The banks.

Speaker 2 (00:47):
They mostly seem to be doing pretty well still, but
there's this dream that they can all be sort of
like disintermediate away, or that each one of these functions
that they do can be better done somewhere else.

Speaker 4 (00:56):
Yeah, So let's see. I have been in financial journalism
for all my most twenty years now, which is kind
of crazy and 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 especially in the

(01:19):
US where you know, sometimes you still have to write
a check for something. Yeah, 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

(01:41):
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 in that space.

Speaker 2 (01:50):
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 where you know, this is deaf, 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.

Speaker 3 (02:12):
Et cetera.

Speaker 2 (02:13):
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.

Speaker 4 (02:25):
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

(02:47):
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.

Speaker 2 (02:55):
Out right, and we'll get into this. There are pros
and cons. I guess relative to credit cards. Thing with
credit cards is that there is 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
credit scoring and all this stuff. BNPL is sort of
more novel. And so therefore, to what degree do we
know how as as an asset or as a function

(03:16):
it performs across different cycles. Do we know the cohort
of people who use BNPL as well as we know
the people the types of people who use credit cards
seems a little bit, at a minimum, a bit more ambiguous. Absolutely, Well,
we've hinted at what we're going to be talking about.
I mentioned PayPal, We talked about BNPL. We are going
to be speaking with one of the original members of

(03:38):
the PayPal mafia. We're going to be speaking with Max Levchin.
He is the founder and CEO of a firm one
of the biggest BNPL companies publicly traded to Max. Thank
you so much for coming on Odd Lots.

Speaker 5 (03:50):
Thank you for having me. I'm a big fan of
the show. Thank you a bit of a privilege to
be here.

Speaker 2 (03:55):
Thank you for saying that on the recording, and so
we always love hearing it, but we love when we
love when it's on the public record as part of
the episode, Thank you so much. Where did you get
the idea to start affirm but prompted it?

Speaker 6 (04:08):
But a two sided coin, both sides bad of personal
experience actually tying neatly to the PayPal story. So I
came to the US at sixteen from Soviet Union, and
so you can imagine I understood very little about borrowing
and credit and things like that. And so I got
my first credit card on campus at college at eighteen,

(04:32):
didn't fully understand what I was signing up for, certainly
didn't read the fine print where it said zero percent asterisk,
don't worry about it.

Speaker 5 (04:38):
Borrowed a bunch of money, financed my.

Speaker 6 (04:40):
First startup from that very same credit card, promptly got
into more than I could afford to pay for. Startup failed,
eventually got some nasty calls from collectors, paid it off,
and four years later or five years later, took this
little company PayPal Public was basically an penalty wealthy overnight

(05:01):
went to buy a fancy car that you know, as I.

Speaker 5 (05:03):
Originally deserved it the right page of twenty three I.

Speaker 6 (05:06):
Wanted to show off to my then girlfriend now wife
and was declined for credit. And not only did I
feel completely screwed by the moment where I found out
that you're supposed to make the minimum payment and by
the way, interest a cruise into principle, and this seemingly
low APR is actually not what it seems to be
because I missed some date of the specific amount that

(05:28):
I was supposed to pay. It bit me again five
years later it was like, oh, by the way, wreck
your credit rating too, so you can't get alone for anything,
even as you're sort of proudly sticking a finger at
the article and newspaper saying, you know, the company public
youngests whatever. And so that was the thing that stayed
with me for years. My friends would prank me at restaurants.

(05:49):
They would ask the wait staff to tell me that
my credit card was declined, which by then was a
different credit card.

Speaker 5 (05:54):
But when I would turn deep purple and basically be like,
oh my god, like it happened again, Like what? And
you know, eventually I knew the joke. But I was
in my mid.

Speaker 6 (06:03):
Thirties when I realized that that's now more likely a
joke than that credit score.

Speaker 5 (06:08):
Bite from eighteen.

Speaker 6 (06:09):
So in my late thirties, I sat down with a
friend from high school, college and PayPal. You know, I
have many of these friends who's I met when I
was just getting my feet wet in America, and ultimately,
you know, we built this amazing company together. And asked
him the obvious question, twenty years too late, why didn't
we try to fix that yuck that comes with having

(06:30):
credit cards as a young person, And he said, you know,
I don't know, but we built so much great AI
at PayPal, fighting fraud and doing all these really interesting things.
Surely we could do a better job scoring credit for
young people like you were at eighteen and then twenty three.
Then what currently happens? And that was sort of the
seminal moment, and a couple of years later.

Speaker 5 (06:51):
We started a firm.

Speaker 4 (06:53):
So I have a bunch of questions already. Firstly, what
kind of car was it? Did you get it?

Speaker 6 (06:57):
In the end, I had to pay cash for right,
I actually wired money, and it would begin like an
eight am visit to a dealership, ended up like it's
five pm. You're wired, hasn't cleared yet, you can't drive
off the slot and drama at the time.

Speaker 5 (07:12):
Don't judge me.

Speaker 6 (07:13):
It was a black hardtop Mercedes convertible.

Speaker 3 (07:18):
No judgment at all.

Speaker 4 (07:19):
I'm judging a little bit.

Speaker 5 (07:21):
I was really young.

Speaker 6 (07:22):
I was very much trying to impress the girl who
is now my wife and the mother.

Speaker 5 (07:25):
It clearly works.

Speaker 4 (07:28):
Okay, another question, So.

Speaker 2 (07:29):
You know, I just I love those those Mercedes. I
think that's there's one of the if I have some
rough conception, no judgment, I think those are great design cars.

Speaker 4 (07:36):
Anyway, Should we just talk about cars?

Speaker 1 (07:38):
Yeah?

Speaker 3 (07:38):
We could?

Speaker 4 (07:38):
Okay, Well, you mentioned the underwriting process. And this, in
my mind, is supposed to be what makes the buy now,
pay later BNPL model different. Right, Like the underwriting process
is more technologically driven, perhaps more nuanced. Talk to us
about what you do differently versus you know, a credit

(07:59):
card company or a bank or someone like that.

Speaker 6 (08:02):
Sure, and you're pulling in a thread that's gonna take
a long time to Onwinyl, try to be fiffy, but
this is where the rage kicks in. So one of
the things that happens with credit cards, at the very core,
they tell you a bunch of things they don't actually want.

Speaker 5 (08:19):
You to do.

Speaker 6 (08:20):
So credit card business model is a crull of interest
into principle. So this exponential function of your signing up
for apr X but you don't actually know what's gonna
cost you, is all the fact that as you make
the minimum payments or whatever the payments you're making, whatever
you're haven't paid off, the interest that you've recrued folds
right into the principle, and it compounds and compounds and compounds,

(08:41):
and so the longer you take to pay it back,
the more it will cost. Which seems obvious, but it's
impossible for most merimortals to predict, and they love it
when you're late because they are late fees which are fixed,
and so the less you spend, the higher the percentage
the late feed represents. So it's this sort of amazing
business model, which is why you know one of your

(09:02):
recent episodes puzzled over how are these rates so high?

Speaker 5 (09:05):
The rates themselves are actually not the problem. The problem
is the structure.

Speaker 6 (09:08):
As you fold interest into principle and pay and pay
and pay late.

Speaker 5 (09:12):
Fees, it can be extraordinarily expensive.

Speaker 6 (09:14):
And so from the very beginning of affirm we ask
the question, how can we make a product where you
don't have this weird misalignment of interests where the lender
tells you please pay your bills on time, but when
they're saying soda vocea is, but not too on time,
and ideally take as long as possible because that's when

(09:35):
we make the most money.

Speaker 5 (09:37):
So the obvious answer is, of course obvious.

Speaker 6 (09:39):
Make a plan that you commit as a lender that
you'll never change, and don't charge.

Speaker 5 (09:45):
Late fees, and that's it.

Speaker 6 (09:47):
If you agree to those design principles, you are not
going to make more money if someone is late and
you're not going to make more money. If they take
longer to pay you back, obviously you'll make less money.
Because getting money to lend isn't free either. We have
to pay for our source of capital as everybody else does,
which means that it immediately rotates you sort of one
hundred and eighty degrees where you say I only want

(10:08):
to lend money when I have a lot of conviction
the person is going to pay me back on time,
because if they don't, I am just going to lose money.
And so we put those two principles down in the ground,
very very early on. It's literally written down to the
foundation of the company. We will not misalign ourselves with
our borrowers. From that came a lot of things like, hey,
we need to understand your cash flow.

Speaker 5 (10:30):
We don't really care what your credit rating is.

Speaker 6 (10:32):
Maybe you gained it, maybe it's an accurate, maybe your
eighteen year old immigrants does not matter.

Speaker 5 (10:36):
We need to understand what your actual capability is.

Speaker 6 (10:39):
We have to have the right to tell you you
are over extending yourself, not just once every few years
when you renew your credit card agreement, but for every transaction.
You have to be able to underwrite and decide yes
or no for every single moment that you create these
payment plans, because that allows us to not lose money
because we are aligned with you. When you pay us
back on time, we'll make some money. If you do own,

(11:00):
we're just going to be a warse off. And so
that is the foundation of Affirm's take on bnpl Many
people have come along since and sort of change the
model a little bit. They introduce laid fees, all kinds
of other fees we never have and never will. But
even with those modifications, the model is still better than
credit cards because of this individual underwriting moment and in
our case, no fees of any kind.

Speaker 2 (11:21):
Just to be clear, So let's say I wind up
at some website and maybe I want to buy like
some Nikes or something like that, and I see the
Affirm option. How do you know how good of a
credit I am in that moment?

Speaker 6 (11:33):
So it's not an effort free thing for you to
use a firm. You'll have to click on a firm
and we will ask you, if we've never seen you before,
we'll ask you to provide some information for us. That
information will allow us to tap into the standard set
of records that the credit bureaus.

Speaker 5 (11:49):
Aggregated about you.

Speaker 6 (11:51):
If there's enough data there for us to use our
custom credit score, we'll render a decision based on that.
If there's not, we'll actually say, hey, we don't fully
understand your personal financial situation. We would like to have
a peek at your bank account cash flow and decide
how your cass and flows relative to your ability to
pay us back. All of this is made possible with

(12:12):
really good news technology, So this takes seconds, even though
it probably takes about as long to do as it takes.

Speaker 5 (12:17):
To describe it.

Speaker 6 (12:17):
But we'll look through your personal financial state of right
now and make a decision not just whether it's he
yes or no, but also how much of a risk
you have of that financial situation changing and that price
is the credit?

Speaker 4 (12:28):
Do you use any creative data points you mentioned checking
against the type of item that people are buying, So
that's one thing I imagine could be interesting, like if
people are buying groceries on installment, does that mean they're
more of a credit risk than someone who's I don't know,
buying a computer or a big ticket item. And then
the other thing I'm very curious about, and I think

(12:50):
I've told this story before on add lots. But I
remember going to see a startup that eventually failed, and
they were in the peer to peer lending space, and
they describe some of the stuff they were doing with
underwriting where they were like trying to measure people's impulsiveness
by how quickly they moved a slideer for a loan
and stuff like that, which freaked me out a little

(13:12):
at the time.

Speaker 5 (13:14):
It would freak me out too.

Speaker 6 (13:15):
So, no, we do not do telemetry as a variable
into underwriting. So before I get into what we do use,
it bears mentioning that the variable to use in underwriting
is a very very highly regulated domain of lending and underwriting.

Speaker 5 (13:35):
There's lots and lots of laws going back quite far.

Speaker 6 (13:37):
Things like Fair Credit Act and any other sort of
subsequent additions to both federal and state level law that
prohibits you from using kind of the obvious things you
wouldn't want people to use, like your race or your gender,
or your age or your creed cannot be a factor.
It's actually a federal offense to do that. And so
we don't do any of those things. We go as
far as to say if it correlates to some of

(13:58):
those things, we also could use it, and that too
is a subsequent law as well.

Speaker 5 (14:02):
So so first of all, we're very very.

Speaker 6 (14:04):
Thoughtful about making sure we don't step into a prohibited territory.
It's called prohibited basis as the fancy term in the industry.
What we can use and what we do use. As
you mentioned, merchants share with us what's being purchased. Despite
the burrito gate that sometimes comes back in the press,
people don't actually use a firm to finance Mexican food

(14:25):
or other cuisines. They do sometimes use a firm for groceries,
but it mostly is, or almost entirely really is for
things like I'm throwing a giant party and I need
several hundred dollars worth of food stuffs, and that's a
lot to pay down with my debit cards, so I'm
going to use a firm instead. So the average sized
transactions for us is roughly three hundred dollars. So it

(14:45):
gives you a sentence for what people use a firm for.
So that's just you know, apper pos where it's being used.
What we gleaned from the information about what's being purchased.
One good mental model, which this is like an approximation,
but a decent one. If the useful life of the
item is meaningfully shorter than the time it takes you

(15:09):
to pay it back, you may find yourself questioning the
quality of the item long afterwards disappeared. And so a
natural question we should be asking is what do we
understand about this item, but also maybe the item's history
of quality before we say, oh yeah, sure by this
thing that's going to be out in six months and

(15:30):
pay for it over two years. So maybe the most
useful thing I can say about actually what variables, what
new variables w we've introduced into our underwriting, vast, fast,
vast majority of them, In fact, all of them actually
influence a decision we make by one or two percent
at most. Anytime someone tells you I found this magic
variable and if I just look at that, it's like

(15:52):
thirty percent better underwriting or five percent better in defaults,
they are lying, probably to themselves more than to you,
but they're definitely lying. Anything like that just immediately becomes
brittle as the macroeconomic reality changes, as people suddenly don't
care about the item or whatever it is that they
found that's this magic bullet of like suddenly I know
who's a good risk.

Speaker 5 (16:13):
It just disappears. And so you actually.

Speaker 6 (16:15):
Want lots and lots of subtle factors that are also
compliant with all the various regulations, helping you shape a
score that will tell you how likely this person is
to pay back.

Speaker 5 (16:27):
That's what we use.

Speaker 2 (16:43):
Let's go back to the just the core of the
business model. So let's imagine there is a shirt that
costs one hundred dollars and I have an opportunity to Okay,
I'm gonna buy it with a firm, so to be
four payments of twenty five dollars and there's no interest,
and so for me, that is almost a free lunch
because the time value of money, et cetera. All Right,

(17:04):
I'm spreading this out over four payments.

Speaker 4 (17:06):
You're gonna work that hundred extra and.

Speaker 2 (17:08):
I'm gonna that extra, that extra seventy five dollars after
the first payment, I'm gonna know.

Speaker 5 (17:12):
As you should. Yeah, great way, okay.

Speaker 2 (17:14):
So I'm gonna make that first payment and i'm gonna
then that seventy five dollars. I'm gonna put that into
an index fund. Okay, And so you make money because
the retailer is paying you a cut because that you've
brought someone into the door. So talk about how is
that cut determined, how much are they paying you for that,
and how competitive is it against other potential BNPL companies

(17:36):
or perhaps new entrants that haven't come into the market yet.
Talk to us about how that price is for him.

Speaker 4 (17:42):
This is my question too, because when you go to
check out, you see buttons, and the buttons I presume
don't mean that much to people. You just click one
of them. So how do you differentiate yourself?

Speaker 6 (17:54):
So we've been around for nearly fifteen years, and the
way differentiated ourselves by the way we basically don't advertise.
When you see us a checkout, that's when you learn
about AFFIRM at some point, and then you come back
to use again.

Speaker 5 (18:08):
And we have incredible retention rates.

Speaker 6 (18:10):
People who have used a firm a couple of times
basically with ninety percent probability we'll come back to use
a firm again, not necessarily the next week. In fact,
we average something like five plus transactions per year, but
when it matters to them, they will use AFFIRM. And
the way we differentiated ourselves is we were there for
them when they needed us and if they ever stumbled.

(18:31):
Our best customers are the ones that email us or
call us and say, hey, I was late to pay
my bill, something happened. What's the layed fee? And we
tell them there isn't one. That's the moment when they
grasp how we're different from the rest of the industry,
and that that's probably why they come back to us
as often as much as they do. Something like ninety
five percent of our transactions come from repeat customers. So

(18:52):
just to give you a sense for the loyalty that
we've engendered in our user base without ever making promises,
you know, on broadcast media.

Speaker 5 (18:59):
If you will.

Speaker 6 (19:00):
So that's why they come back to the business model points.
So first of all, probably worth expanding the aperture a
little bit. So we offer both interest free and not
interest free loans. The pain four that Joe described is
exactly as it sounds. So in our case, there are
no fees of any kinds. So if you see hundred
dollars shirt and you say it's going to be four

(19:20):
payments of twenty five.

Speaker 5 (19:21):
Dollars, that is it.

Speaker 6 (19:22):
You cannot You can take a decade and you wouldn't
be able to use a firm pretty soon after you
went well past the wind over payment. So the punishment
for being late for too long is, hey, you need
to pay us back actually before you can do this again,
which I think stands to reason much more than actually,
let us hit you with a thirty eight dollars laid feet.
But that's besides the point. So that's one form of transaction.

(19:43):
We also have what we call longer term zeros, which
is for a thousand dollars fancy suit, you could potentially
get a loan from a firm for twenty four months
or even thirty six months, which will also be zero.
In both of those cases, it's the retailer that's effectively
paying your interest. I value of money becomes more expensive
than period six months, so you've nailed the business model there.

(20:03):
In some situations, the retailer just doesn't have the margin
or isn't interested in paying your interest, and so they'll say, look,
you're going to use credit card, you'll pay some interest.
If you're going to use a firm, it's okay for
us to have this transaction happen if you are willing
to pay interest to affirm. And in that scenario, you
will see both the principle and interest, will calculate it
for you, both the rate and the dollars, and we'll
show you the schedule, and before you commit to any

(20:25):
of that, you will see and agree to the schedule.

Speaker 5 (20:27):
That we agree on.

Speaker 6 (20:28):
In the latter case, the consumers paying us something, the
merchant is probably paying us something significantly less than what
they're paying us if they're absorbing the cost of interest,
the cost of time, value of money. The business model
is really really simple in our case to understand the
value is fixed, so whoever is paying us almost doesn't matter.
That has to cover the fixed cost of underwriting, servicing,
all the usual bits. Leave a little bit for us

(20:50):
to actually be a profitable company, which we are, and
also absorb the probability of default, which, by the way,
all the way back to these alignment of incentives an
easy check so the work like this whole idea of like, oh,
you know, you're just not going to a profit when
people stumble. Our delinquency rates are about half the industry
of credit cards. That should give you a sense for
we don't make nearly as many mistakes, or perhaps we

(21:13):
are not willing to let people go late because we
don't benefit from it.

Speaker 5 (21:18):
Back to this model. That's how it works.

Speaker 6 (21:20):
The competitiveness of this industry is just like any other
competitiveness is of any payment industry. Payments are notoriously a
competitive world. There's actually never been a monopoly in payments,
full stop. There's a fun puzzle Wiser used to do
this cocktail parties, like name a monopoly and payments. It
turns out there has never been one.

Speaker 4 (21:37):
Interesting toughs cocktail party.

Speaker 3 (21:40):
Yah.

Speaker 5 (21:41):
I you know there's a reason I'm a fan of
the show, right.

Speaker 6 (21:43):
I listen to you a pine and all sorts of
esthetic things with great gusta, and so I think that's
We'll tell you everything you want to know about the
competitiveness of the space. But we have decided from the
very beginning that we want transparency and honesty with everyone
involved with our borrowers. That's why we say everything upfront.
That's why we tell them, here's your disclosure on exactly

(22:05):
the rates and the schedules with our merchants.

Speaker 5 (22:07):
We tell them, here is the price.

Speaker 6 (22:09):
You will have to pay us. If that's where you're paying.
If you can't don't want to, that's fine. We will
probably not be the right one for you. We won't
make it up elsewhere. We're not going to take it
out of the consumer's hide when they least expect it.
That's just not the brand. There are definitely cheaper providers
out there. There are plenty of brands that I'll say
we're just like a firm, but way less expensive for merchants.

(22:30):
What that really means is that's because we charge all
sorts of hidden feats, we have all sorts of other
ways of taking it out of consumer skin. What this
means practically, with fifteen years of experience is consumers as
they cast their eye over the list of buttons, they say, well,
the one I want to use is the one that's
not going to get me if I stumble. And that
makes for twenty four million active users in the last

(22:50):
twelve months, and we feel like we've we've.

Speaker 5 (22:53):
Kept our promise and the consumers keep coming back.

Speaker 4 (22:55):
Just reiterating Joe's question.

Speaker 5 (22:57):
Though.

Speaker 4 (22:57):
On the merchant side again, I imagine they're getting offers
from a bunch of different installment lenders BNPL companies, and
I don't think they do. They care much about the underwriting.
It's not really their problem, it's your problem, right, So
I assume the thing they care most about is the fee,
which seems.

Speaker 6 (23:18):
Like they actually care about three things. Okay, so they
absolutely care about the fee like that.

Speaker 5 (23:24):
That would say, which which.

Speaker 6 (23:26):
Can range from as low as less than credit cards.
So typical credit card rate today is on the order
of between two and a half and three percent, depending
on the size of the merchant.

Speaker 5 (23:37):
But that's kind of the average in the industry.

Speaker 6 (23:39):
We will definitely meet you around those numbers at the
absolute lowest and goes up all the way to let's say,
low single digit percentage points when you are subsidizing consumer interest.
So we are not a cheaper than credit cards provider
like that. That's not you know, don't want anybody tell
that illusion. They care about the rate more than the rate.

(24:03):
They care about incremental sales. So if your next marginal
buyer is either a no thanks, or it will cost
you five percent. If you have the margin of better
than five percent, you don't want the items staying on
your shelves. You would like to pay this five percent
to get the marginal buyer.

Speaker 5 (24:18):
To say yes.

Speaker 6 (24:19):
And so because of that incentive, which I think is
easy to follow, you do have lots and lots of
merchants that say, all right, So what I really care
about then is the approval rates, which is the second
variable they care about. So as people come through and say, hey,
I'm not going to use a credit card, not interested
in buying unless I have an installment loan, let's say,
from a firm, they need to know that that rate

(24:40):
is going to be high enough. Otherwise why have a
button that just sits there and looks pretty. And so
our rates are typically higher than the rest of the
industry because we are so obsessed with underwriting, because we
have no crutches, eg Late.

Speaker 5 (24:51):
Fees, and so this underwriting thing, we don't really.

Speaker 6 (24:53):
Try to explain it to merchants at all. What we
do say is look at our approval rates. If you
see their approval rates are meaningfully higher than the industry,
you know you're gonna get value from this. That's why
it's worth paying more than credit cards. And so that
is true, and that's what they do. The third piece
they do care about. Every merchant knows that the second transaction,
as they want the first transaction, costs them probably more
than the margin in it. They're paying Google, they're paying Facebook,

(25:16):
They'll soon be paying an LM provider or a child
about provider to drive that first transaction in they want
to sell you another thing, So they very much care
about if they had sold that first transaction using a
buy out pay Lada provider, it better not harm their
brand because if they buy out Paylada provider is harassing
the consumer for paying them back or has late fees

(25:37):
or has unexpected fees, it's going to create.

Speaker 5 (25:40):
Negatively to the merchant's brand.

Speaker 6 (25:43):
And so they actually do care about late fees in
a way that has less to do with financial consequences
more with will people come back to us and use
a firm again, or will they be like, ah, I
hated that merchant. I got into some bad transactions. So
that they care about all these things through their own.

Speaker 2 (25:58):
Lens, that makes a lot of sense. So let's say
I start accepting your premise. Okay, this is per se
better than credit cards. One reason that people can't just
quit credit cards generally is not every place takes by
now pay later. People want something in their wallet, right
that they want something at the restaurant and wherever it
is that they know it's going to be accepted now.

(26:18):
For you are launching a card or you have a card.

Speaker 5 (26:21):
Right, we have a card.

Speaker 2 (26:23):
Ye, so you have a card, but I'm curious. You know,
you mentioned, you referenced that recent episode that we did
with Omar Drexler, and one of the things that he
said about cards is they're very costly to advertise. The
marketing expenditure for the card companies is very high. You
mentioned that you don't do a lot of advertising. I'm
curious though, on the card component specifically, you know, if

(26:46):
you want to be quote top of wallet to consumers.
The first thing I think I've read that phrase, I thought,
I'm trying to quaint myself with the industry. So if
you want to be top of wallet for the consumer
in the card, can you do that with an advertising

(27:06):
light model or do you really need to spend to
get significant wallet share?

Speaker 5 (27:12):
You can?

Speaker 6 (27:13):
The card is available to our users. So this is
not a thing that you will see on Times Square displays.
This is a thing you find out from a firm.
Once you are a borrower, once you're actually in good standing,
you qualify for the affirm card as the Hey you
really liked us, didn't you?

Speaker 5 (27:30):
This was great.

Speaker 6 (27:30):
You're transacting five times a year. If you want to
take us with you to your retail shopping experiences, restaurant
or otherwise.

Speaker 5 (27:38):
We have a way.

Speaker 6 (27:39):
It's called the Affirm Card. It's actually pretty magical. The
card is a dual mode card. It switches from debit
to credit explicitly as you tell it to. So when
you're buying a burrito, we expect you to use the
debit mode, which just literally takes the money from your
account and that's it. There's no interest obviously, is just
a pay now transaction. If you're buying a TV, you

(27:59):
can buy it out with Affirm. In the app, you say, hey,
my next transaction, I want that to be a twelve
months maybe to zero percent loan because the retailer wants
you to have it interest free. Maybe you're paying some interest,
but you're setting up that transaction in the app, and
then your card is ready when you tap it next time,
it becomes.

Speaker 5 (28:15):
A loan automatically. It's a pretty magical experience. It's super popular.

Speaker 6 (28:18):
It's the thing that we haven't needed to advertise because
we went from we have this card idea to about
twelve percent of our users having one very very quickly,
because it's just a really really good product. Again, our
user their mindset has long been changed from revolving is okay,
I don't understand it, but I don't care to. I
don't like revolving. I don't want to pay LID fees.

(28:39):
I don't want to pay excess of interest. This affirm
thing is neat the card is a logical next step.
It's how much more can I have of this type
of financial life?

Speaker 4 (29:02):
How much insight do you have into how much people
are borrowing from other BNPL lenders. So the sort of
stacking issue, which has been discussed multiple.

Speaker 5 (29:12):
Times now it's a great question.

Speaker 6 (29:15):
We have a decent insight in the sense that we
understand pretty well the overlap between user basis. So there
are two prongs to this answer. This one it's worth
delving into pretty deeply because this is where we differ
from the rest of the industry pretty significantly. So before
I get into the stacking part, I'll address the overlap.

Speaker 5 (29:36):
So we do a lot of studying just externally through surveys.

Speaker 6 (29:40):
Also, because when we log into your bank account, or
we ask a provider to log into your bank account
and pull in some of your transactional data, we get
a glimpse into what else you're spending money on. So
we to have a decent sense for where else you
might be using Buy now, Pay later, And to date,
the user base overlap with other providers quite minimal, so

(30:01):
there's not a whole lot of stacking possibility, simply because
people who use a firm tend to stay with affirm.
They sometimes stray and use other providers, but it's quite
minimal for a meaningfully lower transactional amounts. I think we
average a significantly higher average transaction relative.

Speaker 5 (30:16):
To the rest of the industry.

Speaker 6 (30:18):
So far, that's not been a problem in the long term. You,
of course, can make the argument like, sure, right now,
you guys are all still tiny.

Speaker 5 (30:25):
You're going really quickly.

Speaker 6 (30:26):
Everybody's taking a bite out of the credit card industry.
What happens five years from now when everyone is signed
up for their favorite DNPL and they're now signing up
for a second one. The right way to address this problem,
and this is the right way, and it's traditionalist of me,
but I really do believe is the right way is
for everyone to report to the credit bureaus. Today, when
we tap into one of the three major credit bureaus,

(30:48):
we see what you're borrowing and relatively current state of
you're borrowing from other traditional source of credit, and it
is a variable that we use inside of our own
underwriting affirm today is the only one that furnishes. That's
another fancy industry term. Delivers the data of both positive
and negative as you're on time, you're not on time
to the credit bureaus. The rest of our competitive set,

(31:12):
generally speaking does not, although everyone has experimented a little bit.
From the very beginning, we saw the idea of building
credit history and improving credit scores for people who are
on time as a key value proposition for our borrower.
We are not going to be the only lender for
our consumers. They need to borrow for a car, they

(31:32):
need to borrow for a house one day. That means
whatever they're doing with us, especially if they're doing well,
which ninety seven percent of our consumers are doing really,
really well. They're on time all the time, it has
to reflect in their permanent record somehow. So we've been
furnishing basically from the very beginning. It took a long
time to persuade not just the credit bureaus but also
the companies that provide traditional credit scores to understand the

(31:55):
data we furnish and treat it in the right way
so that when you are in time, the score go up,
when you're not on time, the scores go down, et cetera.
And so we did all that work basically on a
volunteer basis over the last decade and today right now,
the state of the industry is if you are a
b input for the NPL provider and you're not furnishing data,
you kind of have no excuse. We pioneered this, We

(32:17):
did all the work, We worked with the score builders
and the credit bureaus, and we're now sending all of
our data.

Speaker 5 (32:23):
And so we want everyone to join us.

Speaker 6 (32:25):
Because most people do pay on time, their credit histories
should reflect their good repayment, but also people who should
not be borrowing should be reflected. And I think that
that's just really really important. If I can do one
bit of advertising on your show, its wont before affirm
it will be all of you out there. If you
are in a buyout pay lator industry, furnish your damn data.

(32:46):
It will help consumers and it will eventually accreate to
your brand too. But for now we are the only
major one.

Speaker 4 (32:52):
Wait, what's the resistance then, because it seems kind of obvious.
If everyone cares about the underwriting, you would want more
data out there, so why not provide it?

Speaker 6 (33:00):
So I don't want to pretend that I understand all
the motivations, but I think a basic inferential thought might
occur that if you're making a lot of money from
late fees, it's a cool thing to tell your consumers.

Speaker 5 (33:15):
Don't worry.

Speaker 6 (33:16):
You can just pay me off anyone go on your
permanent record. And if you don't make any money from
late fees, you have no incentive to tell your consumers,
Oh it's okay, just pay me something and we won't
tell on you. The interesting connection between late fees and lack.

Speaker 5 (33:33):
Of reporting is unfortunately the underlying fact.

Speaker 6 (33:35):
And because we don't make any money from late fees,
because we don't charge any we're very pro reporting.

Speaker 2 (33:40):
Just out of curiosity, since you're talking about late fees
and credit and all that stuff. Here we are recording
this on December second, twenty twenty five. You take the
temperature of the consumer for us. I don't think you're
doing seeing any signs of growing mispayments or anything.

Speaker 6 (33:54):
Like that, not as of December second. The important thing
to understand, I'm asked this question fairly often. I am
a great I am the firm is a great lens
into the financial hearts and minds of North American consumer.
We're outperated in the US, Canada and now UK. It

(34:15):
is a specific set of people. These people are more
financially responsible. They made a conscious choice. They picked us
not just because it's installment pay and DA it's convenient.
It's also because we told them we don't charge lazies.
It's also because we told them you hate the asterisk
next to zero percent. We don't have any asterisks. One
of our core values is no fine print, and we
mean it on and on and on and so it

(34:36):
stands to reason that firm consumers will be probably much
later into any kind of a macroeconomic earthquake territory, if
there was one to come. But as of right now,
we feel quite good about our book and also about
the US consumer.

Speaker 2 (34:52):
I'm going to ask you a question, and I'm gonna
mention a competitor. I won't make you name the competitor,
but I'll just say it my question and then ask
you about so. One of your competitors, Klarna, recently announced
a new dollar peg stable coin and I'm very cynical,
and so when I see like random companies announcing some
crypto thing like, sometimes it makes sense, but often it's like, well,
maybe is this just a good press release or something

(35:13):
like that. And I haven't really looked at the Klarna one,
et cetera. But for you affirm right now when you
look at as someone who has been in the internet
payment trenches for literally decades right now, do stable coins
or anything crypto unlock anything for you right now when
you think about the future and you think about opportunities
that you can't do with traditional rails.

Speaker 5 (35:36):
The short answer is, I don't think so. Now.

Speaker 6 (35:39):
I'm also very cynical, so I think you're unfortunately tapping
into the exact same mind flow.

Speaker 5 (35:45):
That you have. This is our way of loading.

Speaker 2 (35:47):
Them to want to come on the podcast and have
you against it.

Speaker 3 (35:50):
But keep going, keep going.

Speaker 5 (35:52):
I you know, I am confident that.

Speaker 6 (35:56):
There is some thought that went to the press release,
so I don't think it's a pure press release.

Speaker 5 (36:00):
So I will.

Speaker 1 (36:03):
Tell us about it.

Speaker 2 (36:04):
I won't make you, We're not gonna make you speculate
on your competitor, but just tell.

Speaker 5 (36:09):
Sure.

Speaker 6 (36:09):
I will straw man the reasons why Yes, so why not?
As obvious, I think you probably can do it much
better job than I can.

Speaker 5 (36:18):
The why yes, So there are a couple of reasons.

Speaker 6 (36:19):
One, in general, if you have a lot of cross
border commerce for an exchange, the complexity of just diligence
around you, everything from sanctions to reserve accounts, et cetera.
You can squint a little and say, you know what,
if we just lived in dollar pegged stable coins everywhere,

(36:40):
all at once, it would be a little bit easier.

Speaker 5 (36:42):
And I think that's true.

Speaker 6 (36:45):
E commerce is not a very significantly cross border discipline.

Speaker 5 (36:49):
And so before you sort of say, oh, it.

Speaker 6 (36:52):
Wouldn't it be amazing if I bought lots of things
from Zanzibar and just paid them with affirm but they
got stable coin as a settlement currency, they'll be very
happy because they want dollars in this thing is essentially
dollar equivalent.

Speaker 5 (37:03):
It's a good story.

Speaker 6 (37:04):
Just most people in the US don't buy a lot
of things from Zanzibar like they buy some things in
other countries. But most of the time, because we all
want things shipped to us very very quickly, we're probably
buying it from a US subsidiary. That's ware houses somewhere
pretty close to the US, and.

Speaker 5 (37:16):
So it's not that big of a market just yet.

Speaker 6 (37:18):
But in like five years, if you see me putting
out a press release, it's not because I finally realized
that I'm missing out, is because there's enough cross border
commerce in our scale where it starts to make a difference.
That's the best I got in terms of why would
you want to do this? The obvious of why nots?
It's like, well, maybe you want to move money around
person to person, but that's not our business. Maybe you

(37:40):
want to believe that one day Joe will have a
wallet full of stable coins. I really have a hard
time imagining you sporting a whole bunch of different kinds
of branded dollar pegged effectively equivalent stable coins, like a
coupon book of I got my firm stable coin and
my brand XYZ stable coin, and I'm going to choose
between the two, Like none of that maybe.

Speaker 2 (38:02):
Solve the rule? What about for like rewards, that's one
thing that credit cards currently have that like, oh, I
get miles, Like could there be something with if I
use this stable coin, I get remitted?

Speaker 3 (38:12):
But I don't know. I'm I'm just throwing stuff.

Speaker 6 (38:14):
Out there, so for what it's worth, I spend a
lot of my time contemplating the word ecosystem and mostly
raging against it because it is one of the less
documented wealth transfers. And by the way, the credit card
industry in general is a regressive wealth transfer where people
who never revolve transactors like probably both of you and me.

(38:34):
When I use credit cards, which is really rare these days,
we're paying our bills at the end of the month.
We're not paying a penny of interest. I think Joe
on the record saying you've never paid any interest, and
so I think that's that's a nice place to be
if you can afford it. Telling people that they should
just not bar and paid off at the end of
the month is an incredibly lead the meat cake equillent
for the twenty first century. Payments lots of people in
America revolve half the country revolves at a ten thousand

(38:56):
dollars and so the idea of those people caring about
rewards is sort of preposterous.

Speaker 5 (39:02):
They do not.

Speaker 6 (39:02):
They care about making their minimum payment. People who are
figuring out which reward scheme they want to be a
part of. I'm just not so convinced that they're going
to be calculated expanding their horizons to have more stable coins,
because ultimately they're just getting dollars.

Speaker 5 (39:18):
In the world of a firm.

Speaker 6 (39:19):
People that we serve every single day, twenty four million
of them in the last twelve months, they really really
care about the interest rates they pay because a lot
of them understand that the alternative is revolving and so
for them being told, hey, your reward is a zero
percent loan is incredibly powerful. And so before we get
into using our hard earned revenue into stable coins, we

(39:40):
will just give it back to the consumers in a
form of no interest.

Speaker 4 (39:44):
So we talked about how you make money, but we
should talk a little bit about your cost side as well.
I think you mentioned funding earlier. So you have to
get money from somewhere, and you're paying for that money.
What levers do you have to pull if the cost
of money goes up? And again, I'm aware that we're
recording this in early December and everyone expects an imminent

(40:05):
rate cut, But in theory, if interest rates were to
go up, what could you do to offset that additional cost.

Speaker 6 (40:13):
So the most important thing to understand about our business
from the capital sourcing part of the game. Everyone understands
that rates are are super volatile, but you know, if
you look back a couple of years, they were very volatile,
if for a brief not so shining moment, and so
we all knew if possible. So all of our contracts

(40:36):
with various lenders of money to us but also people
who will buy our loans, they all adjust fairly gently
over a course of a fairly long period of time.
So it's not about can we deal with rising costs
of credit for us? It's how quickly do they change
for us? And of course we understand that they might

(40:57):
change quickly. Therefore a lot of our contracts stipa that, hey,
if they do move up, the adjustments to our cost
will go fairly slowly over a period of time. So
the more likely outcome in December is probably a downward
motion of the credit rates, or perhaps they stay steady.
But just the same as I described, we're not going
to wake up to twenty five free basis points of

(41:19):
incronal revenue. It will eventually come to us in a
form of in chronal margin, but it will take its
time because these contracts are just both up and down
quite slowly, and we're in no way unique.

Speaker 5 (41:28):
In the industry. Everybody does that.

Speaker 6 (41:30):
The levers we have to deal with such cost changes
are exactly what you would expect, so we will either
pass it through to the consumers and moving up in
the increments or down of twenty five basis points is
not that significant then most people, I think generally don't
care that much. In some cases we actually choose to
tell hey, merchant X, you are providing these rates for nothing.

(41:54):
You should continue doing so, but the cost to you
will go up a tiny bit because the rates have
change now because of time value of money the merchants
pay us in real time, essentially as the transaction is consummated,
the true cost to them is truly deminimus. And so
in either of these two cases, so long as the
movements are not very violent, it's not that major a
component of our business.

Speaker 2 (42:14):
I just have one last question, AI, So setting aside
the technology for the underwriting, which I'm sure is a
very high tech, data intensive application, and setting aside that
probably many of your engineers on staff are using code
generating for that, just putting your tech, your tech had on.
As someone who oversees a large organization people looking for

(42:37):
how large language models in particular are being deployed in
productive capacity at a firm today. Is any of this
technology in use in production and saving human hours in
some respect or another.

Speaker 5 (42:50):
Yes, emphatically. So.

Speaker 6 (42:53):
So we just wrapped up the cyber weekend Turkey, five
Black Friends, Deciber Monday, whatever whatever you want to call yesterday,
which was wonderful. And I don't actually have the stat
yet because I will get the report immediately after this
podcast is recorded. Well, I probably can't pre announce our results.

(43:15):
We report early next year, but we will have handled
tens of thousands of consumer contacts, people saying everything from hey,
I just borrowed money from you, and I don't understand
when my first payment is due, and you know, maybe
it's because they hadn't read the email as clearly or
were everything all the way down to I just borrowed
money and I realized that I need a refund because

(43:35):
I actually have no intention of buying this thing and
all that stuff and a lot of it. We try
to serve them in real time as they're kinds of acting,
but plenty of people contact us right after or maybe sometime,
you know, after the purchase. A huge percentage of that
is handled entirely by AI.

Speaker 5 (43:49):
Now. Now that has not.

Speaker 6 (43:51):
Caused us to lay off our wonderful customer service staff
at all.

Speaker 5 (43:56):
What it has allowed us to do.

Speaker 6 (43:57):
Is to go really deep into specialization. AI is very
very good today at handling basic questions. It can do
cool things like look up for your account and say, no,
you're not late, you are a mistaken, don't worry about it,
or yes you're related, but we don't charge late the
so just please make yourself current and we'll move on.
All of that can be handled by AI. One flee
if it's something like I changed my name or I

(44:21):
changed where I live right as I was consummating this transaction.
There are all sorts of crazy things that come up
that is something that a human can handle. AI models
are not smart enough yet to handle some of these things,
and also frequently enough. We wouldn't want the possibility of
hallucination to derail what is a good customer relationship. So
we've been able to move our human helpers into a
much more sophisticated, much more specific role. So the theme

(44:46):
in our customer service for last year has been specialization.

Speaker 5 (44:48):
Specialization, specialization, where.

Speaker 6 (44:50):
We train people now to serve very very specific subset
of problems because they can be effective and move faster,
and so these tools are actually making them more efficient
by letting them focus on just a very specific thing
that they're good at.

Speaker 5 (45:01):
So that's one example.

Speaker 6 (45:02):
We track all sorts of interesting metrics about AI tool
usage internally. The interesting or sort of random factoid, our
engineering group is not the single largest consumer of AI tools.

Speaker 5 (45:14):
I will not reveal exactly who it is. And by
the way, like vast majority of or.

Speaker 2 (45:18):
Engineering US a hunt or something.

Speaker 6 (45:22):
It's actually finance. Our finance group uses these tools obsessively.
I'm cheating a little bit here, So for a very
long time. It's not the case anymore, but for a
very long time because we are so AI and mL
heavy company. One of the core requirements for any employee,
but certainly in finance, was you have to know how
to read code and probably write code, and so huge
percentage of what we do in our finance group actually

(45:44):
looks a lot like coding and a lot of tough
for engineering and so but they're somehow maybe because it's
a smaller group on average, but they're great adopters of
these tools. Our legal team use it all the time.
We have literally hundreds of thousands of very custom contracts.
Every time a merchant pays your interest for you, they
signed up for it contractually. That's a custom contract. Imagine
managing half a.

Speaker 5 (46:04):
Million of these things.

Speaker 6 (46:05):
They're all carefully written and bespoken, so AI can read
and find errors and corrections, et cetera, et cetera. So
one of the things that we're responsible for as a
regulated business is we cannot allow merchants to advertise our
service incorrectly. We're actually on the hook when a merchant
says something like hooray a firm interest free for everyone.
It's not true. Some people will actually pay some interest.

Speaker 5 (46:25):
Sometimes.

Speaker 6 (46:26):
We are responsible for finding that and telling the merchant
please stop saying things that aren't strictly speaking true. AI
tools are amazing at reading both loads of advertising copy
and saying, hey, wait a second, that is inaccurate.

Speaker 5 (46:36):
We got to fire off an email and tell this
merchant to fix it.

Speaker 6 (46:38):
So you can sort of imagine a flood of ideas
that we had when the CHGBT moment happened and put
it to work for the last few years.

Speaker 4 (46:46):
I'm going to end with a sort of theoretical question,
big picture theoretical question. But if you could design the
ideal payment system from scratch, complete scratch, you know, using
today's technolog there's no legacy card networks, maybe not even
legacy banks. What would it look like and how much

(47:07):
of a firm's current business model would survive in that environment?

Speaker 6 (47:14):
Oh, I think it would look an awful lot like
a firm. Affirm is my personal attempt to build a
system that I can.

Speaker 5 (47:22):
Be proud about.

Speaker 6 (47:24):
One of the core things we tell people who join us.
One of the reasons we had such a black and
white no laid fees, no compounding, no deferred interest, none
of the yuck is because I wanted the smartest people
that would have otherwise gone to Wall Street and trade
it in quant fonds to join us and build the
system that they could be proud about. It's very hard

(47:47):
to be proud about a thing that makes half its
money on lead fees, and that's why we don't do it.
And so what we've built is biased, as I am,
is pretty darn great. It really is something that I'm
very proud about. I think the totality of the team
here takes an enormous amount of pride and how we
went about building this. It is dependent and intertwined with
the legacy systems. But even as we go through card

(48:10):
rails to use another industry jargon, or many other systems
that have existed, when we tap into capital and markets,
which has certainly been here long before we came about,
and everything else in between, we maintain the moral integrity
of the product, and it's DNA all the way through.
We might pay late fees if we borrow money to

(48:31):
a lend, we haven't because obviously we're on a pretty
tight chip here it will not be passed through.

Speaker 5 (48:37):
We take an incredible.

Speaker 6 (48:38):
Amount of pride in the diligence we exercise within the system,
all the way down to leaving a penny on the
table for our partners to keep because we refuse to
make more money than we said we would. I would
love to have a blank sheet design, exercise and payments,
but I think what would emerge is a system that
looks a lot like a firm, just doesn't have some

(48:58):
of the nineteen eighties it.

Speaker 2 (49:01):
Max Levchin, founder and CEO of a firm, So great
chatting with you, very illuminating, helpful conversation, and I appreciate
you coming on odlots.

Speaker 5 (49:10):
Thank you so much, and again I am a fan
of the show and.

Speaker 6 (49:14):
I love being able to see myself inside of a
thing that I actually listened with.

Speaker 3 (49:18):
Very kind of you to say thank you so much.
That was great, Trucy. I thought that was great.

Speaker 2 (49:33):
I thought that was really interesting and just sort of
understanding the real nuts and bolts about how the money
has made and what's different about BNPL companies from the
credit card companies, to my mind, very helpful conversation.

Speaker 1 (49:46):
Yeah.

Speaker 4 (49:46):
Absolutely, I thought it was really interesting, the discussion about
why other BNPL companies don't want to report to the
credit bureaus and things like that. I wonder if that'll
change anytime soon. Maybe politicians will start getting interested in it,
regulators as the space expands.

Speaker 2 (50:03):
The thought that I had listening to Max was he
mentioned the sort of the regressiveness of the points system. Right,
So there's people like us who rarely roll their credit
card debt but get frequent fire miles or other rewards,
et cetera. But that's paid for by the people that roll. Now,
if a firm is targeting, they're not they're clearly targeting
people who are not thinking about points, right, they're thinking

(50:25):
about people who really do need to extend their payments
or implicitly roll and say we have a better option.

Speaker 3 (50:30):
So it's sort of cleaving off, if you know, if this.

Speaker 2 (50:33):
Grows, the firm is still just a twenty two billion
dollar company by market cap, but this grows, You've got
to wonder, like, if the maximum version where you've cleaved
off a significant number of people who roll, what happens
to the points ecosystem for the people like us?

Speaker 5 (50:50):
Now?

Speaker 2 (50:50):
Granted I don't think like, oh what about the poor
frequent flyer and all the great rewards are getting?

Speaker 4 (50:55):
But is just someone think about the point?

Speaker 2 (50:58):
Well, someone please think about the points accumulators who never
go into debt or who never like roll their debt.
But it is interesting to think about if you could
like cleave off that, then a big part of the
business model of credit card the legacy card companies could
potentially be unstable, and part of the appeal of going
to any credit card that offers a lot of rewards
could decline if revolvers moved to this alternate payments model.

Speaker 4 (51:21):
Yeah, it's a really good point on points.

Speaker 5 (51:24):
Thank you.

Speaker 4 (51:24):
That one was a little obvious I'm sorry, No.

Speaker 3 (51:26):
It's good. I like that one. It was straightforward. I
actually got this one.

Speaker 2 (51:28):
Okay, Actually, you know what, I really also appreciated that
Max had substantive answers for things that they're doing with
AI that aren't just code generation, even if it sounds
like the Finance Department is probably still using it for
code generation, Like that makes a lot of sense, like
being able to proactively scan websites to say who is
claiming something that's not true about affirm et cetera.

Speaker 3 (51:48):
So maybe there are productive uses of all this technology.

Speaker 4 (51:51):
Or sending out millions and millions contracts automatically totally all right,
shall we leave it there.

Speaker 3 (51:55):
Let's leave it there.

Speaker 4 (51:56):
This has been another episode of the All Thoughts podcast.
I'm Tracy Alloway. You can find me at Tracy Alloway.

Speaker 2 (52:02):
And I'm Jill Wisenthal. You can follow me at the Stalwart.
Follow our guest Max Levchin, He's at m Levchin. Follow
our producers Kerman Rodriguez at Kerman Erman, dash Ol Bennett
at Dashbot, and Kelbrooks at Kelbrooks. And from our odd
Laws content. Go to Bloomberg dot com slash odd Lots.

Speaker 3 (52:17):
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Speaker 5 (52:18):
And all of our.

Speaker 2 (52:19):
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Speaker 4 (52:25):
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