Affirm Holdings, Inc. (NASDAQ:AFRM) JP Morgan 50th Annual Global TMC Conference Call May 25, 2022 1:10 PM ET
Company Participants
Max Levchin – Founder and CEO, Affirm Holdings, Inc.
Conference Call Participants
Reggie Smith – J.P. Morgan
Reggie Smith
Good afternoon. Thanks for joining. I am Reggie Smith. I cover FinTech here at J.P. Morgan and I’m honored to host Max Levchin, Founder and CEO of Affirm this afternoon. Max, thanks for – coming out, how are you?
Max Levchin
I’m good, thank you. Thank you for pronouncing my name right. That is a relatively high bar.
Reggie Smith
It – no it’s [while] [ph] I practiced. And to be honest with you, I practiced. But you’re welcome. Listen, so I wanted to just start I think people have a sensitive story, but it’s always good to hear like why you founded the company and how you’re different than you know kind of traditional credit card companies. So let’s start there and let you kind of talking.
Max Levchin
Sure. So, I think credit cards are the single best user interface ever created, like the – just swiping your card, chipping it, whatever, whatever you do, is an amazing user interface. It is not been surpassed in my – certainly my 30 years of doing payment products. The underlying financial products is just not good for consumers, it might be even bad for it large, but I’ll stop at consumer finance, people don’t understand how they work.
For a lot of banks, present company excluded, of course, the fine print has become the business model, they literally hide various piece and tricks like deferred interest in the fine print, hoping the consumer will get tripped up. So you’re literally betting on your customers screwing up to make more money. And I think that’s just a bad thing for consumers. The way destruction works is, you find an opportunity where someone has made that their business to not do the right thing by their customer when you show up with a better product, but you also align yourself with that customer interest.
And so, on a consumer side, it’s very clear, you should just do better than what a lot of credit card products have done. And then on the merchant side, the single highest expense for anyone selling things is converting that customer, and – bringing them into the checkout spot is expensive, but then that moment are like, hey you know what maybe you should buy, that conversion rate has always been low. The dumbest way of fixing the conversion rate and say, hey, don’t leave your 10% off or 20% off. Now you’re just teaching a customer that there’s always going to be a day when the 10% off is going to become a 20% off and they should wait. So you’re actually you know mortgaging your future with today’s discounting.
And so, Affirm’s idea that, hey, we can build a better financing product and allow merchants basically buy down whatever consumer must pay and their interests so that instead of explicitly signaling, I’ll give you 10% off, you can actually use 3% or 4% or whatever it takes to pay for someone’s high value of money and help that consumer make a buying decision. The reason we stuck so aggressively to the idea of no late fees and so no gimmicks, is to make sure that in good and bad times, we’re aligned with our consumers’ success. If they are able to pay their bills, we’ll make money, if they’re not, we’re screwed. In the current sort of a seemingly, assumed to be scary economic environment, it’s extra important, because it really puts us on the right side of risk decision, and but we won’t extend credit, unless we know you’re good for it or – our model tell us you are. So but that’s the history of the product.
Reggie Smith
What’s interesting to me is, you guys are giving kind of long-term guidance, and I mean your margin profile, target margin profile is very similar to credit card companies, but you’re not charging late fees. And so, where are you making up the value there?
Max Levchin
I think the – again, the comparison I think is dangerously – that the tools are used for the same purpose, buying things. There’s a quite a lot of difference between us. Generally speaking, we are not prepared to lose money on transactions, our margins comes from the fact we’d like to make money on transactions.
And so, we are quite careful, is comes from the fact that we get to approve every transaction of credit cards sort of hand over to [a line] [ph] and say, hey you know what, I hope the economic times stays good and you don’t lose your job. We say the same thing, but when we see that you may have lost your job or the economic times are tougher, we get to say, hey the next transaction is a bad idea for you financially, and therefore for us, we’re not going to lend money unless we believe you are capable of paying us back.
And so, I think you know I would argue that our margins are actually better than the lot of credit card companies, in part, that stems from the fact that we make the most money at the highest credit quality consumers, we don’t have the weird barbell thing, where your deep subprime is actually your source of cash. And then suddenly, deep subprime is in trouble, because recession, and oh no, you have to defend. We don’t have any of the structural problems.
Reggie Smith
It’s interesting. I – appreciate that. Okay, so you guys had reported results. Two things that really stood out to me, particularly in light of the fact that a lot of e-commerce names we’re talking about witnesses slowdown, you guys show great, still strong GMV growth, and then you also talked about a path to profitability. Could you talk a little bit about what’s driving sustained growth, my sense is that, you’re still ramping up the Shopify and Amazon deals and you know how much runway is there and how should we think about that?
Max Levchin
So you’re exactly right. For quite a while, and I’ll let you guess when this sort of equilibrium between transactors of Affirm like product and not – Affirm like products sort of becomes a steady state. But we’re very, very far away from that you know I think buy now, pay later as an industry’s low single-digits in this country, independent of e-commerce growth, we are seeing growth within the merchants, within the partners that we already have, [EG] [ph], Amazon and Shopify, but also we’re still signing lots and lots of new merchants there, lots of coverage to be had both online and offline.
And one of the things that’s really happening right now is you’re seeing slowdowns in e-commerce, but you’re also seeing quite a lot of rotation among segments, for example, our travel and ticketing segment posted well north of doubling of GMV, because people are you know tired of being cooped up when they’re trying to get on planes and go places and go to a restaurants and things like that. And so, sort of the shift from goods to experiences is another factor of growth.
And so, overall TAM is enormous, we’re very, very early, lots of growth to be had there. Within our enterprise partnerships such as Walmart, Amazon, Shopify, Target, et cetera, we, part of why we were picked by these giants that certainly have their pick in terms of partners, we provide the full solution, we can cover both the low AOVs sort of pay in for six-week product all the way out to you know pay in 39 payments you know your Peloton bike. And because we can cover the durations and the prices and the credit quality, we can solve all of their points of financing needs instead of just a particular point solution, EG, some of our competitors.
In practice though, that doesn’t mean all of them flip on at the same time. We’ve deployed at Walmart over three years ago, and we still haven’t actually fully brought out all the different products that we support. We deployed Shopify exactly one year ago, we’ve just announced that we’re bringing in longer-term, and even within the longer-terms, we have other sub-products that we’re very excited to bring. So, there’s growth across industries, there’s growth within the merchants that we already have, the secular trends are not impacting us yet. And at some point they might, but we’ve got I think years to go before that happens.
Reggie Smith
Got it. You mentioned Shopify and I’ve got to ask you since I have you here. I talked about this at my initiation. To my knowledge, I believe investor policy has changed it that, those customers you can market to them within Shopify, and you show up there, but it’s hard to get them outside of Shopify, am I correct there or how do you get that Shopify shop at consumer that does pay in for does alone through the app? Like how do you get them outside of the app, so you can then market to them?
Max Levchin
So the thing is, I don’t actually need to, the really power of having theses massive overlapping ecosys – typical users are not married to Shopify as their only source of buying, they’re also very active on Amazon, they’re also very active on Walmart, they’re also very active on many, many, many other online stores.
And so, the most important thing for us as we sign these massive partnerships was to be unrestricted and our ability to interact with customers and ability to use the underwriting learnings. Like it’s very expensive to reacquire consumer from merchant to merchant to merchant if you don’t know who they are and you can’t say, oh wait a second, I’ve seen you before and here’s what we understand by your credit profile. And so, none of those things are restricted.
I am very patient when it comes to reacquisition of consumers that I have complete understanding of the repayment profile. And depending on the type of integration and the complexity of integration consumers learn about Affirm at different pieces. But they all eventually end up on the Affirm app interacting with both our payments products and all the other things that we do.
Reggie Smith
Understood. Amazon, obviously huge announcement, you gave some stats in your fiscal second quarter, calendar fourth quarter, it still seems like I guess the presentation within Amazon at still very low. Can you talk a little bit about the opportunity there? It seems like there’s an enormous opportunity you know I go into this Amazon and I have a hard time finding Affirm. What are you guys doing to make that?
Max Levchin
That’s primarily the function of Amazon being enormous and having lots and lots of many different things going on. The way to think about Amazon is first of all, it’s exactly right, the opportunity is massive and there’s lots to do. We’ve had so far a great set of interactions, plannings or point of view, both companies are very obsessed with consumers, consumer satisfaction, both companies think very long-term. So there’s lot to do both sides are very committed to doing it. It’s less about finding Affirm in a front page of Amazon, and it’s all about making sure Affirm is there when an Amazon shopper thinks, hey, I would like to pay for this over time. And that is something where both sides are very, very focused on.
If you look at Amazon’s reviews by the way, Amazon’s reviews everything like I – I’m not sure there’s something they don’t review, but they have reviewed program for their payment instruments. I believe at least last I checked, we were the highest reviewed way to pay for anything on Amazon, and that is the enabling condition for Amazon say, you know what this is a partner we’d like to invest with or invest into bringing out to more consumers. So I feel very, very bullish on where that goes.
Reggie Smith
Got it. So, you know one thing I noticed you know you guys reported strong increased engagement I think you know 20%-ish type engagement improvements. But people still use the account less than three times on average per year. I think credit cards that use you know 150 times a year on average. Where do you want to be? Do you want to be more episodic? Do you want to be more every day? Is there a tradeoff in times of the value that you can extract in the transaction –
Max Levchin
Looking for my prop. Here’s the silent answer to your question. It’s my license, that’s my Debit+ card. I used that twice in the last 12 hours. The goal is to be a daily tool. And it’s – we think a particularly clever way of getting there, we absolutely want to be the transaction tool of choice when it comes to considered purchase, that’s where we started, that’s the hardest thing, that’s we think the longest-term risk, et cetera.
And we arrived at low AOV that by the way, it – it’s – it doesn’t take a genius to figure out that the increase in engagements, the repeat transactions, the repeat transaction numbers are all coming from the fact that we are now successful in low AOV as well high AOV. You’re not going to buy any more mattresses or workout bikes in any calendar year, but you definitely going to buy more than one T-shirt, more than one jacket. And so we’re growing very well there.
The sort of undiscovered country of buy now, pay later is twofold. It’s offline, we’re very heavily invested there and this cart is all about that. And that’s where majority transactions still happen, you know 90%-plus of purchasing with credit cards, debit cards whatever, all happens in physical retail. And two, sort of within that offline world is groceries, and I do think we have a massive role to play there –
Reggie Smith
In groceries?
Max Levchin
Groceries. And I think our consumers love us. And they trust us to help them budget and as recession rolls in, I think you will find more consumers having second thoughts about luxury purchases, but no one’s going to change their plans on feeding their family. And so, we see a massive opportunity for us to be a part of everyday transactions by way of helping consumers with what they actually will never compromise in terms of purchasing. So that that’s the purpose behind Debit+, there’s a lot of other omnichannel as it’s called now, investments that we’re making.
Reggie Smith
I’ve got to ask you this. So, and I’m sure this to resonate with the audience here. I’m addicted to rewards and points. And so how do you get people like me and like them to use the Debit+ and to give up you know their AmEx or their Chase Sapphire Chambers Plug card.
Max Levchin
I would allow – I would never hope at least in at this conference to talk anyone out of their Chase Sapphire cards. As a –
Reggie Smith
I appreciate that.
Max Levchin
As a caring member – I’m not good enough for it, but I do have my United Explorer in my back pocket somewhere too or in my wallet. So, I am customer. But I’ll spare you the rant on the coastal elites that don’t revolve. But a huge percentage of the – this country is not actually point hunting, then the points’ guy is everyone’s favorite read when you can use your credit card like it’s a debit card, where at the end of the month you just zero out and maybe paid an interest or a late fee here and there, but doesn’t really matter to you.
Vast majority of Americans live in the reality of I think 70%, 75% utilized, they’re not really obsessing over rewards, they’re just trying to make sure their family is well fed and they’re not in too much debt and they’re making better than minimum payments and things like that. And so, a lot of our customers are – a lot of consumers are those people they actually are well employed, they’re great human beings, they have families, they have jobs, they’re not obsessed with eeking out that next trade trip.
That said, we do have a Affirm rewards program that we’ve been working very diligently on so you will see that arrive as the feature of your Debit+ account and you’re Affirm customer overall. We think of rewards a bit differently I think point hunting is interesting, but I think it’s a bit of a game, a little bit of a luxury, I think there’s more utility that you can have there. And so we’re trying to comment it from the same sort of a responsible financial life enabler that we think we are.
Reggie Smith
Understood. I got a question from the portal. They’re asking in regards to your funding, your forward-flow agreements, how committed or can you confirm how committed they are I guess they’re – I’m guessing that the question is, you know could those forward-flow partners pullback or what’s the visibility there?
Max Levchin
It’s very good. A big sort of a structural philosophical approach that we’ve had to all of our lending partnerships from the very, very beginning. Like there’s true story from nine years ago, the very first warehouse line I personally closed. I got on a phone with the partner and said, hey, we’re going to go with you, you’re the first one we’re signing with, we’re probably going to screw up at some point, we’re not going to screw up so badly that you’re going to have to fire us, but I need to believe that you’re going to be our partner as we clean up our messes as we learn.
This was nine years ago, we haven’t screwed up in quite some time. but, the idea of it’s okay to leave a few pennies on the table, so we chose the higher rates, the reason I have to call this guy and said, hey, you didn’t outbid the next you know cut rates lender, but I would rather take your lower advance rate and higher interest rate so that we can be partners through the moment when you have second thoughts about whatever. That philosophy we took with us to every single warehouse line on which we now have quite a number and every single forward-flow agreement, every single securitization we’ve ever done, it’s always built around the idea as we have to generate a high quality assets, the number one thing I obsess over – like the way to trigger me, to wake me up in the morning and say, hey, any one of our facilities, any one of our lines, any one of our securitizations is out of the band of credit performance that we promised.
Like, we will go very, very far to make sure we stay within those bands. And that’s because not just because we need to make sure we, you know that all the covenants we’ve signed, but because we’ve promised to be good partners, with the understanding that our forward-flow providers, et cetera, are going to be good partners with us. And so we signed long-term agreements, nothing is due to renew for quite some time. We’ve just done the securitization, we’ve just added a bunch of capacity, every time we sign warehouse and forward-flow agreements, we typically get really nice compliments how good our team is to work with. So, we go very far to make sure these are personable and personal relationships.
That said, we watch the numbers like thoughts to make sure that we are never on the wrong side of any deal and I think in rougher or more complicated times, which is just certainly where we are now, these partnerships are tested but people also flight to quality, like there’s a real sense that I’ve gotten in the several conversations that I’ve had with our funding partners, that they don’t just love our asset that they also have, they expect us to be one of the partners that they rely on to place more capital.
In fact, when we just did our most recent deal, we had to literally totally belong, we really are out of capacity for this one we’re going to have to come back to next time. So, the demand is very strong, the deals are really robust, most importantly, our attitude towards these deals and the relationships of the people signing them is exactly right where I think it should be.
Reggie Smith
Understood. So just thinking about your portfolio today and I don’t have the stat in front of me of what proportion is held on balance sheet. The question is, do you anticipate that changing, are you – is your appetite to hold more increasing and then the second part of that question is with rates rising and there being presumably more options for your – forward-flow partners to invest in different things. Has that changed their appetite or willingness or eagerness to use – that my sense is that, you know when rates were rock bottom that you know these folks had money to put to work – didn’t any place to put it and so.
Max Levchin
So I mean the environment is certainly pre-dynamic sort of to couple of important points I think worth knowing. So generally speaking, we’re quite happy with the way we fund the business. So we don’t anticipate the need or we don’t really have plans to drastically blow out our balance sheet or anything of the sort. We have averaged 2% equity, and we quite like that number and if you sort of look roughly I think two years and a quarter ago, we were at about 10% equity, so overall equity participation in our book has been diminishing and that’s exactly where we wanted to be. So I think a pretty great set of a bookends of our capital use efficiency.
In terms of rates, we’ve been in business for a long time and we ran the company just fine back when the rates were not rock bottom and we had wonderful relationships and we cultivated them and did really well for our partners back then and we’ll continue to do so now. Three, as we grow larger and become a more reliable simply through just having more and more quarters reported, partner on the debt side, the doors to deeper pulls of capital that are less rate-sensitive, but more had just lots more capital to deploy are open to us.
You know five years ago, going to an insurance company or pension fund it was there like probably going to get last out of the room like we’re just too new. And at the time it was like we’re five years in, you know how can we be too new, we’re not startup. So it’s now over 10 years, and these doors are open to us and we are adding insurance companies and pension funds and I think those folks are certainly looking for yield, but more than anything I think they look for stability and great partnerships and that’s what we have become known to bring.
Reggie Smith
Understood. I’ll pause for a second and see if there any questions in the audience. If you have a question, raise your hand, I’ll have the microphone come over to you. It’s guy over here, one second.
Question-and-Answer Session
A – Max Levchin
Now that I look at the screen, the screen is really great.
Unidentified Participant
Thank you. Can I ask about your relationship with the networks so Visa and Mastercard, because I think out of the buy now, pay later is, you were the only ones to make some noise around paying your balances not with the card. But now I see that you took your – I think it’s the Visa card right, out of the pocket. And so I wonder and PayPal kind of went through this before as well with kind of the network and trying to steer kind of customers. So, how do you see the networks in terms of you know are they partners or is it your kind of long-term ambition to kind of perhaps get some of that?
Max Levchin
So a good – as in a perfect analogy, so it may or may not work, but I’ll try it anyway. So a good way of thinking about Affirm is, so we are to Visa what Netflix is to Comcast. The pipes are really, really important. We will never, for some definition of never get to that one last grocery store and wire them up for acceptance so far as much we would like to.
There’s some real benefits to being directly connected with us, vast majority of our network connect – our merchant connectors are direct, we get information about what’s being purchase to you know sometimes extremely high details, sometimes less details, but it’s really valuable to be data enabled, if you’re not data enabled network, you’re kind of riding the old rails.
That said, the last mile has been fully plumbed and piped by the networks and we love that. We’re partnered with them, we have a great relationship with Visa, the card as you correctly noticed, we’ll have a Visa logo on it. So that when you go to that last grocery store, you don’t have to think twice, will my card from Affirm work here or not.
We bring a lot more value on top of the networks, because of the direct integrations that we have with the merchants, because the data – because the ability to underwrite, because of the structural advantages, because of the fact that frankly the networks are built around very, very simple funding model. The kind of the you know not Affirm one of one, of how did we start the company was my answer, the Affirm two of one, you look at credit cards and how credit cards are priced, the MDR and EPR, the merchant price and the consumer price were fixed in the past. Well before the current transaction got contemplated, which is complete insanity.
I decided I’m going to be okay with $14.99, some merchant decided they’re okay paying 3% and here I am and I’m dying to buy this thing and I’m having second thoughts. The merchant would jump out of their skin to say, you know what, I’ll give you discount. I’ll do anything. I spent so much money on marketing, I wanted you here, now here you are, you’re thinking and you’re thinking it’s too expensive and the only tool they have is, I’ll give you 10% off, which is stupid because the guy behind me in line says, wait a second, you’re giving everybody 10% off or is that guy special? It’s a terrible way to run a business and that’s what merchants you know do to drive themselves out and sort of that they’re going out of business sale is immediately after the 50% off sale.
In Affirm, you may think of internet with large as this idea that you go from batch processing which is by the way how all the card networks and lien hard banking infrastructure in this country runs, it still runs, to real time processing. The pricing of each transaction on the Affirm network occurs in real time and that happens with a riding Visa rails overriding our own. The real-time that’s of the pricing and the targeting of what’s going on is essential to who we are. I think Visa recognize that when they partnered with us and we’d love them for the distribution that they bring and we have a lot of defensibility around the data and the real time nature of both risk management and pricing that we had.
Reggie Smith
Any other questions? Good, I got more. Can we talk a little bit about the competitive environment? We’re hearing that is it’s getting tougher. Certainly there the tons of checkout options on checkout pages, what are you seeing competitively and then how do you – you guys don’t spend a lot in advertising, like how do you compete and why would someone choose Affirm over someone else at that checkout that moment in checkout?
Max Levchin
Well I think if your competitors are going from 100% year-on-year growth to 15% year-on-year growth, a merchant might think twice about integrating with them, because they’re clearly choking their growth engine which means that their approvals are going to go real down. And the other, I mean competitor who partner with has just on a massive layoff. So between those two, I feel extra good about my competitive options today.
I think for very long we’ve refused to burn money in large barn fires which a lot of my competition has done for quite some time and just obsessed over building the best product possible. By the way that does result in deeper approvals. We see our product has not what’s you know the button that with –
Reggie Smith
Deeper as in higher or? In terms of the deeper approvals –
Max Levchin
Deeper approval as in approve more people out of a 100 applicants come in, you will actually get confirm approval. So our product strategy is both the user interface of the – what the consumer season with the merchant benefits from as well as the underlying risk manager. So as a risk manager, we want to approve everyone, but we can’t because some people are borrowing beyond their means and with no late fees and they’re structurally prohibiting ourselves from lending money where we can’t get it back is really, really important.
And so, just iterating on the product, not burning money on crazy advertising deals and most certainly not signing deals that are economically non-viable. The most important thing to understand about the sort of competitive nature of BNPL is way too many players, in fact, at some point I think we’re the only one, but fortunately the world is now rapidly stabilizing, we were the only one for a time that would not sign a deal where we wouldn’t make money on every transaction. You cannot make negative money on every transaction and make it up in volume. That’s just a bad idea for businesses. And we’re not like that.
We have been very, very discipline about it and I don’t want to sound giddy, but as the economic times get tougher, it’s a little bit easier to survive, if you don’t have to go back to your merchant partners and say, hey, so here’s the thing, I signed this deal with you and I give you a ton of money in co-marketing, I’m losing money, so can we please change that up. And so I think that discipline is finally going to come pay a lot of dividends for us.
And by the way, a huge part of why these enterprise merchants like Shopify, Amazon, Walmart partner with us, we approach every one of these conversations as a very honest exchange of information where is that, look, here is where we make money, here is where we lose money. If we lose money on your volume, we will be out of business fast. That cannot happen. And so, if it doesn’t work for you that’s okay, but it has to work for both sides.
And two, at every single one of our partners has appreciated that hardly and in the world where money is cheap and you know grows on trees and it can raise money all day every day, it’s hard to compete. You have to stay very true to that north and just keep your head down and believe that at some point it’s all going to get found out, it’s getting found out now.
And so I think today have a lot more credibility going to a merchant and saying, look, if I cut this deal I will lose money, and that’s not okay. I think a year ago merchants would probably tell me well, you have competitors that are willing to lose hills of money here, what’s your problem. So I think that again, I don’t want to show too much shut-in for it, but I think competitively in a tougher economic environment it’s easier to just have a rational conversation.
Reggie Smith
A follow-up on that just a point of clarification, as you were explaining, I was thinking that you know off the top of my head I could think of you know two partners, three partners where you are relatively exclusive, so in Amazon, you’re exclusive, I think in Shopify you’re exclusive, Peloton obviously you’re exclusive. That’s got to help for pricing. Yes, no, or like how should we think about that? And is the competition where you are – in cases, where you are presented versus no one else like? You know what’s the difference there and how – what are you seeing?
Max Levchin
So we don’t obviously disclose all the pricing information and so, probably not something I want to comment to in too much detail. I think generally speaking, pricing is a band, below a certain level it just doesn’t make sense for us and we can’t do it. Above a certain level, the merchant cannot afford it, and they’d rather not. Within that band it’s a question of first and foremost, what’s the consumer experience? Like, if the consumers get approved, but they hate you were to decline all the time. It doesn’t work for the merchant, they won’t sign the deal.
Next is structurally whether this is an interest-bearing product for consumer or not makes a huge difference. Obviously if a merchant paying that interest essentially it’s a lot more expensive for them, but they love the top line that it brings. They have to believe that the bottom line makes sense for them. We are similarly minded that we don’t want to put them out of business anymore the new one them pushing us out, so therefore we’re very, very receptive to that. So understanding how that works for them.
On the consumer side, pricing is based on rest of float, so it’s entirely floated and generally speaking, we tend to commend the highest prices in the industry which I think is factual, not so much because we are good at negotiating exclusive deals, but because we have by far the best product and our consumer satisfaction rates are really, really high.
And so as consumers interact with Affirm, they tell the merchant, hey, this was great, I don’t particularly care if the merchant then says, well, yeah but I also want to offer another BNPL provider, my assumption is that overtime the world becomes you know supports multiple BNPL brands, one or two probably and my job is to make sure that the consumers that looks at the handful of logos I check out and the eyes drift over Affirm say, that one was great, I love those guys, no late fees, great consumer satisfaction, really enjoyed myself, did not get pushed into more than I should have taken on, I think we’ll do just fine.
Reggie Smith
We got two minutes left, I got two quick questions. The first, I wanted to give you a chance to talk about your path to profitability. So you guys I think three out of that five quarters you’ve been public you’ve been profitable, but you’ve always committed to being sustainably profitable by the end of fiscal ’23, I want you to talk about that but then the second thing before you get out of there, I wanted to hear your view longer-term with the industry, and you kind of touched on a second ago, but like what does this look like in 10 years, our traditional FIs offering BNPL, are there more providers like how do you kind of see the industry evolving. You’ve got a mid-40s so.
Max Levchin
I tend to give long answers. So path to profitability. I mean you said yourself, it’s not that hard. So the easiest way to think about it, as long as the growth remains good, and if I deliver one message we’re very committed to profitability at transactional level, there’s not enough people in the world that can hire that would pass the test of working at Affirm, at some point number of transactions times the transactional profit overwhelms the fixed cost. And then you’re profitable and you can’t think of unprofitable as long as you at least maintain and keep growing. And so, that’s the plan we just sort of posted at save the date, that’s really owe it in.
Reggie Smith
Real quick, and that doesn’t include or assume any layoffs, I know –
Max Levchin
No layoffs.
Reggie Smith
Yeah, okay.
Max Levchin
I will not take another round of [indiscernible] no. I’ve had to really up to my last company that’s sucked, I will not do it again. Future of the industry is really interesting. I think the world will support one or two new brands of BNPL, they may already be here today, I’m certainly confident that Affirm will be one of those brands we intend to be, I’d say 100 year old company or a 100-year company, but you I’ll at least prognosticate as far as you know next 20, 30, 40 years I’d like to be Affirm.
The one thing that I think is going to happen and I think 10 years ago this was total nonsense, nobody believed it and I think now it’s pretty real, I think this idea of not revolving, paying things over time close ended, basically using your debit card with a transactional borrowing capacity is going to be a huge stick. Like I’m very, very committed to Debit+ vision, because I think it’s the right thing for consumers. We haven’t set a too loudly before, but one of things we’re going to do is we’re going to license out our partner with any card, debit card issuer who wants to add Debit+ functionality to their card.
Not so much because we see that as a massive profits out of it, because it is really the right thing for the end consumer. So if you’re Credit Union or Regional Bank who don’t have access to the yields that credit card issuers have, we will offer you our Tech Stack, we built it explicitly for that purpose. So our card is hopefully one of many Debit+ branded cards where Debit+ is the enabling technology and not to the underlying lenders.
Reggie Smith
Appreciate that. Thank you.
— to seekingalpha.com
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