When Affirm became public in 2021 and made Max Levchin an instant billionaire. His net worth is $2.2 billion in 2022, a decrease of around $800 million from what he had back in 2021.
Affirm began trading on NASDAQ with the symbol AFRM on January 13, 2021. On that day, the company raised around $1.2 billion in its IPO. The next day, the price of shares had doubled making Levchin’s stake in the company $2.5 billion.
Affirm is a buy-pay-later-company, where shoppers or consumers can buy stuff and pay later. This is how it works, consumers can register on their website or mobile app, and it works the same.
After registering, you are ready to shop. It’s that simple. After choosing what you want from their platform’s hundreds of thousands of shops from merchant partners, Affirm would ask you to choose whether you will have their “4 interest-free payments” or “monthly installments”. You choose a plan and you pay that amount on a scheduled date.
Affirm does not charge its consumers any late fees at all. Merchants also pay no integration fees, annual fees, or monthly fees for using their services. Affirm earns revenue in five ways:
Merchant discount rate (MDR) that they generate from their merchants whenever a transaction is being facilitated that’s typically 5.99%.
Affirm generate revenue through simple interest-bearing fees which would be $0.30 per transaction.
Affirm earn interchange fees whenever consumers use their virtual card over established card networks.
Affirm earn by selling a portion of the assets originated in their platform to third-party investors wherein they can recognize a loss or gain on the sale of these loans.
Affirm also makes money by providing loan services to their consumers on behalf of third-party investors.
Affirm commonly offers two types of payment options:
Pay-in-4 instalments that are paid every 2 weeks claim 0% APR. Most of those shops that offer 0% APR require a 25% down payment upon approval and a 25% payment every 2 weeks until the full value is paid off.
Monthly payments are paid monthly with a 15% APR. This option allows consumers to pay in the span of 3 months, 6 months, or 12 months depending on the merchant. Some even allow consumers to pay for as long as 48 months.
Aside from these two, consumers can also be financed by Affirm with purchases up to $17,500.
Also, the downside that most people find in Affirm is that it has a high interest that climbs up to 30%. However, with the length that some merchants allow, 30% is just fair and very affordable.
At the end of the fiscal year on June 30, 2022, Affirm’s revenue in the merchant network segment was $458.51 million, and $100.70 million for the virtual card network segment.
Affirm spent $2.21 billion on their operations at the end of fiscal year 2022. It is 76.80% more than they spent at the end of the fiscal year on June 30, 2021.
Affirm spent $74 million on advertisements in 2022. This is a large increase compared to their advertising expense in 2019, about 28 times more money spent.
Affirm had a gross merchandise value (GMV) of $17.00 billion at the end of the fiscal Year on June 30, 2022, more than twice what they processed in 2021.
With over 245,000 merchants on their platform, Affirm has partnered with the largest sellers in the world. They are Amazon’s exclusive BNPL partner through January 2023. They are also partnered with Gucci, Walmart, and others. Here are some of their largest merchant partners.
What is Affirm’s loan-based consumer retention rate?
At the end of fiscal year on June 30, 2022, 81% of Affirm’s loan transactions are driven by repeat consumers, an increase of 9% compared to what the company had at the end of fiscal year 2021.
Affirm had a total of 34.29 million transactions on March 2022. These are calculated by multiplying the number of consumers with the average transaction per customer.
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About the author
Ch Daniel is the co-founder of SignHouse and chairman of the CH Group. Daniel is leading the development of SignHouse's product, as well as strategising how else the company can reach its main mission: empowering 100M+ to use the world's most efficient document organisational tools.
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