Rumors of American client strife are drastically exaggerated, Affirm CEO and PayPal cofounder says

That’s in keeping with one CEO with a large stake within the matter: Max Levchin, the co-founder and chief govt of Affirm, the publicly held fintech firm and reigning champ of the purchase now, pay later house. “We’re still growing really well,” Levchin just lately advised Fortune in an interview. “People are paying our bills well on time.” 

He’s not mistaken. Per a latest Adobe Analytics report, U.S. shoppers spent $331.6 billion purchasing on-line within the first 4 months of 2024—7% greater than final 12 months. And practically $26 billion of that on-line spend got here through purchase now pay later providers—an nearly 12% year-over-year leap. Certainly, consumers are “[embracing] more flexible ways to manage their budgets,” the report stated.

Levchin has maintained a sunnier-than-average disposition in regards to the state of the American client, just lately echoing the sentiment to Yahoo Finance. “The economy is in a better shape than popular opinion will have you believe,” he stated final month. “From where we sit, people are spending.”

They’re additionally capable of pay. After over a decade at Affirm, Levchin advised Fortune that most individuals nonetheless don’t consider him when he repeats one specific reality. “The total number of lead fees compounding interest that we charged last quarter was zero,” he stated. “It’s been zero since inception. We’ve never charged a penny of late fees—or any other hidden or gimmicky fees—and have no intention to.” 

Levchin, who in a earlier life was a founding father of PayPal, stated that reality is “profoundly important” and integral to Affirm’s mission.

“Obviously, you don’t want to take advantage of people when they’re struggling to pay their bills,” the 48-year-old Ukraine-born founder stated. “On a more fundamental level, it aligns [Affirm] with customer success. If someone borrows money, and they can pay us back on time, that’s great for us and good for them.”

Plus, they take it personally: Levchin stated his firm sees a buyer’s incapacity to pay as a weak spot on the corporate’s facet. As defined within the firm’s Investor FAQs, Affirm primarily earns cash via the charges it prices taking part retailers and thru “simple interest-bearing loans” it facilitates. It additionally snaps up interchange charges via its digital card, and thru mortgage providers it offers to third-party traders who purchase Affirm’s client loans. 

“Whenever we made an [incorrect] underwriting decision, we had to have been more thoughtful, we should have seen something about [a customer’s] inability to stomach this kind of bill, and so that’s an error for us,” Levchin stated. “And they’re not in a good place. But neither are we. And so we learn from that and we stay aligned with their financial success.”

For higher or worse, the purchase now, pay later business is booming—although its days could also be numbered, as a consequence of latest regulatory scrutiny. Apple, earlier this month, pulled again by itself contribution to the BNPL market, as a substitute saying it might combine Affirm into its upcoming iOS 18 software program. 

To make certain, BNPL is hardly a get-out-of-debt-free hack for shoppers. Analysis exhibits utilizing BNPL tech like Klarna, Afterpay or Affirm doesn’t essentially make it simpler to emerge from debt, and actually, per the Boston Fed, nearly no excessive earners use BNPL; and the most important share of consumers are those that earn between $50,000 and $75,000 a 12 months. And per the New York Fed, BNPL customers with poor credit have a tendency to make use of the service as they’d use a bank card—which BNPL was meant to switch—which could clarify their persistent “phantom debt.” 

No extra sitting in debt perpetually and ever?

Levchin, for his half, doesn’t even just like the “fancy four-letter acronym” that’s turn out to be ubiquitous. “But that’s what the world seems to have settled on.” BNPL is healthier than bank cards, which Levchen defines as “buy now, pay forever.”  For those who’re not cautious—or don’t have the wherewithal to parse the bank card corporations’ phrases—“you’re literally going to stay in debt forever and ever and ever, because minimum payments aren’t designed to get you out of whatever balance you’ve created,” Levchin stated. “They’re, in fact, designed to kind of keep you sitting there compounding interest.” 

That “sitting in debt forever and ever” strategy—which bank card corporations definitely don’t work towards, in Levchin’s view—is what underpins the $1.1 trillion in present excellent bank card debt that U.S. shoppers are saddled with. “There’s no real motivation, on the part of credit card issuers, to tell you, ‘Hey, you got to pay this thing off,’” Levchin stated.

“In fact, that balance is sitting there revolving, which means that the interest [is] accrued every day, and goes right into the principal and just spins up and spins up on itself,” he added. It’s typically not the buyer’s fault. “People have a very hard time estimating exponential functions, which is compounding interest accrual.” That’s why integral to Affirm’s mission are simplicity and a way of management. “We will be a little annoying, telling you like, ‘Hey, you’re behind, you’ve really gotta pay your bills, please.’ But we won’t charge you a penny extra.”

That alignment is essential for Levchin’s mission, and he stated it’s “also just fundamentally healthier” for the buyer. “I have infinite conviction that if U.S. consumers would just switch entirely to Affirm, [or other] binary affiliate products, instead of credit cards, we would be in a healthier financial position, as a nation.”