Affirm, the online payments company founded by PayPal cofounder Max Levchin, now has brick-and-mortar retailer in its sights.
The company made the announcement during the Shoptalk conference in Las Vegas. Its stated goal: “to revolutionize the banking industry to be more accountable and accessible to consumers,” according to its press release. In practical reality, Affirm offers loans covering online and mobile shopping purchases, which are paid back in installments. Now with its new Instore product, it’s going beyond the web to offer financing at physical retail.
“We set out to build a business that offered clear, more transparent financing to consumers at the point-of-sale,” said chief retail officer Rob Pfeifer. “We offer loans that are 0 percent for up to three years, with none of the hidden fees.” Another point of differentiation: Affirm uses data science in credit-scoring algorithms that combine credit history and other factors to assess creditworthiness, instead of relying solely on credit scores and income.
Retailers can integrate Instore application programming interface, which allows with their point-of-sale systems to directly plug into Affirm’s system. Alternatively, they can input the company’s virtual card at the time of transaction. Shoppers fill out a short credit application on their phones, request a loan amount and then choose a payment plan of three, six, 12, 18 or 24 months. Upon approval, the app creates a temporary, one-time use credit card number that the clerk can type in to complete the purchase. The user can also add the temporary card to mobile payment apps like Apple Pay.
As a standard payments solution, the experience looks less convenient than using a regular credit card or mobile payment app. But as a loan option, the process seems rather streamlined, at just a handful of screens — a small bother to snag pricey goods like designer fare with convenient terms. Affirm has worked with BCBG Max Azria, Betabrand, Gilt, Rebecca Minkoff and Tradesy as partners, among others, for its online offering. Bluefly and The Real Real have been piloting the offline solution, in-door bike company Peloton is rolling it out, while Apple reseller Simply Mac steps up as the Instore launch partner.
The company’s online arm alone has provided as many as a million loans, according to Pfeifer, and with the latest product, it has the missing piece for its “omnichannel ecosystem.” Retailers with online and off-line sales channels can bring Affirm wherever the customer wants to shop; the in-store experience was developed to be consistent with the online and mobile experience.
The solution puts expensive or luxury goods in more people’s reach, while giving brick-and-mortar stores the benefit of handing fraud risk off to Affirm. But there’s another perk for retailers: data.
“In an aggregated way, we can show them the income mix in a given store,” Pfeifer explained. “They could actually even change the merchandising in different stores based on the applicants.” Affirm can track buying history down to the stockkeeping unit level, or glean insights from purchase data across its entire merchant platform. Armed with that kind information, retailers can make pricing decisions or redirect their marketing.
“What will happen often times is that ads or radio spots will bring in people with better or worse credit scores, or people with higher or lower incomes,” he added. “We help them verify whether or not the customers they’re [targeting] is what is actually coming in.”