Affirm: The Internet’s American Express - [Business Breakdowns, EP.249]

Today we're breaking down Affirm, the buy now, pay later company founded by PayPal co-founder Max Levchin. Affirm processes more than $50 billion in annual purchase volume and is growing over 30%, even after its stock fell more than 90% following its IPO.

Joining me is Fraser, an investor who has spent time with Max and studied the business closely.

We explore how Affirm makes money, why its transaction-level underwriting is different from traditional credit cards, and how its merchant relationships create powerful network effects.

We also discuss the company's resilience through rising interest rates, its competition with Klarna, and why Affirm may be better understood as the American Express of the internet than as a traditional lender.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page⁠⁠⁠⁠⁠⁠⁠ here.⁠⁠⁠⁠⁠⁠⁠

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Editing and post-production work for this episode was provided by The Podcast Consultant.

Timestamps

(00:00:00) Welcome to Business Breakdowns

(00:01:29) Max Levchin's journey from PayPal to Affirm 

(00:07:11) How an Affirm transaction works 

(00:11:53) AI and the advantage of transaction-level underwriting 

(00:16:43) Affirm’s business model and unit economics 

(00:20:18) Why Affirm is the internet’s American Express 

(00:24:50) The power of negative CAC 

(00:25:25) The growth opportunity in buy now, pay later 

(00:28:16) How AI agents could transform payments 

(00:31:51) Affirm versus Klarna and Afterpay 

(00:37:14) Affirm Card and expanding beyond online checkout 

(00:39:39) Why merchants adopt Affirm 

(00:42:21) Customer retention and the Walmart relationship 

(00:44:58) Affirm’s 90% stock decline and recovery 

(00:49:15) Max Levchin’s leadership and AI-first culture 

(00:54:06) How Affirm funds its loans and manages interest rate risk 

(01:00:56) Affirm’s long-term growth opportunities 

(01:08:57) The biggest risks to the investment thesis 

(01:12:10) Lessons from Affirm’s resilience