WEBVTT - Affirm Holdings Chairman/CEO/Founder Max Levchin Talks Buy Now, Pay Later & Partnerships

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<v Speaker 1>There's one stock that's really been moving over the past

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<v Speaker 1>ten days that we're keeping an eye on, a firm

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<v Speaker 1>around fifteen percent higher over that time frame. It's the

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<v Speaker 1>highest it's been since February. And Affirm this week announcing

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<v Speaker 1>that US Apple Pay users can buy now and pay

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<v Speaker 1>later for as low as zero percent APR. The new

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<v Speaker 1>agreement will allow users checking out online or in app

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<v Speaker 1>with Apple Pay on iPhones and their iPad to be

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<v Speaker 1>able to pay over time with Affirm. And we are

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<v Speaker 1>joined by none other than a firm's co founder and CEO,

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<v Speaker 1>Max Levchin. How does this change the game for you,

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<v Speaker 1>because obviously a lot of users use Apple Pay. Apple's

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<v Speaker 1>own entry into financial services has been a massive wonder

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<v Speaker 1>of the industry, to say the least, But now the

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<v Speaker 1>addition of buying now paying later through a firm, what

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<v Speaker 1>is the expectation here?

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<v Speaker 2>It was just really exciting.

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<v Speaker 3>It's first and foremost, it's unbelievably great to have direct

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<v Speaker 3>integration into a really best in my biased opinion, I'm

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<v Speaker 3>sure digital wallet out there super early days. We've been

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<v Speaker 3>lived for three days, so you know, don't ask me

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<v Speaker 3>for results just yet. But the actual implementation is wonderful,

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<v Speaker 3>and so I'm very excited about the possibilities here. Obviously,

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<v Speaker 3>it's going to be great for consumers that love their

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<v Speaker 3>digital wallet, but it's also going to be amazing for retailers.

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<v Speaker 2>It's just in time for the holidays.

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<v Speaker 3>You'll be able to use your Apple Pay affirm integration

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<v Speaker 3>to buy gifts, to affirm all the things you need

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<v Speaker 3>to have for your loved ones, et cetera.

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<v Speaker 2>So just just really excited about the possibilities.

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<v Speaker 1>It's interesting you and I are old enough to remember

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<v Speaker 1>years ago when I was bothering you left and right

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<v Speaker 1>about what it would mean for Apple to get into

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<v Speaker 1>buy now, Pay Later, and now they're partnering with you.

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<v Speaker 1>There was a time where people would worry about whether

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<v Speaker 1>that would create a significant competitive force. The way the

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<v Speaker 1>landscape is shaking out is through partnership and massive way

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<v Speaker 1>with the giant tech companies. How do you expect that

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<v Speaker 1>to continue to extend because it seems like a pretty

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<v Speaker 1>massive change from what we saw a few years ago.

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<v Speaker 3>It's still a very young industry and partnering well is

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<v Speaker 3>what we have become known for.

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<v Speaker 2>You know, we count the largest.

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<v Speaker 3>Retailers, the largest platforms, some of the best known brands

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<v Speaker 3>in the world among our partners, and it's always for

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<v Speaker 3>the same very basic set of reasons. We treat both

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<v Speaker 3>sides of the customer ecosystem right.

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<v Speaker 2>We don't charge lead fees, we don't hurt our consumers.

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<v Speaker 3>We're very careful to say yes and know when we

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<v Speaker 3>don't believe someone will pay us back.

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<v Speaker 2>And we really deliver value for retailers.

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<v Speaker 3>We increase their average sales, we help them drive conversion

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<v Speaker 3>at the point of sale. And so those two things

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<v Speaker 3>combined make us data deal partner. And you know, it

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<v Speaker 3>helps to be built by very serious computer scientists, which

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<v Speaker 3>means that we can scale with volume. The spikes you

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<v Speaker 3>see during Black Friday and the holiday season are pretty

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<v Speaker 3>significant technical challenges and we're just very very good at it,

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<v Speaker 3>and so that's why we're picked by the best brands

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<v Speaker 3>out there to be partnered with.

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<v Speaker 1>Another aspect of this is you have seen some of

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<v Speaker 1>the retailers you work with. Some have had some knockout

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<v Speaker 1>numbers in the last couple of months, but others have

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<v Speaker 1>really faced weaknesses in the consumer And if you think

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<v Speaker 1>about the path forward here with that interest rate cut,

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<v Speaker 1>how does that really change the game? Do you expect

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<v Speaker 1>consumers to still be this bifurcated in the market. Do

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<v Speaker 1>you still expect significant weaknesses until we see a much

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<v Speaker 1>more significant level of cuts.

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<v Speaker 3>It quite good to predict macroeconomic events as as well

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<v Speaker 3>as that I probably would have a very different job.

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<v Speaker 3>But a firm consumer is buying and shopping. We've just

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<v Speaker 3>reported numbers a couple of weeks ago. They look very strong.

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<v Speaker 3>We are forecasting a really great growth going forward in

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<v Speaker 3>this fiscal year.

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<v Speaker 2>So cautiously optimistic.

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<v Speaker 3>US consumer is shopping, they're buying, they're paying their bills

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<v Speaker 3>with a firm and so that seems to be going well.

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<v Speaker 3>The FED lowering the interest rate obviously among other things,

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<v Speaker 3>suggest the FED is worried about too much of a

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<v Speaker 3>slowdown and that their war on inflation has now been

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<v Speaker 3>bla blah one. So you know, I'm in a cautious

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<v Speaker 3>posture relative to US consumer. That said, we're seeing great demand.

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<v Speaker 1>What are you expecting for the holiday season? You were

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<v Speaker 1>talking about that a little bit before. You were talking

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<v Speaker 1>about how you expect people to pay for their holiday

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<v Speaker 1>shopping on Apple pay who if you guys, among other things.

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<v Speaker 1>What do you think will happen this holiday season? Relative

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<v Speaker 1>to years past from what you know.

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<v Speaker 3>This being an easy prediction to make, but I'm relatively

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<v Speaker 3>sure this holiday season will be the greatest number of

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<v Speaker 3>people affirming their gifts ever.

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<v Speaker 2>That's my prediction for our business. I do expect there.

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<v Speaker 3>To be a significant amount of AI curated gift lists.

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<v Speaker 3>I think that's a big new thing, and there'll be

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<v Speaker 3>a lot of attempts to drive.

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<v Speaker 2>To drive people's buying with just.

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<v Speaker 3>A more curated experience, which now can be done using

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<v Speaker 3>JENIAI So I'm pretty excited about that. And then I

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<v Speaker 3>do see already early in the holiday shopping season retailers

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<v Speaker 3>coming to us and saying we would like to subsidize

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<v Speaker 3>the interest of consumers might pay in these loans, and

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<v Speaker 3>they choose to essentially offer zero interest loans, zero interest

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<v Speaker 3>financing plans that we power of course for everything from

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<v Speaker 3>four weeks.

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<v Speaker 2>To four years late.

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<v Speaker 3>And so I see a lot of that coming, which

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<v Speaker 3>will be amazing for consumers. Being able to take more

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<v Speaker 3>use of money over time without paying any interest is

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<v Speaker 3>pretty awesome.

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<v Speaker 1>Glad to hear you talk more about Jenai, because the

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<v Speaker 1>last time you and I have talked about it, we

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<v Speaker 1>were kind of talking about the limitations and you know,

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<v Speaker 1>kind of the more boring use cases, let's say it.

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<v Speaker 1>When it came to AI and jen AI and financial

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<v Speaker 1>technology in particular, what's changing, especially because you dovetail with

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<v Speaker 1>the world of e commerce so greatly, So I think.

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<v Speaker 3>It's becoming more and more user friendly on the consumer side,

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<v Speaker 3>and I think AI shopping assistance and all the various

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<v Speaker 3>things that retailers are pouring resources and you know, genuinely

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<v Speaker 3>excited about is pretty great. We don't talk a ton

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<v Speaker 3>about it because we want to be very careful to bifarcate.

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<v Speaker 2>We do not use GENEI for underwriting.

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<v Speaker 3>That is something that has to be very predictable and

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<v Speaker 3>cannot hallucinate, so we stay very far from that. We

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<v Speaker 3>do use it for productivity enhancements internally with really wonderful effects.

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<v Speaker 3>I keep unshipping these really cool new ways for our

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<v Speaker 3>consumers to quickly get to the right answer when they're

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<v Speaker 3>contacting us for customer service purposes. We're also looking at

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<v Speaker 3>all sorts of acceleration in our development schedules because we're

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<v Speaker 3>able to use these AI generali tools, and so there's a.

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<v Speaker 2>Lot to be excited about.

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<v Speaker 3>Just you know, like every new technology you have to

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<v Speaker 3>be appropriately careful in use cases that you don't fully

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<v Speaker 3>have control over.

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<v Speaker 1>Max Back to the consumer for a moment here, because

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<v Speaker 1>you and I talk about this a lot. The credit

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<v Speaker 1>card uptake in the country right now, people have been

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<v Speaker 1>maxing out. We are near record levels of credit card

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<v Speaker 1>balances across really the spectrum of America. And then you

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<v Speaker 1>also have rates above twenty often twenty five percent aprs.

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<v Speaker 1>How fast does that come down? And you know, even

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<v Speaker 1>if you can't tell me how fast, or if you can't,

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<v Speaker 1>then what is the relationship between how people use buy now,

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<v Speaker 1>pay later and a mass credit card debt?

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<v Speaker 3>So from my point of view, and you know, am bias.

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<v Speaker 3>So I'll talk about on book for a second. We

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<v Speaker 3>are the right alternative to credit card debt if you

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<v Speaker 3>are borrowing to pay for things over time, which all

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<v Speaker 3>of us do. You know, from education loans all the

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<v Speaker 3>way to holiday gifts, you are better off not revolving

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<v Speaker 3>full stoff when your interest compounds. Into principle, you are

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<v Speaker 3>paying on an exponential curve, and that what credit cards

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<v Speaker 3>do for you. And so I am genuinely conserved of

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<v Speaker 3>credit card balance is growing less because of the absolute

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<v Speaker 3>number of these balances more because of the type of

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<v Speaker 3>debt that they're generating. It's the debt that can't run

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<v Speaker 3>away and does run away from people. The reason by

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<v Speaker 3>now pay later, the reason Affirm in particular, is such

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<v Speaker 3>a good alternative is in our case not just that

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<v Speaker 3>there aren't any FeAs and there's no penalties. In there

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<v Speaker 3>are gonschias, the interest doesn't compound. Into principle, if there's

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<v Speaker 3>any interest to pay at all, it is very reasonable

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<v Speaker 3>to stretch your budget by paying over time. It can

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<v Speaker 3>be dangerous if you revolve on that debt and have

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<v Speaker 3>no idea how you're going to pay it off. And

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<v Speaker 3>I sometimes call credit cards by now pay forever for

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<v Speaker 3>exactly that reason.

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<v Speaker 2>By now pay later is a safer alternative.

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<v Speaker 1>Max, we have to leave it there. But of course

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<v Speaker 1>this is a much longer discussion. This is going to

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<v Speaker 1>change very quickly this world in the next year. So

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<v Speaker 1>that is a firm co founder and CEO Max Lenchen