Startup Affirm creates Apple Pay-compatible credit card without the plastic

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Affirm Inc., a startup from PayPal co-founder Max Levchin, is going after millennials with a new kind of credit card alternative that only exists online.

People can sign up through the website or at checkout on some web stores for financing from Affirm that’s paid off in monthly installments. On Monday, the company said it’s making the micro-lending program available through Apple Pay, letting customers tap their iPhones to pay in brick-and-mortar stores.

This essentially makes Affirm a credit card provider without physical cards or credit scores. The San Francisco-based company pitches itself as superior to traditional credit cards from American Express Co. or Visa Inc. because it’s transparent about fees and charges no interest on purchases from more than 150 retailers.

“From the beginning, our mission at Affirm has been to provide honest financial products,” Levchin said. “Affirm’s products are directly serving this growing need in a way no other company has, and I believe we will continue to stand out from the crowd as consumers demand financial products and services that help improve their own financial lives.”

After starting PayPal with Peter Thiel two decades ago, Levchin has dabbled in an array of businesses. In 2012, he returned to his roots in financial technology with Affirm. Venture capitalists are willing to follow Levchin where ever he goes. Affirm is backed by more than $700 million from Thiel’s Founders Fund and other investors.

While it’s still barely on the radar of the U.S. credit card market, Affirm now works with more than 1,000 retailers and is used by people who want a separate financing option for major transactions, like a computer or smartphone. Since there’s no credit score requirements, Affirm’s consumers run the credit spectrum, a spokeswoman said. Affirm pays the store up front and said it can afford to do this because it uses an underwriting method that looks at a wide array of credit data and other information to gauge a customer’s risk of defaulting.

Levchin hopes more stores will embrace Affirm’s approach by offering them insights into customer purchasing habits. With Affirm In-Store, retailers are able to track if someone applies for a loan in the shop but finishes the transaction elsewhere. This is designed to let the retailer better understand the impact of sales staff.

“I’m optimistic there will be a day when shoppers instinctively reach for their phone and the Affirm app, rather than their credit card,’’ Levchin said.

Bloomberg News
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