Episode summary
Affirm CEO on Why ‘Buy Now, Pay Later’ Beats Credit Cards | WSJ's Bold Names
The Journal
· · 22 min · Hosts: Tim Higgins, Christopher Mims · Guests: Max Levchin
Summary
Max Levchin argues that buy now, pay later is not a gimmick but a cleaner version of consumer credit. He says the core problem is that credit cards hide the true cost of borrowing behind revolving balances, interest compounding, and late fees, while Affirm shows the payment schedule up front and does not let customers revolve debt beyond the agreed plan.
Levchin traces the company’s origin to two personal experiences: being denied a car loan after PayPal’s IPO and damaging his own credit in college by missing credit-card payments. He says those experiences pushed him to build a product that a young, inexperienced borrower would actually understand. He also says merchants adopt Affirm because transparent installment offers can lift sales by 20% to 30%, and that the business makes money from merchant fees and consumer interest while keeping underwriting tight enough for every loan to be profitable.
He also frames Affirm’s debit card, Walmart relationship, and AI tools as part of the same strategy: making payments and credit more explicit. Levchin says AI will change shopping by helping consumers research products and see financing terms in the same flow, and he expects richer cash-flow data and machine learning to improve underwriting beyond traditional credit scores.
Key takeaways
- Levchin says Affirm’s pitch is transparency: customers see the payment schedule and cost before they buy, unlike credit cards with revolving interest and late fees.
- He says his own bad credit history and a denied car purchase after PayPal’s IPO motivated him to build a product an 18-year-old immigrant could understand.
- Levchin says merchants adopting Affirm can see sales lift of 20% to 30% when they offer simple installment plans.
- He argues the business works because every loan must be profitable, and Affirm avoids late-fee revenue that credit cards rely on.
- He expects AI shopping tools to increase demand for transparent financing by showing installment terms alongside product search and recommendations.
Notable quotes
“When you put your credit card down at your favorite burrito, you are financing that burrito, too”
“before you consummate the transaction, you actually see the payment schedule. You understand what it will cost you”
“The costs are spelled out. Cannot change is pretty attractive and merchants would place those offers on their site and promptly see increments of 20 30% more sales”
“We don't charge late fees which means we lose money which you know by the way that aligns us perfectly with our consumers”
“The reason by now pay later is a better alternative is because it is transparent”
How the episode opens
As much as we all can laugh and mock the, "Oh gosh, they're financing burritos." When you put your credit card down at your favorite burrito, you are financing that burrito, too. You may be personally paying it off at the end of the month,
But half the country is paying interest to their credit card provider. That burrito gets right on top of that pile and immediately starts acuring interest. The sort of a, oh gosh, a new way to borrow money.
Let's stick with the old one because it's better is pretty disingenuous. This week on Bold Names, serial entrepreneur Max Levchin. You might know him as one of the co-founders of a company that became PayPal.
And for the past decade or so, he's been at the company of firm. Max started the buy now pay later company to try to make credit more transparent and therefore less risky. Beex, thank you for joining us on Bold Names.
You have been in the fintech space for most of your adult life. You've been heading up a firm since its creation in 2012. Really becoming one of the darlings in the buy now pay later space.
That buy now pay later, it's not necessarily a new idea, right? Installment payments were really made popular the Great Depression and kind of lost uh the favor as we saw the rise of the credit cards years later. I'm curious, how did you think you could innovate in this space and what was motivating you?
Why why why go into that area?
So two personal events actually shaped the foundation for the founding of the company. So I came to the US as a teenager from what was Soviet Union and as a semi-independent adult I tried to buy a car and was declined even though this happened right after we took my first successful startup aka PayPal public.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- buy now pay later
- credit cards
- ai shopping
- credit scores
- late fees
Companies and tickers mentioned
- AFRM
- PYPL
- WMT
- Affirm
- PayPal
- Walmart
Watch the episode
Watch “Affirm CEO on Why ‘Buy Now, Pay Later’ Beats Credit Cards | WSJ's Bold Names” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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