Online payment service Affirm Inc., which lets consumers split purchases into smaller monthly payments, has raised $275 million in new capital. Spark Capital Growth led the Series B funding round, with new investors Jefferies and Andreessen Horowitz, and existing investors Khosla Ventures and Lightspeed Venture Partners also taking part.
The company, launched by PayPal co-founder Max Levchin in 2012, previously had raised $50 million in a Series A funding round. The new capital, Levchin says, “will be used to significantly increase Affirm’s loan distribution capacity, grow its merchant services efforts, offer customers lowercost loans and develop new products. The company will also be able to reach more consumers, and develop and launch brand new products and services.”
Affirm enables online shoppers to split the purchase price, plus a small amount of interest depending on the individual consumer, into monthly payments of three, six, nine or 12 months. For retailers, such payment flexibility makes shoppers more likely to complete a purchase, according to the company.
“The simple interest, term loan (not compounding or revolving) is underwritten in real time and only requires most customers to provide top of mind information such as name, DOB, phone number and last four of social security number,” Levchin explains. “Affirm settles with merchants within a day, guarantees all payments, and takes on all the repayment and fraud risk.”Affirm makes money from the interest charged to consumers as well as the processing fee merchants pay, which Levchin says is comparable to credit card processing fees. Credit card fees average 2%-3% of the purchase price.
He says more than 100 retailers offer Affirm to customers, including Real Real Inc., the designer consignment retailer that is No. 239 in the Internet Retailer 2015 Top 500 Guide. The payment service integrates with e-commerce platforms offered by the likes of eBay Inc.-owned Magento, SpreeCommerce, 3DCart and AmeriCommerce.
Among the e-retailers that offer Affirm to customers is Casper, a direct-to-consumer startup that has been selling mattresses from its Manhattan nerve center for almost a year. “We know not everyone can pay for a Casper mattress upfront,” says Gabriel Flateman, Casper’s co-founder and chief technology officer. “I think personal financing, like sleeping, is recession-proof. Consumers prefer to pay for an item, especially a larger purchase like a mattress, over time. It’s often easier, and Affirm allows for much more financial flexibility.”
Upon checkout at Casper, consumers can choose to pay by debit or credit card or select “Financing with Affirm.” Consumers who choose that option can pay off their purchases over six months with 0% interest. Flateman declines to give specifics about how Affirm has worked out for Casper, but says that “the percentage of customers using Affirm has grown steadily since we launched last April.”
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