Affirm, Inc.

Estimated valuation: $800 million

Product: Consumer Loans

IPO Timeline: TBD

Date Founded: 2012

Affirm is committed to improving the financial industry and add transparency and accountability to the banking experience. Founded in 2012 by former PayPal principal, Max Levchin, the company has received $520 million in four funding rounds. In October 2016, Affirm received its most recent round of funding, $100 million debt financing from lead investor Morgan Stanley, according to CrunchBase. This follows an April 2016 round of $100 million from lead investor Founders Fund and others.

Affirm’s initial product is a lending solution that can be used to pay for purchases at a variety of online or bricks and mortar retail stores. The Silicon Valley company prides itself in transparency and explains that there are no hidden fees so that the total you see at checkout is the amount you pay.

There are two ways to sign up for Affirm. You can sign up for an account on the Affirm website or app. Or, you can select Affirm as the payment method when checking out with an online merchant partner. Users must be at least 18 years old in most states, have a U.S. home address (not available in West Virginia), and have a U.S. mobile or VoIP number registered in their names. Finally, you must provide your full name, email address, birth date, and full or last 4 digits of your social security number.

If it sounds too easy, as with any loan product, there are interest charges. Affirm loans charge between 10% and 30% APR simple interest. This is the only fee. In comparison, creditcards.com states that the current national average credit card interest rate is approximately 15%.

The Affirm payment options are also transparent. If you use Affirm to purchase an item for $100 or more, you can repay the loan over 3, 6 or 12 months. For smaller purchases between $50.00 and $99.99, you can pay over 3 or 5 months. Merchants may offer different options.

Affirm explains that it is not like a credit card with an upper limit. Consumers may take out several Affirm loans simultaneously and each will be evaluated on its own merit. Although, consumers might get approved for one loan and denied for another.

In April 2016, Bloomberg’s Gjorgievska wrote about the firm and stated that Affirm gives shoppers the opportunity to finance their purchases at checkout in over 700 online and brick-and-mortar stores. Retailers that accept Affirm include Casper Sleep Inc., Wayfair, Motorola and BCBG Max Azria. The company has plans for other services including loyalty rewards programs and financial management tools, and strives to expand its market presence. Additional growth plans include a possible move into the mortgage and auto financing areas, according to a VentureBeat conversation with founder Max Levchin.

VentureBeat, among others, isn’t a fan of Affirm. In a recent article, Robert Harrow states several problems with Affirm. The underlying critique of Affirm is that just because you can finance a purchase, doesn’t mean that you should. The article continues by explaining the disadvantage of financing purchases at 10% to 30% interest and paying off these items during periods that could stretch out to a year. VentureBeat claims that this type of credit is promoting irresponsible borrowing for wants and luxuries that the consumer can’t afford. In a comparison between buying a Casper mattress on a credit card and paying it off over 12 months with an Affirm loan, the total credit card loan carried lower interest rates and netted a lower total interest payment than the Affirm loan.

Affirm clearly fills a market need in a crowded lending sphere. Along with its fintech peers, the online lending industry is exploding. As more retailers accept Affirm, the opportunities for consumers to pay with credit will accelerate. Yet, to reiterate the VentureBeat critique, just because you can pay with credit, doesn’t mean that it’s necessarily a good idea.