Affirm Archives - Lend Academy

Affirm + Peloton: I can almost hear the market expanding

Bo Brustkern, co-founder & CEO of LendIt Fintech shares his experience purchasing a Peloton bike with Affirm financing.

January 30, 2020 By Bo Brustkern Leave a Comment

As Ryan wrote last week in an article about an industry-wide push into online retail point-of-sale financing, Affirm is changing the game for many retail brands. Ryan wrote about the partnership between StubHub and Affirm, wherein Affirm underwrites major ticket purchases (think SuperBowl) and books the interest on a 12-month payback that ranges in annual interest from 10% to 30%. In other cases the partnership can look very different. Take the popular smart exercise equipment brand Peloton.

I’ve been a studio cyclist since the 90s, when studio cycling was called spinning, and the only spinning studios were at the local YMCA. Yet as we closed out the second decade of the new millennium, the studio cycling hype had reached a fever pitch. Peloton had arrived, and the very real possibility of enjoying a high quality in-home studio experience became real.

Even for a gearhead like me, the steep cost of entry remained a barrier to adoption. While the monthly membership for Peloton is a modest $39/month, one needs to purchase an in-home bike — or treadmill, pick your poison — to get started, and the bike lists at $2,245. Yowza. If it weren’t for the up-front cost, I would have adopted Peloton immediately. As it was, I didn’t buy in, and instead continued to drop in on my local FlyWheel studios for $28/ride.

Enter Affirm, which offers up to 39 months of interest-free financing for the purchase of a Peloton bike directly from the Peloton website. That caught my attention, and closed the deal. Affirm’s financing option eliminated the large up-front expense and replaced it with a $58/month commitment. All-in, I’m looking at less than $100 for the complete experience, including paydown of a 0% APR loan. With this capability, Affirm effectively eliminated a material barrier to entry, making the Peloton purchase decision a slam-dunk for a household like mine, which has several cycling enthusiasts under one roof.

The results? For Peloton, this massively expands their addressable market. This 2018 case study points to a 15% increase in conversion rates after it deployed Affirm’s financing solution. The company has effectively expanded its ability to capture an “increasingly mass market audience” by using Affirm’s 0% APR financing option as a customer acquisition tool. As of 2018, Affirm sales accounted for close to 30% of Peloton’s monthly online business sales. That, my friends, is market expansion.

Now, Affirm can afford to offer 0% financing because they are being compensated directly by Peloton. There is no deferred interest, it is a true 0% financing deal.

The results for the Brustkern family are almost as impressive. We now get 24×7 access to the entire Peloton video library, including individual logins for each member of my family. At this rate, even with the monthly amortization of our bike purchase, we are going to do about 40 workouts this month as a family. That’s just a touch over $2 per session, which compares pretty favorably to what we were doing before. That, mis amigos, is a win-win.

As Ryan rightly pointed out, Point of Sale financing has massive potential. While total credit card debt keeps expanding the younger generation are opting out. They are much more likely to be open to a fixed term deal, particularly with 0% interest, than financing a large purchase on a credit card. Instead of a credit card bill with multiple purchases they will have multiple fixed term loans on their bank statements. This is a more financially responsible than taking 20+ years to pay down a credit card bill.

=============

Bo Brustkern is the co-founder & CEO of LendIt Fintech. He can be found on Strava at https://www.strava.com/athletes/bbrustkern

Affirm: Financing Almost Everything at the Point of Sale

Consumers have more options than ever when it comes to financing their purchases at the point of sale.

January 22, 2020 By Ryan Lichtenwald 1 Comment

Over the past decade we’ve seen consumers warming up to buying everything with multiple payments. It is a phenomenon that I believe may have first started with smartphones. It wasn’t too long ago when cell phones were advertised at their full price. Now flagship models from various manufacturers are advertised first as a monthly price though there is still an option to purchase outright. The idea of purchasing items with installment payments is an area that has grown tremendously. So far Affirm has dominated the market in the US, but there are others who provide a similar service or have decided to focus on a specific niche in point of sale finance.

This idea of being able to finance almost anything is also dangerous. Just because you can finance something, doesn’t mean you should. I err on the side of having no debt outside of mortgage payments, but used responsibly I think there is value to a subset of consumers in these types of products. In some cases, true interest-free payments are offered meaning you pay the exact same amount whether you purchase it today or purchase it in payments over a few years. The offerings range from more practical purchases to non-essentials like vacations. For example, Affirm partners with Delta so that you can pay for vacation tickets over a period of months or years.

Bloomberg just highlighted a new partnership Affirm has secured which demonstrates all too well the idea of being able to finance almost anything. NFL diehards will now be able to finance their Super Bowl tickets to cheer on their team through a partnership with StubHub. According to the report, customers can finance tickets from $99 to $17,500 for up to one year. The average ticket price on the secondary market currently sits at around $7,100. Not a football fan? Don’t worry, the partnership extends to other sports and concert tickets as well. Customers receive nearly instant credit decisions with the ability to select a three, six or twelve month term. Annual interest rates will vary from 10%-30%. It’s important to note that the deals differ depending on which retail brand Affirm is partnering with. In the case of StubHub, Affirm pays StubHub immediately for the entire ticket price and Affirm will book the interest. We’ll have more on Affirm partnerships next week.

The 10 Largest Fintech Funding Rounds of 2019

Fintech funding really heated up in 2019, here are the ten biggest deals of the year

January 6, 2020 By Ryan Lichtenwald Leave a Comment

Last year we saw continued interest in a broad array of fintech companies. Recently the fintech space has become more mature, bringing in ever larger rounds to the more established fintech companies. At the beginning of 2019 we began to track the fintech deals over $10 million and we are doing the same for 2020. In 2019 we recorded 199 funding rounds representing over $14 billion invested. Here are the ten largest funding rounds from our list. The total investment from these rounds alone was over $4 billion.

1. Greensill

SoftBank is no stranger to committing large amounts of capital and their $800 million investment in Greensill was just another example of that. Greensill has more than doubled their growth rate annually since 2015 and at the time the round was announced was valued at $3.5 billion. The company operates in the supply chain finance space. They plan to accelerate their growth in Brazil and enter other markets including China and India. Read more

2. Chime

Chime’s brought in a $500 million funding round making a big splash at the end of the year. They are one of the leaders in the digital banking space and are valued at $5.8 billion. The round was led by DST Global and they intend to use the funds to hire employees and expand into more products. CEO Chris Britt also discussed the possibility of making fintech acquisitions. Read more

3. SoFi

SoFi is one of the more well known fintechs in the US. This has been a result both of their marketing spend, having secured the naming rights to a new stadium in Los Angeles and their success in branching out into multiple product offerings. The $500 million round was led by Qatar Investment Authority, valuing the company at approximately the same valuation as their previous round of $4.3 billion. Read more

4. Klarna

Klarna operates in the buy now, pay later space and was founded all of the way back in 2005. They raised $460 million in August 2019, making them Europe’s most valuable fintech startup at $5.5 billion. Klarna is planning to use the funds in part to expand to the US, similar to plans of many of the other leading fintechs in Europe. They are also one to keep an eye on for a potential future IPO. Read more

5. OakNorth

Just behind Klarna comes another large investment in a European fintech with OakNorth’s $440 million fundraising round in early 2019. OakNorth is different than most making this list in that they are a bank focusing on serving small and medium sized growth businesses. They operate a lending business and have also licensed their technology to banks in at least nine different countries. Read more

6. Nubank

Nubank is the only fintech from South America making the list. The Brazil-based company raised a $400 million Series F round in July and reportedly fetched a valuation over $10 billion. Nubank which offers a variety of financial products to consumers had over 12 million customers as of July 2019 which makes it the sixth largest financial institution by customer count in Brazil. They also recently expanded to Mexico and Argentina. Read more

7. Robinhood

Robinhood is best known for their free stock trading app and they raised $323 million in 2019. What’s interesting is that many of their competitors have cut commissions on trading but it’s clear that Robinhood wants to expand beyond free trading into other financial products. They recently announced a revamped savings product after a failed launch in late 2018. The company had 6 million customers at the end of 2018, a number which has surely grown since making them well positioned as they move into new areas. Read more

8. Affirm

Affirm is well known in the US with their point of sale finance solution. The $300 million Series F round included Thrive, Fidelity, Wellington Management, Ballie Gifford, Sound Ventures as well as existing backers Founders Fund and Khosla Ventures. Read more

9. N26

N26 is most well known in Europe but officially launched in the US in 2019. The $300 million round valued the company at $2.7 billion. At the time of the announcement on January 9, 2019 the challenger had 2.3 million customers in 24 European markets. Read more

10. TransferWise

TransferWise raised $292 billion in May and planned to use the funds to hire 750 more team members. More recently the company reported that they handle $5.25 billion in transactions every month and have over 6 million users. 24% of their payments now happen in under 20 seconds. Read more

Conclusion

With such a large amount of interest in fintech in 2019 it is hard to imagine how 2020 will shape up. There have been some industry experts that have taken pause with the valuations some of these companies have been fetching, but it seems like that had little impact on the deals we saw close throughout 2019. We’ll be keeping a close eye in 2020 and look forward to hearing updates from many of these companies at our upcoming LendIt Fintech USA event in May.