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Levchin Launches New Payments Startup, Affirm (allthingsd.com)
95 points by jamesjyu on Feb 26, 2013 | hide | past | web | favorite | 39 comments

Most of the replies here are a great example of a filter bubble. Living in San Francisco or New York you just assume everyone has a credit card.

Not so.

A quarter of US households are unbanked or underbanked and primarily rely upon cash for payments.

That's why Walmart introduced shop online and pay in person. Only 15% of Walmart's in-store customers pay via card, from surveys they found that two-thirds of their online customers would prefer to pay in cash.

That's actually quite interesting. It reminds me that Japan as a whole has very low credit card penetration as well, and the primary mode of transaction is cash, even for items costing hundreds of dollars (or tens of thousands of yen, to be precise). Use of 10,000 yen bills (~$100) is routine.

People still have latent mistrust for handing over credit card information online. Virtually all courier services have a "pay upon arrival" option which allows you to pay for the cost of the item + the shipping when you receive the item. The courier then pays the retailer for the item cost.

edit: It may also have to do with the fact that the financial services industry there is even more sales driven and more scammy than its U.S. counterpart, and hence the public has a mistrust for all financial "products" that are anything other than super conservative.

I remember building my first EC site in Japan. The payment processor gave us an API to use that included all the fancy options of paying at a convience store, COD, Bank Transfer and credit cards. It seemed really weird at first, but then I noticed how nice it was for people who did not have credit cards.

It was always fun to know that the payment notification handler on the server would get hit when someone goes to 7-11 and pays their bill.

I forget the percentage, but most orders were not using credit cards.

That's really quite interesting. Could you share the processor for curiosity's sake?

Pretty much all Japanese payment processors support payment at convenience store.

http://www.gmo-pg.com/ and http://www.paygent.co.jp/ are two examples.

What sort of credit card penetration do other parts of the world such as Western Europe/Eastern Europe/Middle East/SE Asian Countries/Australia... other places.

Where do you get the information that you wrote about? I'd be very interested to read into it further. Anybody know any relevant works off the top of your head that you could share?

Where do you get the information that you wrote about? I'd be very interested to read into it further. Anybody know any relevant works off the top of your head that you could share?

Unfortunately this is from anecdotal experience. I was living and working in Japan for some time so I saw first hand what services are offered and how people behave.

Credit card penetration is pretty high in Australia.

Its a few years old, but as of 2009 at least 65% of Australians have credit card debt. http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Main+Fe...

From my experience in Nepal credit cards are pretty much non-existent....apart from the local cards which only work within the confines of Nepal & India.

"unbanked" and "underbanked" are a great illustration of the way one can misapply terminology to create an artificially negative view. I would suggest that most who would be considered "un[der]banked" by the banking and commerce industries are quite happy with their status.

We should try not to proliferate terms that imply a negative accusation just because someone chooses to do or believe an innocent thing that's different from what some other people do, believe, or want others to do or believe (particularly the word's inventors).

Your reply here has limited applicability to Affirm. Max is using a user's digital identity to assure them credit- he'd never be able to do that with an "unbanked" customer who by definition would have quite a limited history.

Do you have a source for that? I'd be interested in reading more about it. I never would have guessed credit transactions would be that low at Walmart; I grew up in a poor, "redneck" area and knew a lot of people (my family included) that depended on the "float" you get with a credit card to give a little flexibility over their normal paycheck-to-paycheck existence. But I'd believe the data, if it exists for public consumption.

I'm curious what searches have you done to find such data. Companies like Netspend (just acquired this week by TSYS) and Greendot exist almost exclusively to serve this market. American Express has their own offering called Bluebird card to compete in the same market. There are lots of articles discussing these companies and the target market of the "unbanked" when looking for info on these public companies. The only reason I hesitate to post links to specifics is because I'd rather not taint your approach to finding such information, but it is pretty easy to find, if you are to search.

Is Affirm willing to extend credit to those people?

This looks interesting. I guess they're going through all of this trouble in "digital credit checking" because they don't assume everyone has a credit card?

There's probably a market for a very low friction payment system for high margin goods (e.g. virtual goods, or subscriptions), similar to just doing net terms, for individuals, online. Something where as long as you can guarantee an individual only has one account, you're willing to extend a certain amount of credit per user (not per transaction).

Even assuming everyone has a credit card, entering a credit card on a mobile phone is enough friction to cause the potential consumer to postpone or never make the purchase. It seems like Affirm would solve that problem.

I'd rather just put my amex into my iphone once (oh, wait, done already) and let Apple handle it. It would probably work IFF Apple and Android/Google both have a relatively compatible solution (from the merchant perspective).

What do you mean by "put my Amex into my phone once...and let apple handle it"? Is this a component of Passbook or something?

I mean in iTunes, and just buy stuff via iTunes. There are obviously many serious problems with that. (Apple's policies, 30% cut, etc.)

In practice what I do is just buy things from Amazon, whether it is on my phone or laptop, so the critical thing is being logged in to amazon.com.

Teens are an example of a group that has mobile phones and doesn't have credit cards (or bank debit cards) and there are other examples. There is also a group that has bank cards, secured credit cards (i.e., requires up-front payment), but doesn't have any means of credit/lay-away-payment available to them that is as easy as a credit card.

Plenty of CPA ads relied on users clicking through to make a purchase using their phone (being billed for what they've purchased). Finding a way to make this purchasing scheme more legitimate (explicitly warn the users that, yes, they will have to pay one way or another) would be the next logical step.


> Sign up with Facebook to buy online securely.

Really? The only signup option is via Facebook? Noooo thank you.

The entire point is that Affirm looks at data from your social network(s) to establish an alternative metric for credibility.

I wish somebody "solve" the problem of payments for people NOT in USA. That is something that seriously require solution.

This will eventually be solved by a bunch of people building solutions in different countries and one firm sweeping through and buying up the startups

This _IS_ a solution for payments outside the USA. Do you know how many countries with a rapidly growing middle class that Visa, MasterCard, etc won't touch because their crappy credit models can't deal with these people?

This is a game changer that allows people who haven't been able to buy online to do so..

That's interesting. I went to a presentation last year where the presenter (I believe she was from paypal) was saying that the US was many years behind several other countries on payment methods, especially SMS.

Payment methods available to consumers via banks. Yes, other countries are farther ahead.

Online commerce is a different story where the US is far ahead of the rest of the world.

Levchin has money in most of the major payments startups so it's interesting to see him launch his own venture. I like the idea but the current site/demo doesn't really feel like the right execution. I suppose I should get to know it before making a decision.

I have my reservations about the viability of a Klarna type approach in the US - where there is a high level of credit card penetration among the US customers. Since Affirm will require customers to choose that as a payment option, over other funding sources - Paypal, CC and others, there has to be a compelling reason for a customer to choose Affirm. And atleast in the US, where we are card-entrenched, and everyday we make it easier for customers to use their plastic - it's a tough value proposition for Affirm.

Affirm saves the user from entering cc info on mobile - a pain for many reasons. Just like PayPal on web.

Except that wasn't why Paypal became what it is today. The P2P aspect and sufficiently protecting the customer during early days of e-commerce is why Paypal became so big. Removing the need to enter the full credit card info - was a nice to have - and secondary, once use of Paypal became more ubiquitous.

Infact, Affirm would have to hope that customers will use anything other than credit cards to settle with Affirm - because it will be cost prohibitive for them to do that. They would have to find ways to justify the customer settling via ACH. Too little, too late imho.

At Spreedly we support 45 + payment gateways and naturally one of those is PayPal. One thing PayPal has pushed really hard in the last 12 months to us as a "partner" is "BillmeLater" So I'm trying to work out what part this is about ease of payment (feels like digital wallets will get there soon too) and how much this is about the fact you don't have to pay for 30 days (PayPal seems enthralled with it) Maybe it's both? Anyway there's always room for more innovation.

Promising. Entering credit card information is pain, particularly on touch devices. Is Google Wallet their main competitor?

This is a very interesting take on what Klarna has done in Europe. Since there is such high friction to completing a transaction on mobile (pulling out your credit card number, entering it on a smartphone keyboard, etc), anything that makes the checkout process easier is going to be very valuable.

Facebook as social proof (of creditworthiness !!) ? I somehow don't buy <no pun> it.

I wouldn't be willing to delete my FB profile and start over for $50. If you tie a purchase to that profile, so I might be able to scam you for $50 once per "real" FB profile sometimes, that's acceptable. What's not acceptable is letting a Russian organization scam you for N x $50 where N is as many random email addresses as they can generate.

Similarly, I'm not going to throw away my iPhone for $50. If there were a way to strongly tie an account to a physical iPhone, with no more than 1 account per iPhone, that solves a lot of problems. Then your only problem is if I make a piece of malware which goes to everyone else's iPhone, opens an account, and then somehow sends me the benefits.

Then your only problem is if I make a piece of malware...

Yes. Only the little problem of malware spread in the form of software on eternally connected devices.

Credit cards, Square and now Affirm. Yet another way to spend all your money without really keeping track of where it goes. :-)

But seriously, looks promising. Really hope someone would crack the mobile payments market.

looking forward to see how this pans out.

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