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Reports of American consumers\u2019 inability to pay their bills\u2014or their waning interest in shopping\u2014are greatly exaggerated.\u00a0<\/p>\n
That\u2019s according to one CEO with a sizable stake in the matter: Max Levchin, the co-founder and chief executive of Affirm, the publicly held fintech company and reigning champ of the buy now, pay later space. \u201cWe\u2019re still growing really well,\u201d Levchin recently told Fortune <\/em>in an interview. \u201cPeople are paying our bills well on time.\u201d\u00a0<\/p>\n He\u2019s not wrong. Per a recent Adobe<\/a> Analytics report, U.S. consumers spent $331.6 billion shopping online<\/a> in the first four months of 2024\u20147% more than last year. And nearly $26 billion of that online spend came via buy now pay later services\u2014an almost 12% year-over-year jump. Indeed, shoppers are \u201c[embracing] more flexible ways to manage their budgets,\u201d the report said<\/a>.<\/p>\n Levchin has maintained a sunnier-than-average disposition about the state of the American consumer, recently echoing the sentiment to Yahoo Finance<\/em><\/a>. <\/em>\u201cThe economy is in a better shape than popular opinion will have you believe,\u201d he said last month. \u201cFrom where we sit, people are spending.\u201d<\/p>\n They\u2019re also able to pay. After over a decade at Affirm, Levchin told Fortune<\/em> that most people still don\u2019t believe him when he repeats one particular fact. \u201cThe total number of lead fees compounding interest that we charged last quarter was zero,\u201d he said. \u201cIt\u2019s been zero since inception. We\u2019ve never charged a penny of late fees\u2014or any other hidden or gimmicky fees\u2014and have no intention to.\u201d\u00a0<\/p>\n Levchin, who in a previous life was a founder of PayPal<\/a>, said that fact is \u201cprofoundly important\u201d and integral to Affirm\u2019s mission.<\/p>\n \u201cObviously, you don\u2019t want to take advantage of people when they\u2019re struggling to pay their bills,\u201d the 48-year-old Ukraine-born founder said. \u201cOn a more fundamental level, it aligns [Affirm] with customer success. If someone borrows money, and they can pay us back on time, that\u2019s great for us and good for them.\u201d<\/p>\n Plus, they take it personally: Levchin said his company sees a customer\u2019s inability to pay as a weakness on the company\u2019s side. As explained in the company\u2019s Investor FAQs<\/a>, Affirm primarily earns money through the fees it charges participating merchants and through \u201csimple interest-bearing loans\u201d it facilitates. It also snaps up interchange fees through its virtual card, and through loan services it gives to third-party investors who buy Affirm\u2019s consumer loans.\u00a0<\/p>\n \u201cWhenever we made an [incorrect] underwriting decision, we had to have been more thoughtful, we should have seen something about [a customer\u2019s] inability to stomach this kind of bill, and so that\u2019s an error for us,\u201d Levchin said. \u201cAnd they\u2019re not in a good place. But neither are we. And so we learn from that and we stay aligned with their financial success.\u201d<\/p>\n For better or worse, the buy now, pay later industry is booming<\/a>\u2014though its days may be numbered, due to recent regulatory scrutiny<\/a>. Apple<\/a>, earlier this month<\/a>, pulled back on its own contribution to the BNPL market, instead announcing it would integrate Affirm into its upcoming iOS 18 software.\u00a0<\/p>\n To be sure, BNPL is hardly a get-out-of-debt-free<\/a> hack for consumers. Research shows using BNPL tech like Klarna, Afterpay or Affirm doesn\u2019t necessarily make it easier to emerge from debt, and in fact, per the Boston Fed<\/a>, almost no high earners use BNPL; and the biggest share of customers are those who earn between $50,000 and $75,000 a year. And per the New York Fed<\/a>, BNPL users with bad credit tend to use the service as they\u2019d use a credit card\u2014which BNPL was meant to replace\u2014which might explain their persistent \u201cphantom debt.\u201d\u00a0<\/p>\n Levchin, for his part, doesn\u2019t even like the \u201cfancy four-letter acronym\u201d that\u2019s become ubiquitous. \u201cBut that\u2019s what the world seems to have settled on.\u201d BNPL is better than credit cards, which Levchen defines as \u201cbuy now, pay forever.\u201d\u00a0 If you\u2019re not careful\u2014or don\u2019t have the wherewithal to parse the credit card companies\u2019 terms\u2014\u201cyou\u2019re literally going to stay in debt forever and ever and ever, because minimum payments aren\u2019t designed to get you out of whatever balance you\u2019ve created,\u201d Levchin said. \u201cThey\u2019re, in fact, designed to kind of keep you sitting there compounding interest.\u201d\u00a0<\/p>\n That \u201csitting in debt forever and ever\u201d approach\u2014which credit card companies certainly don\u2019t work against, in Levchin\u2019s view\u2014is what underpins the $1.1 trillion in current outstanding credit card debt that U.S. consumers are saddled with. \u201cThere\u2019s no real motivation, on the part of credit card issuers, to tell you, \u2018Hey, you got to pay this thing off,\u2019\u201d Levchin said.<\/p>\n \u201cIn fact, that balance is sitting there revolving, which means that the interest [is] accrued every day, and goes right into the principal and just spins up and spins up on itself,\u201d he added. It\u2019s often not the consumer\u2019s fault. \u201cPeople have a very hard time estimating exponential functions, which is compounding interest accrual.\u201d That\u2019s why integral to Affirm\u2019s mission are simplicity and a sense of control. \u201cWe will be a little annoying, telling you like, \u2018Hey, you\u2019re behind, you\u2019ve really gotta pay your bills, please.\u2019 But we won\u2019t charge you a penny extra.\u201d<\/p>\n That alignment is critical for Levchin\u2019s mission, and he said it\u2019s \u201calso just fundamentally healthier\u201d for the consumer. \u201cI have infinite conviction that if U.S. consumers would just switch entirely to Affirm, [or other] binary affiliate products, instead of credit cards, we would be in a healthier financial position, as a nation.\u201d<\/p>\n<\/div>\nNo more sitting in debt forever and ever?<\/strong><\/h2>\n