- Alternative consumer credit start-up Affirm, run by PayPal co-founder Max Levchin, is partnering with Canadian e-commerce platform Shopify on a new interest-free, zero-fee payments program for online customers.
- Shopify and Affirm have seen dramatic growth in online users during the Covid-19 pandemic.
- Levchin says the traditional credit card business model is facing an existential threat.
Credit card alternative start-up Affirm is partnering with e-commerce giant Shopify to power a new way for consumers to split up purchases without interest or fees.
"Shop Pay Installments" — a new option that Canada-based Shopify is rolling out later this year, will give approved Shop Pay customers this option at checkout, with their total purchase split into four equal, bi-weekly payments, which will be processed and handled by Affirm.
Affirm, which ranked No. 23 on the 2020 CNBC Disruptor 50 list, said the new payment option and partnership reflects how small businesses must reinvent themselves with e-commerce strategies and meet young shoppers where they prefer to buy. Shopify is one of the fastest-growing commerce platforms for businesses that want to sell direct-to-consumers and has witnessed a dramatic increase in stock value this year.
"We can help merchants seamlessly enable a pay-over-time option at checkout. In doing so, we're helping them reach new customers, particularly Gen Z and Millennials, who are looking for more transparent and flexible ways to pay," Affirm founder and CEO Max Levchin in a press release.
Affirm's existing "buy-now-pay-later" alternative to credit cards is available at over 6,000 merchants in the U.S., and is used by 5.6 million people, according to the company. As a result of the Covid-19 pandemic, there's a been a massive uptick in digital adoption over the past few months.
"I do think the shift from offline to online spend is very powerful. I think it's here to stay," Levchin said, while also noting that the demographic of Affirm users has shifted with adoption now including older customers like his 72-year-old mother. "I do think that will eventually slow down a bit ... but I don't think the trend is going to reverse."
Levchin said the biggest winners in the buying habits shift will be the digital platforms — not necessarily merchants themselves. "When you look at retailers writ large ... platforms, providers that enable merchants to serve customers where they are, which is online, are going to be huge winners," he said. "On the consumer side ... I do believe the age of credit cards is rapidly coming to— I wouldn't call it an end, but a viable alternative in the buy-now-pay-later tools that are built around transparency, clarity and simplicity."
Affirm and Shopify will begin testing in the coming months, with the hope of making "Shop Pay Installments" available to eligible U.S. merchants later this year. Terms for consumer approval to access the new "Shop Pay" option were not detailed.
Affirm is a two-time CNBC Disruptor 50 company.