Affirm, which is a cutting-edge fintech company, has taken the 23rd spot on CNBC’s Disruptor list (last year, the company was ranked No. 33). Might then we see Affirm stock hit the market soon – with an IPO?
It would not be a surprise. The company has certainly gotten to a large scale and appears to be growing quickly.
But first, let’s take a look at a backgrounder on Affirm. The company’s CEO and co-founder is Max Levchin and his vision for the company is “to remake consumer finance from the ground up.”
Keep in mind that he has done this before. Levchin is also the co-founder and former chief technology officer of PayPal (NASDAQ:PYPL), which currently has a market capitalization of $204 billion.
How It Works
Affirm is essentially about rethinking the traditional credit card. The idea is focus on transparency, competitive interest rates and fair terms. For example, when you use Affirm, you will know exactly what the fee is, which will never go up. There are also no late fees, penalties and compounding interest.
But the most interesting twist about Affirm is that you can create your own payment schedule, such as for six months to 18 months. The interest rate and payment amount are then based on a sophisticated artificial intelligence (AI) system.
As for the traction – which has definitely been key for the rapid rise in the value of Affirm stock – the company has been able to create a large user base of more than 5.6 million customers. The service has been quite popular for merchants because of the higher conversions and repeat purchase rate (which is at 20%).
Affirm also has a net promoter score of 74 (this is based on the survey question if a customer would recommend the service to someone else).
Last year, the company announced a new app that enables customers to shop at nearly any store. It actually allows the user to create a one-time use virtual card for brick-and-mortar purchases, so long as the retailer uses Apple (NASDAQ:AAPL) Pay or Google Pay. The app also has a feature to split payments.
Next, Affirm launched an option to save money at a higher yield (it was initially set at 1.30% APY). The program, which is backed by FDIC insurance, does not require minimums or fees.
Affirm Stock: Will There Be An IPO?
Millennials and Generation Z are the target markets for Affirm. These groups prefer technology solutions but also want new ways to save money and finance their purchases. And with the impact of the novel coronavirus, their financial challenges have become even more urgent.
Because of this, Affirm has implemented more flexible payment options.
In terms of funding, Affirm has raised about $800 million since inception. The latest round was in April 2019, when the company announced $300 million in funding led by Thrive Capital (note that actor Ashton Kutcher, Sound Ventures, Fidelity Management and Research and Lightspeed Venture Partners participated in the round). The valuation was at about $2.9 billion.
Now later in 2019 there were rumors that Affirm was in the process of raising a hefty $1.5 billion in debt and equity. But nothing materialized from this.
So, given it has been awhile since Affirm has done a round, it would not be reasonable for there to be one soon. Although, since the IPO market is heating up and there is considerable interest in fintech offerings, the next step could easily be a public offering.
Tom Taulli (@ttaulli) is an advisor and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.