Consumer Lending Startup Affirm Lands Big Series B Funding
Affirm has raised $275 million in a Series B funding round.
The data-driven lending startup underwrites three to one year-long loans to consumers to allow merchants to sell to consumers with no or bad credit histories.
Signing up with Affirm on the consumer side requires a few key details such as name, email address, mobile number, date of birth, and the last four digits of their social security number.
Affirm does the rest by checking the customer’s credit report and their internet footprint, including their presence on social media.
This may prove especially valuable to the Millennial generation, which has tended to shy away from banks and credit cards.
Merchants can reach these traditionally risky buyers since Affirm settles the payments and likewise handles the loan repayment and buyer fraud risk.
So for a student who is short on cash and starting school, Affirm can help put a laptop in their hands, while capturing a sale for that retailer who would normally would have never received that student’s business.
For online retailers, Affirm could mean greater conversion rates and lead to consumers spending more, while promoting greater financial awareness and responsibility for these consumers.
Hence the hefty funding round, which consisted of a mix of debt and equity financing.
Participants included Spark Capital Growth which led the investment, Jefferies Group, and Andreesen Horowitz, along with Khosla Ventures and Lightspeed Venture Partners.
Affirm will use the funding to lower consumer loan rates, increase loan distribution capacity, and develop new products.
Other companies have certainly taken notice.
Brian Billingsley, CEO at Klarna North America had this to add:
“The payments industry is ripe for disruption and we are big fans of any product that makes credit more transparent to consumers. Klarna is a very different company than Affirm and we offer more than just lines of credit. We handle the entire checkout process and make purchasing as simple as possible for the consumer. Klarna also focuses on solving the most important problems for merchants such as increasing conversion on mobile, where most of the traffic is coming from, and assumes all the risks. As Affirm shows market traction and consumers like the product, we would be happy to consider adding it as a payment option in the Klarna checkout.”