Affirm CEO and PayPal Co-Founder Max Levchin sits down with Yahoo Finance's Brian Sozzi at Goldman Sachs' Communacopia & Technology Conference to discuss the latest with consumer spending, recession fears, how rising rates have impacted the fintech space, and more.
- Very cool. All right, from the Benzinga Cannabis Capital Conference here in Chicago all the way to San Francisco, where the Goldman Sachs Technology Conference is ongoing. Brian Sozzi, anchoring our coverage there. He got an exclusive sit-down with the Affirm CEO to talk a little buy now, pay later, what it tells us about the economy, and of course, inflation.
MAX LEVCHIN: I think people are concerned by the inflation prints. I think they are second, third, and fourth guessing what Jerome Powell will do next. I think they, at least to my face, appear to be quite pleasantly pleased.
I hope they're not surprised, but they seem to be pleased with my team and our collective execution of the company's vision. So generally, the comments have been positive to Affirm and generally quite encouraging.
BRIAN SOZZI: These markets are increasingly volatile, major sell-off here on Tuesday. What are you seeing from consumers? Are consumers pulling back? Do these market sell-offs make any sense?
MAX LEVCHIN: Consumers are not yet pulling back. I've been expecting a pullback in consumer spending for a little while. That has not happened. There's been quite a lot of rotation. So around May 15 or so, the short description I can come up with with consumer sentiment was from goods to services.
People literally went from, what I need is another couch to, I got to get out of town. And we saw unbelievable growth all through the summer. 4th of July weekend, I think we saw triple-digit growth over several days, just in travel.
This is coming from a relatively high travel '21. So consumers still spending. I think that's probably what's contributing to inflation not quite subsiding yet. My expectation is that eventually, it will have to slow down.
BRIAN SOZZI: Do you see a recession?
MAX LEVCHIN: I am not a macro-micro economist. My job is to look at what the prints are telling me and adjust the risk models to make sure that we manage the risk accordingly.
BRIAN SOZZI: Are the delinquencies picking up on the platform at all?
MAX LEVCHIN: There is a little bit of consumer stress that we can tell. I think at this point, it's sort of a fairly commonly repeated refrain, the lower credit tier folks are starting to assemble a little bit. The employment is still quite strong. And typically, delinquencies go up when people lose their jobs and are suddenly having to make ends meet in a way that they're not prepared to, hasn't really happened en masse at all. And that's both visible in our numbers and in the jobs reports.
Again, my expectation is that if things continue to rise in interest rates, we will see, eventually, some number of layoffs, joblessness, and that will ultimately have an impact. And we have the tools necessary to navigate that. But it's, from my point of view, in the very early stages.
BRIAN SOZZI: How do rising interest rates impact the funding for a firm?
MAX LEVCHIN: They do not very much. Majority of our funding partnerships are quite long term, very diversified. And some of them are with folks that have very, very different yield expectations from each other. Most of them do not renew. And they're pretty much all committed funding relationships.
They do not renew for quite some time, into '23 and '24. So for the moment, we are largely unimpacted. Obviously, if the rates continue going up and going up and going up, eventually they will have real impact on us. But for the moment, we feel very comfortable where we are.
BRIAN SOZZI: You guys have put up some good quarters on the top line.
MAX LEVCHIN: I agree.
BRIAN SOZZI: Are investors missing something?
MAX LEVCHIN: It's very hard for me to read into the minds of our investors. My job and my promise to them is to build a great company and to think in terms of years. If I had my druthers, I would think in decades and beyond because I think myself a long-term entrepreneur.
But I think an annual or biennial check-in with our progress is my ideal mode of self-evaluation. If you look back a couple of years ago, we went through the COVID pseudo recession with extremely fine colors and emerged stronger. We gained market share. We got new products launched. We got a lot more consumers, more partners.
We expect to continue doing that. Obviously, I have shareholders. I am a shareholder. I've never sold a single share.
BRIAN SOZZI: Still haven't sold shares. I remember you telling me that.
MAX LEVCHIN: Never sold a share of Affirm. That is still the case. And it is my job to give them excellent return. So I do not see that as something that I'm willing to compromise on. That said, the only way I know how to do that is by building long-term value.
Like, I cannot and will not attempt to find a way to move the stock price on a day-to-day basis. I would like to continue printing excellent quarters with my team. Over time, the stock price will undoubtedly catch up.
BRIAN SOZZI: How should investors view Affirm? Is it fintech or financial?
MAX LEVCHIN: It's a technology company. I think we are, more than anything, a trusted technology partner to our major network and platform partners that happens to provide a financial service. But we do a lot more than that at this point.
To consumers, we are a service and a way to feel in control and safe with their money. I don't think consumers think of us as a fintech or a financial. They look at it and say, this is a far better way to pay than my credit card. I should use Affirm instead.
BRIAN SOZZI: Don't throw this mic at me, but I think, since the last time we talked, I think Apple has launched buy now, pay later. Any impact from them?
MAX LEVCHIN: It's really too early to tell.
BRIAN SOZZI: All right, good, you didn't throw the mic at me, thank you.
MAX LEVCHIN: I don't throw mics at anyone. Look, I think Apple choosing to enter buy now, pay later with no late fees is a profoundly important statement to the industry. We are still massively underpenetrated in the US and even worldwide.
BNPL is growing faster than any payment system ever invented. Even some of the inventions of yesteryear like PayPal, the BMPL is outpacing, I think, all of them. And yet we're still in single digits in the US e-commerce and, certainly, broad commerce market.
So new entrants coming in is, generally speaking, good for consumer education, good for overall recognition by merchants. I have issues when people enter the space and say, oh, here's a wonderful opportunity to charge some late fees or harvest origination money or something like that.
Apple coming in and saying, look, no late fees, is the right way to do this, endorses our approach for the last 11 years. So generally speaking, I'm quite positive. Obviously, time will tell.
- Some really good stuff there from Max Levchin, Affirm CEO with Brian Sozzi out at the Goldman Sachs Technology Conference in San Francisco.