Morgan Stanley Backs PayPal Co-founder’s Credit Card-killer

PayPal co-founder Max Levchin has $100 million more in credit for his fintech startup Affirm, which offers short-term loans for specific purposes.

Morgan Stanley is the new backer of Affirm. The San Francisco-based startup earlier this year also got a credit line as part of a $275 million debt and equity funding from Jefferies and has raised more than half a billion dollars since Levchin launched the company four years ago.

Affirm aims to be an alternative to credit cards, particularly targeting millennials.

“We are helping them take an expensive item — that would hit the cash flow too hard —split it into several payments, pay it off, be done,” Levchin said in an appearance on CNBC on Thursday. “A lot of people prefer that to the complexity and unpredictability of carrying a credit card balance.”

Every purchase made with Affirm’s 750 merchant partners has a one-time credit line, rather than the open, revolving line of a credit card. That helps users avoid running up big debts that get compounded for an unlimited length of time.

The startup doesn’t underwrite or service the loans by itself, partnering with Cross River Bank to provide loans to customers ranging from $50 to several thousand, according to Jeremy Solomon, Affirm’s head of capital markets. The company has tripled its transaction volume over the last year. Affirm also declined to comment on default rates, but insisted that they’re strong.

Solomon told TechCrunch that the company has kept all of the loans issued to date on its balance sheet to show outside investors that it is fully invested in its strategy. He also said that the company tripled its transaction volume in the past year but declined to disclose its default rate.

Affirm’s venture backers include Andreessen Horowitz, Peter Thiel’s Founders Fund, Khosla Ventures, Spark Capital and Lightspeed Venture Partners.

Source: Silicon Valley Business Journal, Cromwell Schubarth
Photo: Max Levchin, co-founder of PayPal, on Thursday got a $100 million credit line for Affirm, his fintech startup that provides an alternative to credit cards. (David Paul Morris)