Affirm, Sam’s Club Strike Exclusive Buy Now, Pay Later Deal

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0:08 You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio.

0:16 So out on the Bloomberg today, again, our Paige Smith all over this space.

0:19 She's on fire.

0:21 She really is. She reports Affirm Holdings teaming up with Walmart Sam Club as the retailer's exclusive buy now, pay later platform. partner. And this is happening just weeks before the key holiday shopping season kicks off. Affirm will serve as its exclusive BNPL provider in a multi-year agreement, starting in that role on Sam's Club's website in the coming weeks and then rolling out to stores. in 2027. That's according to a statement put out. The terms of the deal, though, not disclosed. We are delighted to have back with us Max Levchin. He is the founder, chairman, and CEO of Affirm Holdings. He joins us from Las Vegas on this Thursday. Hey, great to have you back with us, Max. Congratulations. Interesting.

1:02 We're kind of reading between the lines here. What does this deal say about the competitive landscape and your rival's?

1:12 I cannot speak to my rivals. Uh, I can only speak to the fact that we are truly delighted to be back in Benville with this amazing partnership. Uh, it it's, it's wonderful. We're excited just in time for the holiday season. Okay.

1:26 I'm going to, I'm not, you can think about your rivals and you can think about the competitive landscape. I know you're excited about this without mentioning your rivals. Talk to us about what this means for the comp, the competition. In the space right now, consumers have a lot of ways to pay for things, including credit cards, Max, and including other buy-now-pay-later firms. What's your view there?

1:49 Well, I think the maybe unstated question here is what's going on in the overall consumer spending. And I think the headlines... Don't appear to be particularly warm and fuzzy, but reality is we are seeing great demand for our product. This partnership, partnerships we have announced, partnerships we have coming up, they're all a consequence of a firm being, in my biased opinion, the best way to handle your holiday shopping beyond, et cetera. We don't charge late fees. We don't compound interest. Retailers, small and huge like Sam's, choose us because we are the best way to pay for things when it matters to you. And so I think what I can offer today is that it pays to use a product that has your best interest in mind as a consumer. And

2:40 I think retailers, big and small, are realizing that everywhere.

2:45 No, Max, I think that is, yes, part of the economic story that's going on, right? And consumers increasingly feeling squeezed. And so how do they make purchases? I do believe, as you say, that that's one story. But I also do think about is it also somewhat saying to the optionality and options you guys have? in terms of growing your business and where you can, you know, have your programs used at this point? Like, is it getting more limited because there's so many choices out there?

3:18 You know, we are not seeing any slowing for our demand of our, for our product, neither among retailers nor among consumers. And I would argue that It's good for the consumers, for sure, and for retailers to have ample competition among providers like Affirm. We are the leader in the U.S. We are the largest and most successful one in North America. I think our numbers speak for themselves, frankly.

3:48 I do think that... The fact that there's competition just highlights the fact that we are the strongest provider. Folks everywhere, not just at Sam's, have meaningful opportunity to decide what is the best choice of buy now, pay later integrated providers at their point of sale. Every time they pick us, I take it as a vote of confidence that we've built the mousetrap that works for a lot of folks.

4:12 Well, this deal too, you're going to get the benefits of holiday shopping via the website at Sam's Club, but you'll miss out on that in-person shopping. until 2027.

4:22 Why is that?

4:22 Why is that timing gap a part of this deal? Why not all in on everything?

4:28 I would integrate and launch everything yesterday if it were as simple as that. It's pretty simple. Going online is a matter of engineering integration. It has to be tested. All the water has to be run through the pipes many times before it will take it live. Delivering our solution at physical retail is a whole different level of complexity.

4:49 You have to make sure there's signage, that the staff is trained, that folks understand exactly how to speak to the product and its offerings, et cetera. And so it's just a matter of rolling it out. But there's no message between the lines here.

5:04 So, Max, I think for people who understand credit cards, they know that when you swipe a credit card, you're paying– You're not paying, but in the long run, you are paying oftentimes because of transaction fees. Maybe prices go up as a result of those transaction fees when people pay with credit cards at a lot of bodegas here in New York. You get a cash discount as a result of that. Can you explain for the uninitiated the way that a firm is compensated by a retailer when a retailer signs up to use a firm? And what's in it for them?

5:40 So....

5:44 Probably the right place to start is actually, what does consumer pay? So the major difference, the big difference between a firm and credit cards is every transaction with a firm is entirely separate. It's a decision. We underwrite every transaction. We tell you very transparently. We think the answer is yes.

6:02 We believe this is the right amount of money for you to borrow. If there's an interest rate attached to the transaction, and there isn't always, I'll give that a second, when someone is subsidizing your transaction, be it the retailer or the manufacturer sometimes, you'll pay no interest at all. And unlike anyone else in the market, if we tell you the price of credit is $ 5 or $ 0 in many cases, that price cannot change, will not change. If you prepay and there was interest, we will actually subtract the interest that you would have paid. So we will essentially reward you for paying early. The product is deliberately designed to save you the most money, to be super transparent, and most importantly, to be highly predictable. So as a consumer,

6:41 you have a sense of control, sense of total clarity as to the full cost. A lot of times, the compensation to a firm from the retailer side is actually used to give the consumer this amazing deal of a true 0% loan. And by the way, there's lots and lots of other 0% loans out there. Most of them have a very small asterisk right next to the zero that says, it's a zero, but you have to be exactly on time. You have to make the following payment schedule work, et cetera, et cetera. For the avoidance of doubt...

7:09 We do not do any of those terrible, awful products. The zero from a firm is, in fact, a true interest-free loan, which is very valuable, especially in a world of rising interest rates, as we are seeing right now again. Retailers pay us to compensate us for the services we provide. It's not especially different from the prices. Do they pay you.

7:29 More than just a credit card company pays?

7:37 So when they do, we use that extra spread to make the cost of credit lower for the consumer. Like that's what I was trying to get. Okay. Okay. Got it.

7:46 Okay.

7:47 Yeah, go ahead.

7:48 30 seconds, Max. And we apologize. There have been many recession indicators associated with buy now, pay later programs. You said business is booming. One of my producers said that's because nobody can afford anything anymore. Just 20 seconds. Are you seeing any signs of a recession? Very quickly.

8:08 No, I don't believe we are. I think American consumer is doing unbelievably well. I reject the notion. Okay.

8:14 Always feel like we want so much more time with you. So please, please come back soon. Max Levchin, founder, chairman and CEO of the firm Holdings.