This will end well…
Max Levchin’s new startup, Affirm, essentially offers to loan consumers money to pay for their purchases.
The Affirm website claims that the company aims “[to use] modern technology to re-imagine and re-build core components of financial infrastructure from the ground up… focusing on improving the lives of everyday consumers with less expensive, more transparent financial products,” but that all sounds rather impenetrable, as first noted by Zero Hedge.
Baupost's investment process involves "never-ending" gleaning of facts to help support investment ideas Seth Klarman writes in his end-of-year letter to investors. In the letter, a copy of which ValueWalk has been able to review, the value investor describes the Baupost Group's process to identify ideas and answer the most critical questions about its potential Read More
Affirm offers easy consumer financing
Fortunately another section of the website tells that Affirm allows you to “pay over time for your most important purchases.” Obviously everyone’s definition of “most important” varies, but Affirm’s main purpose is to “connect directly with online stores” and loan consumers the money they need to buy items.
One surprising area into which the company is headed is premium footwear. Hypebeast writes of a partnership between Affirm and specialist sneaker store Flight Club, which will allow fans of expensive kicks to finance their purchase over the course of up to a year.
Prices for the rarest sneakers can reach thousands of dollars, putting them out of reach of some consumers. With Affirm. Flight Club allows those consumers to finance the sneakers of their dreams.
Selected picks include the “Fragment” Air Jordan 1 at $123.01 USD per month and the Nike Air MAG at $702.90. While many people will not be aware of the cachet attached to these shoes, they are very expensive indeed.
Could shoe-backed securities soon be traded on Wall Street?
Affirm offers financing for purchases of up to $10,000 on Flight Club, with options to pay over 3,6 or 12 months. Interest rates vary from 10-30% APR.
Other asset-backed security offerings from the likes of Springleaf and OneMain have proved successful, and supply of consumer loan-backed ABS is predicted to reach $30 billion this year. As a result it might not be too long before we see groups of sneaker loans put through Wall Street’s securitization machine and traded as securities.
Given the demand for high-priced sneakers, which inspire significant investment from people who might otherwise balk at spending such a large amount of money at one time, it seems that Affirm may be onto a winner with its partnership with Flight Club.
Since Converse is not rated by Affirm, maybe one of the rating agencies could help out a young entrepreneur who wants to build the next unicorn?