Affirm CEO Levchin: Modern Credit Has Evolved into an Exploitative System
Affirm CEO Max Levchin stated that "buy now, pay later" is an ancient concept, and before the Middle Ages, there were more self-regulated lending systems, such as the Code of Hammurabi, which explicitly prohibited harming borrowers or excessive charges.
However, over the past 100 years, the credit system has gradually deviated from the principle of "not harming customers" and shifted towards complex compound interest and punitive fees. Currently, a significant portion of revenue for most banks in the U.S. comes from high-margin late fees.
Levchin noted that the original intention behind the founding of Affirm was to combat this exploitative credit model and provide more transparent and fair consumer financial services.
Source: Public Information
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Max Levchin, as a co-founder of PayPal, has long been involved in the payment and credit sectors. His statement continues the trajectory from the early PayPal anti-fraud system to Affirm's "transparent installment" model. Previously, Affirm's main selling points included 0% or low interest rates, fixed repayments, and no late fees, directly targeting the punitive mechanisms of traditional credit cards.
In terms of capital strategy, Affirm reduces bad debt rates through technological risk control and transparent pricing, while avoiding the high late fee revenue model. The strategic motive is to build long-term user trust and repeat purchases, sacrificing short-term high margins for greater market share and brand moat.
Similar to early PayPal's fight against high fees from traditional banks, or emerging BNPL platforms replacing credit cards, the consumer finance sector is currently in the later stages of transitioning from punitive credit to transparent consumer finance. Companies like Affirm that insist on fair pricing gain significant loyalty advantages among younger users.
Essentially, this is about capital concentration: transparent credit shifts pricing power from punitive charges to long-term user value. The mechanism involves technological risk control replacing high late fee income, forcing capital to concentrate on financial platforms that genuinely address user pain points rather than relying on penalties, accelerating the industry's capital tilt towards consumer finance companies like Affirm that adopt anti-exploitative models.
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The higher the profit margin from late fees, the closer the business model is to exploitation; long-term trust is the highest leverage. From the Code of Hammurabi to modern credit cards, the more complex the credit, the easier it is for borrowers to be exploited. The more companies dare to give up high-margin punitive income, the easier it is to win over the next generation of users; fairness has always been the greatest competitive barrier.