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Affirm: Why Shoppers are Walking Away from Credit Cards
Season 4, Ep. 2
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Affirm’s buy now, pay later service offers shoppers a transparent alternative to credit cards. It tells consumers up-front what monthly charge they face, promises no late fees or hidden charges – and in many cases offers a zero percent interest rate. Co-founder and chief executive Max Levchin reveals how the business originated in his own “painful” experiences with credit cards, and how AI-powered shopping agents could supercharge its future.
Background:
Scottish Mortgage first invested in Affirm in 2019, when it was still a private company.
Today, the listed business provides credit to millions of customers across the US, Canada and the UK when they make online and offline purchases, and it has its sights set on further expansion and taking a greater share of business away from the incumbents in the credit card industry.
“No one loves thinking about money because it’s a drag, it’s complicated,” Levchin tells investment manager Tom Slater in this interview. “It doesn’t have to be this way. And we’ve proven that for our little niche, big as it is… we can alleviate the burden.”
In this podcast, the two discuss how Levchin came to build Affirm after his prior success at PayPal, the technology that underpins the company’s ability to tailor loans to each customer and purchase, why merchants are keen to cover the cost of zero percent credit from a third party, and how AI-powered shopping agents could impact the firm.
Timecodes:
00:03 Coming up…
00:48 Introduction
02:25 Max Levchin interview begins
02:51 A transparent alternative to credit cards
04:05 A threatened amputation
08:52 Lessons from PayPal
11:44 Returning to the world of fintech
14:28 A terrible credit card experience
18:15 Attracting early investors
22:14 How Affirm works
25:48 The appeal to merchants
28:36 Focusing on the Affirm Card
31:23 Underwriting data provides a ‘powerful moat’
35:41 Why permit credit for luxury purchases?
39:25 Listening to your gut
42:20 How big could Affirm get?
45:39 AI agentic shopping
48:54 What the world looks like if Affirm fulfils its mission
50:38 Claire Shaw and Tom Slater on the investment case
57:35 Podcast lookahead
Glossary (in order of mention):
Point-of-sale lending: Credit offered at the moment a customer buys something, either online or in a shop.
Network effects: The effect where a product or service becomes more valuable as more people or businesses use it.
Fintech: Technology-driven financial services, such as digital payments, lending or banking tools.
Charge-off: When a lender writes off a debt as unlikely to be repaid, usually damaging the borrower’s credit record.
Delinquent/delinquency: A loan or credit account becomes delinquent when the borrower is late making required payments.
IPO: Initial public offering: the process by which a private company lists its shares on a public stock market.
Accrued interest: Interest that has built up over time on a loan or balance.
CMO: Chief marketing officer, the executive responsible for a company’s marketing strategy.
Competitive moat: A durable advantage that makes it hard for competitors to copy or overtake a business.
Cash flow: The movement of money into and out of a person’s or company’s accounts.
Total addressable market: The total revenue opportunity available if a company could reach all possible customers for its product.
Operating expense: Day-to-day business spending, such as salaries, rent or marketing.
AI agent: An AI system that can carry out tasks or make decisions on a user’s behalf.
Net promoter score: A customer loyalty measure based on how likely users are to recommend a company or product.
Flywheel: A business dynamic where one improvement drives another, creating self-reinforcing growth.
Read the transcript.
Check the podcast description to ensure this content is suitable for you. Your capital is at risk.
Presenter: Claire Shaw
Executive Producer: Leo Kelion
Line producer: Jessica Rooney
Broadcast Technician: Samual O’Hare
Editor: Jody Black
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3. Gopuff: Online Shopping's Express Aisle
52:16||Season 4, Ep. 3The instant commerce company Gopuff delivers groceries and other must-haves to shoppers' homes within minutes of an online order. Co-founder and co-chief executive Yakir Gola tells Scottish Mortgage manager Tom Slater how he developed the business from a dorm-room experiment into a service relied on by millions, and the changes he’s made to prepare for the next phase of growth.Background: Scottish Mortgage first invested in Gopuff in 2021.The US-based company speedily delivers groceries, hot coffee and alcohol, among other items, without charging premium prices. Unlike rivals that send gig workers to pick up goods from third-party stores, Gopuff runs its own warehouses. Gola explains how that decision, taken in the firm’s early days, helps it deliver exactly what customers ordered and keeps its prices competitive with the major supermarkets.In this interview, Gola discusses Gopuff’s partnerships with Amazon and Starbucks, why it has started offering free deliveries to US households receiving food stamps, and what’s next on his to-do list.“Consumers are price-sensitive, so if [Gopuff] can match the prices they experience outside of the convenience category or get closer and closer to those price points, then that just brings more and more users to them,” says Tom Slater.Timecodes: 00:03 Coming up…00:48 Introduction02:28 Yakir Gola interview begins02:44 “5,000 products delivered in as fast as 15 minutes”03:31 Making the family business millions of dollars04:56 A better way to get stuff delivered07:20 Capital from California10:33 Keeping control of its own warehouses13:20 The FAM membership scheme14:44 Free deliveries to families on food stamps18:22 Fresh produce and everyday essentials21:06 Partnering with Starbucks23:37 An alliance with Amazon UK24:52 Focusing on the long term27:24 Recalibrating after Covid30:55 A lesson from Steve Jobs33:06 In growth mode, again35:15 Sharing ownership37:39 Drawing on expert advice41:13 Taking the hassle out of shopping44:09 Tom Slater on the investment case51:26 Podcast lookaheadGlossary (in order of mention): Instant commerce:The category of online retail focused on delivering goods within minutes of an order, rather than within hours or the next day. Bootstrapped:When an entrepreneur starts and grows a business using his or her own money and cash generated by operations rather than outside investors. Free cash flow:Cash left after paying for operating costs and investment needed to run the business. Venture capital:Money invested by specialist investors in early-stage or high-growth private companies. Vertically integrated:When a company owns and controls more of the supply chain itself, such as inventory and warehouses.Series A:An early major round of external fundraising. Inventory integration:The systems that let a company know what products are actually in stock and available to sell or deliver.FAM membership:Gopuff’s paid subscription programme, which waives delivery fees and offers discounted prices in return for a monthly charge.Supplemental Nutrition Assistance Program (SNAP):A US government food support scheme for people on low incomes.Private label: Products sold under a brand owned by the retailer.Capital markets:The financial markets where companies raise money from investors.Unit economics:The profit or loss made on each order, customer or unit.Same-store sales growth:Sales growth from existing locations, excluding new ones.Read the transcript. Check the podcast description to ensure this content is suitable for you. Your capital is at risk. Presenter: Claire ShawExecutive Producer: Leo KelionLine producer: Jessica RooneyBroadcast Technician: Samual O’Hare Editor: Jody Black
2. 10-MINUTE TAKE: Affirm
11:28||Season 4, Ep. 2This is a compressed version of Scottish Mortgage’s interview with the buy-now, pay-later service’s chief executive and co-founder Max Levchin.Listen to the full episode here. Affirm offers shoppers a transparent alternative to credit cards. It tells consumers upfront what monthly charge they face, promises no late fees or hidden charges, and in many cases offers a 0 percent interest rate. Levchin tells Scottish Mortgage Investment Trust manager Tom Slater what drove him to create the business and why it has an edge over rivals.Background:Scottish Mortgage first invested in Affirm in 2019, when it was still a private company.Today, the listed business provides credit to millions of customers across the US, Canada and the UK when they make online and offline purchases. It now has its sights set on further expansion and is taking a greater share of business away from the incumbents in the credit card industry.In this podcast, Levchin reveals how he came to build Affirm after his prior success at PayPal, Affirm’s appeal to merchants and consumers, and why its underwriting technology gives it an enduring advantage. Timecodes:00:02 Introduction00:56 Max Levchin interview begins01:03 A transparent alternative to credit cards01:24 Lessons from PayPal02:55 A painful credit card experience05:50 How Affirm works08:35 Underwriting data provides a ‘powerful moat’Glossary (in order of mention):Point-of-sale lending: Credit offered at the moment a customer buys something, either online or in a shop.Network effects: The phenomenon whereby a product or service becomes more valuable as more people or businesses use it.Charge-off: When a lender writes off a debt as unlikely to be repaid, usually damaging the borrower’s credit record.Delinquent/delinquency: A loan or credit account becomes delinquent when the borrower is late making required payments.IPO: Initial public offering – the process by which a private company lists its shares on a public stock market.Accrued interest: Interest that has built up over time on a loan or balance.Underwriting: A lender's process of assessing whether to grant credit to a borrower, and on what termsCompetitive moat: A durable advantage that makes it hard for competitors to copy or overtake a business.Check the podcast description to ensure this content is suitable for you. Your capital is at risk. Presenter: Claire ShawExecutive Producer: Leo KelionLine producer: Jessica RooneyBroadcast Technician: Samual O’Hare Editor: Jody Black
1. 10-MINUTE TAKE: Enveda
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1. Enveda: Finding Hidden Medicines in Nature
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3. Tempus AI: Pioneering AI-Enabled Healthcare
01:04:08||Season 3, Ep. 3Hear from the founder on a mission to make his company the Amazon of the healthcare industry. Join us for the latest episode of Invest in Progress, in which Eric Lefkofsky, Founder and CEO of Tempus AI, tells Scottish Mortgage manager Tom Slater about transforming the healthcare landscape with artificial intelligence and big data. Episode Highlights:Personalized Healthcare Revolution: Discover how Tempus AI is revolutionising cancer diagnosis and treatment by leveraging one of the largest libraries of oncology data. Eric shares the personal journey that led to the creation of Tempus AI, driven by a desire to improve his wife's cancer treatment.Technological Edge: Learn about Tempus AI's unique technological advantage, akin to Tesla's in the EV market. Eric explains how Tempus integrates AI with diagnostics to provide intelligent, personalised insights that empower physicians and improve patient outcomes.Data-Driven Insights: Explore how Tempus AI's vast data resources are being utilised to accelerate drug discovery and enhance clinical trials, in partnership with major pharmaceutical companies like GSK and AstraZeneca.AI's Transformative Potential: Eric discusses the future of AI in healthcare, envisioning a world where AI diagnostics become the norm, saving the global healthcare industry trillions of dollars and significantly extending human life expectancy.A Visionary Leader: Gain insights into Eric's entrepreneurial spirit and his ability to articulate a compelling vision for Tempus AI, drawing parallels with industry giants like Amazon and Google.This episode is a must-listen for anyone interested in the intersection of technology and healthcare, offering a glimpse into a future where AI not only saves lives but also transforms the efficiency of healthcare systems worldwide. Don't miss this opportunity to hear from a leader who is not just imagining the future but actively building it. Check the podcast description to ensure this content is suitable for you. Your capital is at risk. Presenter: Claire ShawExecutive Producer: Niamh KiddLine producer: Jessica RooneyBroadcast Technician: Samual O’Hare Editors: Rhona Taylor-Craig, An Phan