What a start of the year for Fintech and I’m not even talking about Bitcoin!
London-based Checkout.com, with a $450 million Series C is now worth $15 billion, Grab raising $300 million for its fintech unit, Financial data specialist MX, payments provider Rapyd and digital lending startup Blend all raised nine-figure rounds.
And then there’s Affirm the Buy Now Pay Later (BNPL) valued at $28 billion (18/01) post IPO, a nearly 60x multiple of revenues on top of a $110 million loss.
Max Levchin is the CEO and founder of Affirm (ex-Paypal). When Max was 16, his family emigrated to the US from Ukraine. On the flight, he spotted a computer worth $650 in a magazine and asked his mother if they could afford to buy it. No, she said, “we have $733 for the entire family.”
That’s one of the founding stories of Affirm.
In the introduction to theS1 Filings of Affirm Holdings Inc, Max takes a moral stance (emphasis is mine):
[O]ne could argue cards have devolved, even become corrected. The barely-readable fine print makes only one thing clear to consumers: you'll never know exactly what your purchase will really cost you...We believe that the morality of each financial product offered to our consumers is a key consideration, and is an essential part of the Affirm brand.
Later, he adds:
Our core strengths and competitive advantages remain in two fundamental areas: we are very good at technology and we are committed to being good.
In other words, the problem is not our desire to buy, but the tools we are given. The company’s mission is “to deliver honest financial products that improve lives”.
There is more to the IPO success story: the technology, the risk management (this is credit after all), the growth, etc. all play a part. But one must admire the transformation of what was formerly known as “consumer credit”.
We’re not in a world where irresponsible and greedy consumers fall prey to predatory lenders. Instead, they can fulfil our potential by acquiring that computer they couldn’t afford. Except Affirm’s main client is Peloton, followed by Shopify and there’s no mention of providers of essential food or school supplies. (That last sentence may give away where I stand in the BNPL debate.)
Whether you are a BNPL fan or not, there’s no denying that strengthening that ethos and framing BNPL as a force for good contributed to the IPO’s 98% pop on day one and is a long term success factor for the company and its peers.
The Affirm Movie
Storytelling is a powerful force, but could we make a film about Affirm?
The actual filming part is very restricted at the moment. What we can do instead, is use the footage of an existing film, but repackage it by rewriting the dialogue and using Deepfake.
So what movie could we use for Affirm? Well, this is where it gets fun. Max Lechkin actually produced a movie. It’s called ‘Thank you for Smoking’:
a Satirical comedy follows the machinations of Big Tobacco's chief spokesman, Nick Naylor, who spins on behalf of cigarettes while trying to remain a role model.
This is just for fun. Don’t get me wrong I greatly admire Max Lechkin - but he had to be the protagonist of this movie. And I’m not saying BNPL is like smoking, although others did.
So here is the synopsis where Credit replaces (Ctrl + H) Tobacco and Max Lechkin replaces the Aaron Eckhart character (Nick Naylord), and a few other minor changes.
Thank you for Buying Now - Synopsis
Adapted from IMDB on Thank you for Smoking, produced by Max Lechkin
The film opens with Max Lechkin (Aaron Eckhart) appearing on a daytime talk show, along a ‘financial health’ expert, a senator's aide, and a suicidal teenage girl crippled with debt. As he's introduced, the audience boos him. Lechkin explains what he does for a living. He is the CEO of a company that offers instant credit to consumers who want to buy what they can’t afford immediately.
On the show, he protests that in no way would he want a potential customer to die, and accuses the financial expert of profiting off poor clients.
His immediate nemesis is Senator Ortolan Finisterre (William H. Macy), a Birkenstock-wearing Vermonter whose office is decorated with cheese and maple syrup bottles. Senator Finisterre wants to plaster a danger sign on every BNPL checkout opportunity.
Through all of this, Lechkin is also trying to maintain a relationship with his son Joey. His boss BR (J.K. Simmons) wants ideas on how to make smoking sell. "We sell credit. And it’s cool, available, and addictive. The job is almost done for us." Naylor has the idea of product placement in movies.
He takes Joey on the trip to Los Angeles to meet with an agent about putting more smoking in movies. Naylor is divorced and shares custody of his son. His son is rather uncomfortable with his father's profession, but Naylor is as great arguing with his son as he is with the press and starts to win him over. Naylor portrays himself as being on the side of freedom and personal choice.
On a side trip, Lechkin takes a briefcase full of cash to Kym an Instagram influencer, facing a debt crisis and about to launch a public outcry against BNPL. She can keep the money and clear her debts. But If she denounces them, she can't keep any of the blood money. As Lechkin leaves her, she posts another item that she shopped on credit.
Naylor is interviewed by a reporter for a Washington paper but ends up seducing her. He's confident of some positive press but is shocked when she gives away all of his secrets. She was having sex with him to get the story. She tells about the hush money to Kym and other misgivings from Lechkin.
Investors distance themselves from Lechkin; the stock plummets; he is ousted as CEO. Some supportive words from his son inspire him to fight back. He reveals that the reporter was having sex with him to ruin his career, and agrees to appear in Senator Finisterre's committee. He comes out swinging again, accusing Vermont's cheese of clogging arteries and causing heart disease. When asked if he would let his own son buy on credit, he points out that his son is under 18, which would be illegal. Pressed for what he would do on his son's 18th birthday, he says if his son wants to buy a computer he can’t afford; he can use BNPL.
Outside the hearing, an investor offers him his job back, but Lechkin turns him down. Good timing: shortly thereafter, the BNPL industry settles for billions and regulators step in to ban it. Joey wins the school's debating contest, and Lechkin finds a new use for his fintech talents: his new company is preparing an ICO.
Fintech in Films
So that was a film about Fintech. I’m actually considering doing something with the script, just for fun.
I’ve been putting Fintech in Films on YouTube for a while now. The concept is fun, simple and educational: solving fictional companies' problems with real fintech. It started picking up; many videos are getting tens of thousands of views. The channel gained over 1,500 subscribers last month.
The latest episode is about Natural Language Processing and Geospatial Data in the Showtime series: BILLIONS.
Podcast: The Fintech Files new season
‘The truth is out there', we investigate how Fintech is shaping the future with wonderful guests.
Sankaet Pathak: CEO of Synapse - on enabling any company to launch financial products
Pierre Mendelsohn: CEO of Alpima - on the future of investing
Listen to the previous episodes
This was fun to write, and I don’t think B2B Fintech should always take itself seriously. If you think I’ve lost it; blame the lockdown with two boys under 5.
For more serious reading: there are two excellent essays on Affirm in our educational database on Fintech.
If you found it entertaining or insightful, please share this newsletter.
Thank you and see you next month!