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Affirm Public S-1 Filing

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Re: Affirm Public S-1 Filing

#61

Post by raiyu »

112012123 wrote: post #21

Interesting. Overall, I agree with everyone else - Affirm looks like a healthy company. Major takeaways: 1.5% write-off rate for their jan 2020 vintage is very healthy - comparable to the long-term trend for unsecured superprime consumer debt. Given the (I suspect) lower average creditworthiness of Affirm customers, this is a great number. I'd be curious to see their long-term trend for same-age vintages, however. In…

When you look at 30% of revenue from Peloton, and that their interest rate revenue is lower than merchant fees, it's basically companies paying to finance larger purchases for their customers because they get to book the full revenue on their books immediately, pay down the interest through merchant fees themselves, get higher numbers on their books, increase their market cap, and for consumers it's a benefit because why not finance it over a period of 39 months than be out of pocket immediately or finance it through a credit card with high interest rates.

So really it's a great way to take advantage of the credit markets and public company comps being extremely high while benefitting the customer.

Re: Affirm Public S-1 Filing

#62

Post by subsubzero »

bertjk wrote: post #50
subsubzero wrote: post #14

Earlier quoted context omitted.

yeah its probably this, market caps on some of these money losers is stratospheric. I think alot of people forgot the lessons of 2000. Take Palantir, a company that is 11 years old and for the past 3 years has lost 600M a year. What monopoly will this company carve out for itself to achieve this lofty valuation? Or lets look at doordash [1] despite the pandemic and most of its workers not being employees(low paid gig…

What makes you think the fed's tap will ever get turned off? What preconditions do you think we have to see before it happens? In the past, every time I thought "the Fed will have to tighten soon" something happens which somehow, magically, always requires more easy money to solve. Example: Easy money caused a housing bubble that burst? Now we need easy money to fix unemployment and keep the markets from seizing up.…

It could happen with this Biden presidency, although most likely with whoever comes after him. If you think about easy money and interest rates, with Obama the lowering of interest rates made sense, the country was coming out of a long protracted recession and the money was needed to grease the gears of the economy so to speak.

With the Trump presidency he made his north star be the stock market(and keeping it high) and its why he heavily pressured the Fed to keep interest rates extremely low to supercharge the economy(and make him look good).

If a vaccine comes quickly and is highly effective long term and covid is eradicated by late spring/summer I expect a big jump in the stock market and a red hot housing market, this would be a time to slowly increase the interest rates, wall street won't like it but at some point it will have to happen.

Re: Affirm Public S-1 Filing

#63

Post by Guest42 »

tadkar wrote: post #56
Guest42 wrote: post #35

Earlier quoted context omitted.

I’ve worked in credit risk modeling and it is rather strict the predictors that can be used and well documented. Data comes in from a variety of sources and it is favorable to be skilled in established models than to try something obscure that isn’t intuitive. The models have to work across different sets of time and the varying business processes that may have been in place. Fraud modeling is more flexible, but seem…

That is definitely changing in credit risk and underwriting as well. There are several companies like [1] applying deep neural nets to the credit risk problem. This on top of a lot of in house work in the big banks to “supplement” what is available on the open market [1] https://zest.ai/

Do you work for them? What is your background in academia/business?

Re: Affirm Public S-1 Filing

#64

Post by akrymski »

> Our agreement with one of our originating bank partners, Cross River Bank, which has originated the substantial majority of loans facilitated through our platform to date, is non-exclusive, short-term in duration and subject to termination by Cross River Bank upon the occurrence of certain events, including our failure to comply with applicable regulatory requirements. If that agreement is terminated, and we are unable to replace the commitments of Cross River Bank, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.

Affirm is effectively a broker for loans issued by Cross River Bank

Re: Affirm Public S-1 Filing

#65

Post by 112012123 »

tadkar wrote: post #56
Guest42 wrote: post #35

Earlier quoted context omitted.

I’ve worked in credit risk modeling and it is rather strict the predictors that can be used and well documented. Data comes in from a variety of sources and it is favorable to be skilled in established models than to try something obscure that isn’t intuitive. The models have to work across different sets of time and the varying business processes that may have been in place. Fraud modeling is more flexible, but seem…

That is definitely changing in credit risk and underwriting as well. There are several companies like [1] applying deep neural nets to the credit risk problem. This on top of a lot of in house work in the big banks to “supplement” what is available on the open market [1] https://zest.ai/

This is definitely a super interesting company/approach - thanks for the link! I'm definitely curious as to whether they're actually using things like neural nets (or any other more-sophisticated technical techniques). The traditional problem is that those models aren't explainable, and potentially have hidden biases in them, so I'd be really curious what their approach is.

Re: Affirm Public S-1 Filing

#66

Post by akrymski »

There is something fishy about selling a product with 0% APR - it means as a consumer you're actually WORSE off if you DON'T get the loan (since you would earn interest on the cash in your account). Forcing people to borrow when they don't have to is a strange way to make money off fees?

Re: Affirm Public S-1 Filing

#67

Post by fairity »

akrymski wrote: post #66

There is something fishy about selling a product with 0% APR - it means as a consumer you're actually WORSE off if you DON'T get the loan (since you would earn interest on the cash in your account). Forcing people to borrow when they don't have to is a strange way to make money off fees?

I'm sure it increases conversion rate for the seller, especially for expensive purchases.

Re: Affirm Public S-1 Filing

#68

Post by solumos »

throwaway69123 wrote: post #27

Where does Affirm get their under writing for its credit?

> As of September 30, 2020, we had over $4.2 billion in funding capacity from a diverse set of capital partners, and we have funded approximately $10.7 billion of purchases since July 1, 2016.

"diverse set of capital partners"

Re: Affirm Public S-1 Filing

#69

Post by lcrmorin »

tadkar wrote: post #56
Guest42 wrote: post #35

Earlier quoted context omitted.

I’ve worked in credit risk modeling and it is rather strict the predictors that can be used and well documented. Data comes in from a variety of sources and it is favorable to be skilled in established models than to try something obscure that isn’t intuitive. The models have to work across different sets of time and the varying business processes that may have been in place. Fraud modeling is more flexible, but seem…

That is definitely changing in credit risk and underwriting as well. There are several companies like [1] applying deep neural nets to the credit risk problem. This on top of a lot of in house work in the big banks to “supplement” what is available on the open market [1] https://zest.ai/

There is a big difference between dumping a dataset in the latest hot ML model and building something that offer some actual explainability, deal with intrinsic biases, have some stability over time and recalibration and that will go trough an unprecedented crisis for which you don't have any data to learn from. That mean the model usually has to go trough a lot of internal commities and different external agencies. I highly suspect that an external proprietary solution won't go very far in the credit rating field.

Re: Affirm Public S-1 Filing

#70

Post by kirillzubovsky »

herewhere wrote: post #38
toomuchtodo wrote: post #17

Earlier quoted context omitted.

Am I right in reading 30% of their rev is coming from Peloton? (Control-F “Peloton”) “Our top merchant partner, Peloton, represented approximately 28% of our total revenue for the fiscal year ended June 30, 2020 and 30% of our total revenue for the three months ended September 30, 2020. Our top ten merchants in the aggregate represented approximately 35% of our total revenue for the fiscal year ended June 30, 2020 an…

Recently, I went to Peloton dealership to order one bike. They offered 39 months 0% APR. I asked if they can give me some sort of cash discount. Because of lack of cash discount, and availability of 0% APR naturally I financed it. Perhaps, that's how Affirm is getting their business.

I am curious, did you end up paying the sticker price, or did it double by the time you checked out?

I'd sold my P already, but back in the day you'd go in, and it would cost 1800 or something, but then you add a (mandatory) subscription cost, (mandatory) delivery and assembly fee, and of course a pair of shoes and a matt, and now you've got yourself an indoor bike for 3k.

I wonder if it's still the same.

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