5 ms·
It's similar but a little different, as it is usually shorter (you need to pay it in a set number of installments over a fixed schedule, like 4 weeks) and there
by yladiz 5y ago
It's similar but a little different, as it is usually shorter (you need to pay it in a set number of installments over a fixed schedule, like 4 weeks) and there's no interest if you pay on time, at least with Klarna. I have no idea how they make money (maybe they make some money from the interchange?) but that's the gist of their business model.
- nivenkos 5y agoThey make money when you don't pay on time.
- hogFeast 5y agoThey earn a fee from merchants and, despite what they say, I believe most of these companies also have products that aren't zero interest (Affirm also sells some of its loans...I have no idea about this, I have relatively good knowledge of accounting but I am not 100% on the accounting for this so I have no idea whether it actually generates income). The fee from merchants is interesting because the claim is: the fee from merchants is going to be larger than the losses from making bad loans (and the costs of servicing). I am very sceptical of this. Management describe their underwriting model as largely using stuff like the product bought, the retailer used, the value of the order...it just sounds very suspect. And that is before you consider the valuation, the legislative risks, the interest rate risk (doing 0% loans stops making sense if interest rates rise), etc. I am in the UK and these kind of businesses usually trade at very low multiples because the regulation in the space is so high. I would regard $10bn market cap as a pretty jazzy valuation for Affirm, the stock is at $35bn.