Payday Loan, Installment Lending & Direct to Merchant Disruption

Jer Trihouse

Jer Trihouse

By Jer Trihouse. The small dollar loan space is undergoing monumental change. It’s time we step back and remember what our borrower’s goals are. They want money, right! But what’s their next move? To pay a merchant for a service or a product? Maybe pay a bill?

In case you missed this, Max Levchin has entered the lending space. A co-founder at Paypal, Max launched Affirm.com last year. In effect, Affirm provides consumers with 30 day loans to enable them to purchase goods and services from merchants. Affirm offers payment solutions for a wide range of online storefronts across the U.S. Affirm employs Facebook for authentication of borrowers, and uses  other social and data signals to assess risk. Other data Affirm will be using range from incomes per zip code and a user’s mobile device ID. Affirm then guarantees payment to merchants — who pay Affirm a fee — after this underwriting process.

“We are trying to get as close as possible to one-click, which has always been the case on the desktop,” said Levchin. “In mobile, it has become an imperative to be able to buy it now or you lose a customer quickly.”

“You will essentially be putting a purchase on a digital tab, and we’re going to make it work for us by looking at all available data to determine if you are someone who will pay it back,” said Levchin.

Like any credit card, consumers will have 30 days to pay their bills. Affirm will not charge consumers for the service. In addition, he added, the “overwhelming transformation of everything toward mobile shopping changes all the fundamentals.”

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