Affirm CFO Says Bank Charter Would Diversify Funding, Not Turn It Into a Bank

Key Points

• Affirm’s bank charter push is mainly about diversifying funding and bringing more infrastructure in-house, not turning the company into a traditional bank. CFO Rob O’Hare said the proposed Affirm Bank would be a subsidiary and could help lower funding costs by accepting deposits.
• O’Hare said consumer credit remains healthy, with no recent deterioration in delinquencies, and that Affirm can quickly tighten underwriting if conditions worsen. The company watches first-payment delinquency closely and can adjust approval standards, down payments, loan terms, or APRs by merchant or geography.
• Affirm reaffirmed growth ambitions, including at least 25% gross merchandise volume growth, while pointing to international expansion, Affirm Edge, and Agentic as future contributors. O’Hare also said AI is already improving engineering productivity, with more than 60% of weekly pull requests now AI-aided.

Affirm NASDAQ: AFRM Chief Financial Officer Rob O’Hare said the company is pursuing a bank charter primarily to diversify its funding base and bring more of its existing infrastructure in-house, while emphasizing that Affirm itself is not becoming a bank.

Speaking with Evercore ISI’s Adam Frisch at a broadcast investor event, O’Hare said the proposed Affirm Bank would be a subsidiary of the company. If approved, the industrial loan company charter would allow Affirm to collect deposits, which O’Hare said could diversify funding and potentially lower funding costs.

“Affirm itself is not becoming a bank,” O’Hare said, adding that the charter would be more of “an infrastructure and a diversification play” than a near-term move to become a broader financial “super app.”

Bank Charter Seen as Funding and Infrastructure Move

O’Hare said the bank charter would initially have more impact on Affirm’s funding model than on consumer-facing products, noting that the industrial loan company structure would carry limitations on how closely the bank could engage with consumers and what products it could offer.

He said Affirm currently relies on partner banks for core products, including basic buy now, pay later loan originations and some virtual card issuance. Over time, O’Hare said the company would expect more originations to come through Affirm Bank rather than partner banks, though he said the goal is not necessarily to eliminate those partnerships.

“I think having the charter will allow us to sort of vertically integrate a bit more and to bring some of those workflows in-house,” O’Hare said.

O’Hare Says Consumer Credit Remains Healthy

Asked about the operating environment, inflation and the potential for consumer stress, O’Hare said Affirm continues to see a healthy consumer and has not observed a negative turn in recent weeks.

O’Hare said Affirm’s risk management depends on its ability to “rank order risk” and predict repayment rates. He said the company originates about $100 million of loans per day and closely monitors first payment delinquency, particularly at the first repayment event about 30 days into a loan cohort.

“If losses are, or delinquencies rather, are too high or too low, that would cause us to do an investigation,” O’Hare said.

He said Affirm’s average loan term is roughly one year, while the weighted average life is closer to five months. The company is not extending an open line of credit, he said, but instead underwriting individual transactions in smaller increments, with an average transaction size around $250 to $275.

O’Hare said more than 95% of transactions in a given quarter come from repeat borrowers, and that risk tends to decline with each subsequent transaction a consumer completes with Affirm. He said the company’s average customer income is roughly $75,000 per year, with average FICO scores in the 650 to 660 range, describing the customer base as broadly prime to near-prime.

Downturn Playbook Focuses on Fast Underwriting Adjustments

In a recession scenario, O’Hare said Affirm would rely on internal delinquency data rather than macro headlines alone to determine whether underwriting changes are needed.

“If it’s not showing up in the delinquency rates internally, we’re probably not actioning change proactively,” he said.

O’Hare said the company can respond quickly if first payment delinquency data begins to drift from expectations. Potential actions include raising approval thresholds, increasing required down payments for marginal borrowers, shortening loan durations or increasing APRs. He said Affirm can make these changes in a highly specific way, including by merchant, geography or other factors.

He added that in a stressed environment, the company would likely sacrifice some growth to preserve predictable credit outcomes and protect its funding ecosystem. However, he said it is “definitely possible” that Affirm could continue growing through a downturn as buy now, pay later gains share in consumer wallets, though he described that outcome as not necessarily likely.

Growth Outlook Includes International, Edge and Agentic Opportunities

O’Hare reiterated Affirm’s medium-term target of “at least” 25% gross merchandise volume growth. He said both the point-of-sale and direct-to-consumer businesses are currently growing well above the at least 10% growth levels previously cited for those programs.

He said international expansion is expected to become a larger part of the story over the next several years. O’Hare also pointed to Affirm Edge and Agentic as potential medium-term contributors, while noting that Affirm is not currently ascribing growth from those programs into the at least 25% target.

“I don’t think we’re envisioning a world that doesn’t already exist,” O’Hare said. “I think it’s just about continuing to execute.”

On revenue less transaction costs, or RLTC, O’Hare said the company’s 3.75% to 4% target range reflects improved visibility into the business, including funding sources, fixed-cost ABS deals and the performance trajectory of Affirm Card, Shopify and Amazon programs.

Funding, Capital Allocation and AI Productivity

O’Hare said the terms of Affirm’s most recent or next asset-backed securities deal are the best leading indicator of funding ecosystem health. He said recent ABS spreads are at all-time lows on a like-for-like basis, indicating a healthy market for the company’s paper.

On capital allocation, O’Hare said Affirm has been active in buying back convertible debt issued in 2021, particularly when the bonds traded at a meaningful discount. He said the company remains early in generating cash and maintains a high bar for distributing cash externally through M&A, buybacks or dividends. O’Hare said it would not surprise him if Affirm pursued an acquisition over the next five years, but said any deal would need to meet a high bar and likely be tangential by product category or geography.

O’Hare also discussed Affirm’s use of artificial intelligence, saying the company held an internal AI tooling week in January to accelerate adoption by engineering teams. He said more than 60% of weekly pull requests now come from AI-aided development, and that cost per pull request has declined even with added token costs.

“We haven’t done AI-driven layoffs,” O’Hare said, adding that AI is currently more of a growth and productivity driver than a cost-cutting tool.

About Affirm NASDAQ: AFRM

Affirm Holdings, Inc is a financial technology company that provides point-of-sale consumer lending and payments solutions for online and in-store purchases. Its core product is a buy-now-pay-later (BNPL) platform that enables consumers to split purchases into fixed, transparent installment loans with no hidden fees. Affirm offers a range of financing options through merchant integrations, a consumer-facing mobile app and virtual card capabilities, and tools for merchants to offer alternative payment methods at checkout.

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