Affirm CFO discusses the rise of Buy Now Pay Later in 'uncertain times'

Intro well more than half of Americans believe the US is currently in a recession according to a Harris poll and that's despite the fact that we're actually not in a recession and to help alleviate the pressure of inflation and higher cost of living more people are turning to buy now pay later Services 76% of people believe that buy now pay later helps them improve their overall financial situation to discuss what the rise of buy now pay later Services signal about the state of the consumer Michael Linford who is the affirmed CFO here on Yahoo finance to discuss with us Michael great to connect with you once again and thanks for joining the show here with us thanks for having me certainly so let's let's dive into this I mean there's a lot of thought that buy now pay later helps you offset or at least relieve some pressure where there's this existing thought of where inflation is impacting cost of living where higher rents or even home costs are impacting what you can actually go out and buy in discretionary spin so what is the realtime calculus realtime calculus that you're seeing households and individuals work through right now that pushes them towards byy now pay later see you know look so long as consumers feel like we're in a recession it actually doesn't matter if we're in one our survey that we recently conducted shows that consumers have a strong sense of unease and uncertainty about the economy right now and what a firm offers is a sense of certainty and control in these very uncertain times it's not surprising but nearly all consumers having predictable expenses as a key part in maintaining their household budgets and that's what a firm offers and what credit cards can't and so we feel like we're really well positioned to help consumers manage their financial outcomes in these very uncertain times Michael I mean I'm sure you just heard our conversation around McDonald's and what their struggles are with the consumer I mean I doubt people are doing buy now pay later on their McDonald's fries but I mean it seems like we're we're getting to this point where we're trying to figure out exactly where consumer is leveraging buy now pay consumer trends later the most what are you seeing from your data Yeah in our last quarter we grew at a growth rate that was four times that of us e-commerce consumers are still in the early stages of what we consider to be a secular shift away from credit cards away from revolving debt with uncertain outcomes and moving towards certain outcomes with we deliver with the firm um and and so I think we're we're pretty early in in that cycle and so some of the macro economic Trends aren't necessarily showing up in our category data you know all of our categories were growing last quarter except for sporting goods but what's clear to us is that consumers are looking for more control and more certainty as they look around and see some uncertain times and and it's a feeling more than it is a fact I mean you pointed out at the top the the data indicates consumers think that we're in a recession and you know credit to Kyla scanland for for coining the phrase VI session that's where we're at there's a Vibe here and and consumers are trying to to be reactive to that um and and so predictability and control are really important to them right now you know one one choice Merchants have is to use discounting as you discussed with with some fast food chains another approach is to give consumers certainty um it's not surprising that half of consumers say that a 0% financing offer from a from a company like a firm will impact their decision to make a purchasing decision that's because we give consumer certainty and and when they look around the economy right now and they see lots of uncertainty everywhere and they see somebody providing that certainty that encourages them to to continue to engage Michael while we have you and I think you know you and I talk about this time and time again here but I think it's more prevalent even more so given some of the data that we're rattling off here and and thinking about the near-term relief versus long-term risk for consumers for buy now pay later and the nearterm relief vs longterm risk impact to consumer credit scores how are we ensuring that you know if people are looking for that near-term relief that they're not layering on long-term risk and pricing themselves out because of the impact to a credit score later on down the line if they're unable to pay on one of the buy now pay later purchases that they're making yeah I I think it's really important to think about the B out pay lader industry in in longterm and short term um obligations in the in the short-term sense where where the pay in for product is so profitable there's really little risk in accumulating long-term uh liabilities just because those things move so quickly they turn over 17 times a year but for longer term obligations it's true that consumers need to be very aware of these obligations they're taking on what's important about a firm though is our business model is such that we're so aligned with the consumer we can't win unless the consumer wins because we offer consumers immutable uncertainty when they check out the total obligation is known they can't revolve there are no late fees with our product we can't win unless the consumer is is also winning and so our company is built behind making sure that we can reliably predict and deliver credit outcomes for our consumers which is really important for our Merchant Partners who who want us to help them grow their business and for our Capital Partners who are investing in the loans you know it's interesting we were having a conversation with the conference consumer uncertainty board's Chief Economist who said that this is a consumer that is Battle weary how would you describe the consumer right now yeah I think the consumer is experiencing a lot of mixed signals so inflation is Cooling and yet prices remain very high real wages have actually kept up really strong over the past 12 months but unemployment is beginning to tick up and everybody on shows like this have been talking about a recession now for a very long time and As the adage goes economists have predicted nine of the past five recessions I do think that the consumer is is bombarded with all of these mixed messages and our data suggests that the consumer more than anything is just uncertain and and they're looking to somebody like a firm to provide that certainty and just lastly while we have you here I mean when we think about the business itself for a firm I know we're in quiet period we can't get into any financials we don't want to get anybody in trouble here but you know even as we're thinking about this earning season and margins as a whole right now I mean companies like by now pay later companies like a firm you know how do you guys go about pulling certain levers to ensure investors that the margins are secure that they can come to expect what this company has been able to show them in its own growth rate over time a firm has done a phenomenal job in pivoting the the economics of the business into this current macro environment the the past 12 years in my opinion has been a clinic on how to how to manage the macroeconomic risk in a business and create really strong units we did that through uh really strong control of credit outcomes we did that through pricing initiatives with merchants and consumers if you look at last quarter we posted extremely strong unit economics and an incredible amount of operating leverage and we feel like we're we're going to continue to do that from from here on out all right Michael Lyford affirm CFO Michael always a pleasure to grab some time with you appreciate it thank you