Affirm CEO: Higher for longer rates is 'not a terrible thing'

[Music] another strong quarter in the books for a firm as credit quality well that says stable let's get right to airm founder and Co Max L chin Max good to see you here in New York City for a change for a change yeah I I before we get to the quarter I follow you aely on Twitter and a couple weeks ago you put out this higher for longer rates you you seemed excited about it and why is that one why are you excited about it and does it benefit a company like a firm uh it's not a benefit but I think there is an offree a narrative that it's a huge problem for a firm that the rates are not coming down and that's just plain inaccurate generally speaking the reason I said hire for longer is a good thing is because that's an outcome of Def fed basically saying hey prices are not coming down inflation is a little sticky we're going to keep these rates a little higher for a little longer to make sure that the economy cools down just enough what that means though is the joblessness situation the job claims just came out today moved up a little bit but not a ton still under 4% reasonably healthy so long as we are keeping job losses in check people are able to spend people are able to transact people are able to pay their bills and that's really good for a firm so hire for longer is an outcome of a not great situation with inflation but not a terrible thing for us and as we have proven now over the last couple of years so long as the rates remain reasonably consistent we're able to print an excellent quarter just like we showed yesterday what are you what are you seeing in terms of charge offs still quite stable you saw that they they think ticked up a little bit but all within the ranges of uh of of very very reasonable delinquencies 30 plus is what we report to the street as kind of the forward-looking metric down a tiny bit but again very reasonable we expect some seasonality coming through the summer typically a slight increase in rates but generally speaking our consumer is still borrowing spending paying us back never a so go to sleep and don't look at it against or a situation at airm we look at it all the time any given day there'll always something to to look at and obsess over but so far so good I know you're not an economist but you have a great insight into the health the economy and look we see consumer sentiment readings they're not great people are are pissed off about inflation what's your read on the economy again I think there's a lot of people who have read the news and said well economy is not doing so hot in reality price of eggs is up a lot some other prices are not up in fact they're down it's averaging to a number that's not the 2% Target that the FED had set for itself but it's not exactly at the nine points where we were looking you know a year or whatever ago so I think generally speaking econom is actually in a better shape than the popular opinion will have you believe I think some of the complaints you're hearing is actually from the upper echelons of income if you look at the wage growth I think the lower income groups have kept up better than the higher income groups and so I think it's a little bit distributed but from where we sit people are spending people are still traveling which is an important growth Vector over the last 12 months people are still buying nice things for themselves which is good uh we're helping them Finance it and again they're able to pay their bills back on time to us doesn't sound like an economy that that needs a r cut you know that's where I stop at The Economist like not not for me to app where and when to have rate Cuts what I do know is that we don't require a rate cut to be successful again another great quarter just just yesterday and looking forward to the rest of the fiscal year for us in fiscal 25 High F longer is okay I want to read this headline for you because I I think you'll appreciate it or or have something to say on it Phantom debt from buy now pay later schemes is a $700 billion black hole that economists aren't accounting for that is what they uh technically call clickbait um that math is so wrong it's worth doing it on air what is phantom dead well the claim is not mine and erroneous as it may be is that bino paleor is this thing that is existing in the shadows of the economy it's not reported to the credit bureaus and by year 21,000 it will reach some obscene number and all of it is wrong first of all monthly installments which is part of the overall B system is reported has been reported to the credit bureaus and and it's been reported for a very long time so that that's just not a at all so whatever indebtedness you see in the consumer land it is visible in the credit bureau data part one part two there's a fraction of B now pale industry called paying for sometimes people call it split pay sometimes they just call it bnpl but that's the pay over six weeks and um weighted average life of that loan is 3 weeks that means money turns 17 times a year last year's overall industry estimate for the US was $50 billion that's $3 billion in outstanding balances total Us credit card de $1,100 billion or 1.1 trillion that's 30 basis points 30 basis points of debt that is not revolving not generally speaking compounding doesn't even pay interest 90 plus% of the time is not reported to the bureaus that's Phantom debt you're terrified of 30 basis points of us Consumer Debt that is just a headline that's made up to get people riled up and click on headlines do you think that people are paying your bill first as compared to a credit card company there's a great question I think they are paying our bills in a very predictable fashion because whenever they agree to use a firm they see not just well here's your bill please make a minimum payment don't worry about the long term so the the buy now pay never which is what credit cards are is or buy now pay forever is probably a better term is a stark difference to what we do we present the entire plan you know exactly when your next payment is due generally speaking it's quite rigid which may seem like a problem but in fact it's a huge benefit consumers love the sense of control where this is the bill I got to pay it of course if you need to have a little bit more time to pay later slightly later we will accommodate you and there are no incremental fees or compounding interest that is what gets us into this grade Zone where people generally speaking pay our bills just fine Some people prefer to have their firm in the best standing possible and so I think they do prefer us to their credit card bills some I think just make their bills on time as you saw 2.3% delinquencies 30 plus last quarter suggested they are paying our bills good thing good thing I you and I have talked in the minutes couple minutes we have left you and I have talked in the past about Ai and I can never tell if you're like man I can't believe this guy's asking me this about about this again everybody in my life asked me about this but let me ask you from this perspective since we have last talked we are Warren Buffett uh out here annual sh shareholder meeting talking about the genie is now out of the bottle apparently some weird video of him was posted and it wasn't actually him is he right to be that concerned about Ai and and I should know too yes you're the founder and COO of a firm but you have spent many years in tech industry and of course where there are for those early days of PayPal MH so I think generally speaking I am a an extreme techno Optimist and so asking me should we be worried about some amazing technological breakthrough is that's another form of clickbait like no we should not be we should be excited about all the opportunities we're going to make amazing things efficiencies assistance co-pilots all of that is coming most of it is not ready for prime time that an important thing to be worried about is how far have these valuations run ahead of themselves there's some amazing things happening most of them in Labs that said we announced in our last quarter as it happens that we have for a long time now been experimenting with AI as a customer service agent we still guarantee that any human who wants to talk to a human will be able to do so but we found our ability to satisfy consumer requests questions complaints whatever it is they have with a chat bot that is powered entirely by our built AI is really really strong 60% of the time a little bit higher than now the consumer says oh okay great that works for me I don't need to talk to a human lots and lots of geners and Millennials like chatting don't like talking to humans they get their satisfaction through a chat bot that is AI powered very cool they need to say hey I got to talk to a person you don't get me person I guess I'm the old guy now ah you're the one mashing the button like Operator Operator we we will always have that we'll always support that modality of interaction but a lot of people get their questions simple ones anyway done very quickly with a single interaction with an AI all right well I promise not to ask you about that until I don't know a couple months from now when we talk again Max leevin uh founder and Co firm always good to see you appreciate it good to be here

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Length: 8min 51sec (531 seconds)

Published: Thu May 09 2024