Update 8 November – Original post is below the image.. I had doubted Visa’s support here. But clearly this is a real product.
Affirm Debit+ is a decoupled debit on the Visa network with Evolve Bank as ODFI/Issuer. I doubt if Visa fully vetted this product.. it MUST have “slipped through”. For more info see Affirm’s investor day presentation.
Per my blog last week, my hypothesis is that the new Affirm Debit+ will be revolutionary.. which is why it is currently causing a massive firestorm amongst Banks. Today I want to drill into what I believe the value proposition will be (my hypothesis) and why Visa had to support this.
Today Affirm is “limited” in growth to the merchants it can directly integrate to. How can they solve this problem? Create a consumer “pay anyone” product that lets the consumer pick and choose what items they want to finance after they purchase them. Connect any of your bank accounts or all of them.. Finance anything you buy on improved terms. Affirm will also work with Stripe and others to create an improved checkout process, which will improve both conversion AND consumers ability to purchase (ie underwriting). The first mover advantage will be tremendous and step on much of the Neo Banks (already slim value prop).
- Instant account opening
- Instant credit line, pay on your terms
- Link Any Bank (or all your banks)
- Pay with Debit+ in store or on line
- Finance anything you buy before or after the purchase
- Use Debit card in eCommerce with enhanced consumer protections and real time notifications
- Reduced credit costs
- Debit rewards
Note that Square/Afterpay will likely seek to compete in something similar as well, but Affirm has the US risk engine proven today.
Visa was smart to join this team as Affirm’s credit value proposition was a direct threat to the Visa network. While Visa only participates on the Debit+ interchange, they can both observe and make the case for Affirm to expand merchant integration (within Visa scheme).
My top question? Who is the ODFI here. If it is a small bank this will fail (PayPal had WFC and it almost failed). My guess is that someone like JPMC is contacting Affirm to get them into the tent. One core challenge of ACH is the ODFI’s responsibility to take ACH returns for 60 days. Bank customers only need to claim fraud for the RDFI to reverse transaction immediately. It is the ODFI’s responsibility to investigate. The only entity with deep experience here is PayPal, with Wells Fargo as ODFI. They have all the pieces to create a similar product in weeks. But PayPal decoupled debit + PayPal Credit (+installments) will reverse the efforts of last 4 years in striking Bank “peace agreements”.
Will this open the floodgates to other FinTechs seeking to replicate the model? Yep. Visa has to be consistent. The debit piece of this is easy.. The credit piece is very hard.. I think SoFi could follow here.. But few others. First mover advantage will be key.
The Affirm model is just brilliant.. And a revolutionary advancement over any of the NEO banks. Affirm will take all of the upside, allowing users to connect to any bank.. And deliver superior products, with better rates, and improved commerce integration.