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We believe that by using modern technology, strong engineering talent, and a mission-driven approach, we can reinvent payments and commerce.
−Removed: Our solutions, which are built on trust and transparency, are designed to make it easier for consumers to spend responsibly and with confidence, easier for merchants to convert sales and grow, and easier for commerce to thrive.
+Added: Our solutions, which are built on trust and transparency, are designed to make it easier for consumers to spend responsibly and with confidence, easier for merchants and commerce platforms to convert sales and grow, and easier for commerce to thrive.
Legacy payment options, archaic systems, and traditional risk and credit underwriting models can be harmful, deceptive, and restrictive to both consumers and merchants.
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Our platform is designed to address these problems.
−Removed: We believe our innovative approach, based on trust and steadfast commitment to our core values, uniquely positions us to define the future of commerce and payments.
Our company is predicated on the principles of simplicity, transparency, and putting people first.
−Removed: Since our founding, we have charged $0 in late fees for missed payments, we never profit from consumers’ mistakes, and we are transparent in our product offerings.
−Removed: By adhering to these principles, we have built enduring, trust-based relationships with consumers and merchants that we believe will set us up for long-term, sustainable success.
−Removed: We believe that technology, underwriting, and risk management are collectively our key competitive advantage.
−Removed: We believe our proprietary technology platform and data give us a unique advantage in understanding customers and merchants, as well as pricing risk — which we can almost always accomplish within seconds at checkout.
+Added: Since our founding, we have charged $0 in late fees for missed payments.
+Added: We never profit from consumers’ mistakes, and we are always transparent in our product offerings.
+Added: By adhering to these principles, we have built enduring, trust-based relationships with consumers and merchants.
+Added: We believe that our technology, underwriting, and risk management are key competitive advantages.
+Added: Our proprietary technology’s ability to price and assess risk at a transaction level provides a unique advantage compared to legacy payment and credit systems.
Our approach to risk management is core to our business model and has been proven to lead to low fraud rates, higher approval rates compared to traditional credit underwriting models, and low credit losses.
−Removed: Our models have been built on more than one billion data points, including data from over 30 million loans and over seven years of repayments.
+Added: Our models have been built on billions of data points, including data from over 71 million loans and over seven years of repayments.
Furthermore, our risk management models are designed to continuously improve over time, becoming more precise and efficient with each transaction powered by our platform.
What this means for consumers is increased purchasing power and more control and flexibility.
−Removed: As of June 30, 2021, over 10 million consumers have trusted Affirm to pay over time.
+Added: As of June 30, 2022, over 23 million consumers have trusted Affirm as their transaction partner.
By utilizing our unique risk model predicated on sophisticated machine learning algorithms, proprietary data, and product-level underwriting, we can serve consumers across the credit spectrum and price risk across transaction types.
−Removed: Consumers on our platform represent a broad cross-section of society, with sizable geographic representation across the United States ( “ U.S.”) and Canada.
+Added: Consumers on our platform represent a broad cross-section of society.
For merchants, Affirm's commerce solutions help drive growth by enhancing demand generation and customer acquisition.
Our platform is explicitly designed and engineered to integrate with a wide range of merchants.
−Removed: This is a point of differentiation for Affirm, and we can accommodate and partner with merchants regardless of industry, size, average order value ( “ AOV”), or customer profile.
−Removed: As of June 30, 2021, we had approximately 29,000 merchants integrated on our platform, including several thousand integrated through our partnership with Shopify Inc.
−Removed: ( “Shopify ”), ranging from small businesses to large enterprises, direct-to-consumer brands, brick-and-mortar stores, and companies with omni-channel presences.
−Removed: Our merchants span a diverse range of industries, including sporting goods and outdoors, furniture and homewares, travel, apparel, accessories, consumer electronics, and jewelry.
−Removed: T able of C ontents
−Removed: Our business model is designed to align with the interests of both consumers and merchants — we win when they win.
+Added: This is a point of differentiation for us, as we can accommodate and partner with merchants regardless of industry, size, average order value ( “ AOV”), or customer profile.
+Added: As of June 30, 2022, we had approximately 235,000 active merchants, ranging from small businesses to large enterprises, direct-to-consumer brands, brick-and-mortar stores, and companies with an omni-channel presence.
+Added: Our merchants span a diverse range of industries, including sporting goods and outdoors, furniture and homewares, travel and ticketing, apparel, accessories, consumer electronics, and jewelry.
+Added: No single merchant accounted for more than 10% of total revenue for the fiscal year ended June 30, 2022.
+Added: Our business model is designed to align with the interests of both consumers and merchants.
+Added: Table o f Contents
From merchants, we typically earn a fee when we help them convert a sale and power a payment.
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we generally earn larger merchant fees on 0% annual percentage rate (“APR ”) financing products.
−Removed: For both the fiscal years ended June 30, 2021 and 2020, 0% APR financing represented 43% of total Gross Merchandise Volume (“GMV ” ) facilitated through our platform.
+Added: We have two loan product offerings:
+Added: Split Pay and Core loans.
+Added: Split Pay is a short-term payment plan with 0% APR, while Core loans include all interest bearing installment loans and 0% APR monthly installment loans with term lengths greater than three months.
+Added: For fiscal year ended June 30, 2022 , Split Pay and Core 0% loans represented 22% and 21%, respectively, of total Gross Merchandise Volume (“GMV ” ) facilitated through our platform.
+Added: For fiscal year ended June 30, 2021, Split Pay and Core 0% loans represented 11% and 32%, respectively, of total GMV.
This structure incentivizes us to help our merchants convert sales and increase AOV through the commerce and technology solutions offered by our platform.
−Removed: From consumers, we earn interest income on the simple interest loans that we purchase from our originating bank partners.
+Added: From consumers, we earn interest income on the simple interest loans that we originate or purchase from our originating bank partners.
Interest rates charged to our consumers vary depending on the transaction risk, creditworthiness of the consumer, the repayment term selected by the consumer, the amount of the loan, and the individual arrangement with a merchant.
−Removed: Because consumers are never charged deferred or compounding interest, late fees, or penalties on the loans, we are not incentivized to profit from our consumers’ mistakes or misfortunes.
−Removed: In order to accelerate our ubiquity, we facilitate the issuance of virtual cards directly to consumers through our app, allowing them to shop with merchants that may not yet be fully integrated with Affirm.
+Added: Because consumers are never charged deferred or compounding interest or late fees, we are not incentivized to profit from our consumers’ mistakes or misfortunes.
+Added: We also facilitate the issuance of virtual cards directly to consumers through our app, allowing them to shop with merchants that are not fully integrated with Affirm.
When these virtual cards are used over established card networks, we earn a portion of the interchange fee from the transaction.
−Removed: We have already achieved significant scale, facilitating consumer purchases of $8.3 billion in GMV in fiscal year 2021, and we are just getting started.
+Added: We have already achieved significant scale, facilitating consumer purchases of $15.5 billion in GMV in fiscal year 2022.
+Added: Our business transforms the way consumers and merchants transact by creating a powerful platform built upon honest financial products.
Our platform comprises three core elements:
−Removed: a point-of-sale payment solution for consumers, merchant commerce solutions, and a consumer-focused app.
−Removed: • Consumer Point-Of Sale Solutions.
−Removed: Our point-of-sale solutions allow consumers to pay for purchases over time in fixed amounts without deferred interest, hidden fees, or penalties.
−Removed: With our 0% APR payment options, consumers pay zero interest and zero additional costs.
−Removed: On the interest bearing loans we facilitate, we charge simple interest, which means consumers pay fixed amounts of interest that they agree to up front, and the interest never compounds.
−Removed: We believe in treating people fairly, which is why consumers never pay more than what was agreed to at checkout, even if they miss a payment.
−Removed: • Merchant Commerce Solutions.
−Removed: We offer merchants commerce solutions that help them drive growth.
−Removed: Our solutions empower merchants to enhance demand generation, more efficiently promote and sell their products, optimize their customer acquisition strategies, and drive incremental sales.
−Removed: Our flexible payment solutions allow merchants to solve affordability for their customers, providing a revenue accelerator while avoiding discounting and other expensive marketing and promotional channels.
−Removed: With Returnly Technologies, Inc.
−Removed: (“Returnly”), Affirm addresses the full shopping journey by enabling seamless return experiences that drive loyalty and satisfaction.
−Removed: We also provide valuable product-level data and insights — information that merchants cannot easily get elsewhere — to better inform their strategies.
−Removed: • Consumer Offerings.
−Removed: Our consumer-focused app unlocks the full suite of Affirm products for a complete end-to-end consumer experience.
−Removed: Consumers can use our app to manage payments, open a high-yield savings account, and access a personalized marketplace.
−Removed: Our marketplace serves as a discovery platform that allows consumers to find products and make purchases from partner merchants.
−Removed: In addition, our app allows merchants to provide tailored offers based on consumers’ spending patterns, shopping habits, and purchase intent.
−Removed: We are also beginning to roll out Affirm Debit+, the first U.S.
−Removed: debit card to have direct access to pay-over-time functionality.
−Removed: Affirm Debit+ will allow consumers to pay upfront, from their bank
−Removed: T able of C ontents
−Removed: account, or pay later, by using a unique post-purchase feature to instantly convert any eligible transaction into one that is pay-over-time.
−Removed: Our Solutions
−Removed: We are transforming the way consumers buy and merchants do business by creating a powerful platform built upon honest financial products.
+Added: point-of-sale payment solutions for consumers, merchant commerce solutions, and a consumer-focused app.
We started our business with our core pay-over-time solution at checkout, and have since continued to innovate and expand our product suite by building and acquiring solutions that address the needs of both consumers and merchants.
−Removed: We plan to further add to our solutions over time so that we may offer more benefits to our consumers and merchants — this is just the beginning.
−Removed: Our products benefit consumers in numerous ways:
−Removed: • Simple, transparent, and fair.
−Removed: When using our solution, consumers never pay more than what they agreed to at checkout, even if they miss or are late on a payment.
−Removed: • Delightful user experience.
−Removed: Our solution provides a fast and straightforward experience through our easy-to-use app.
−Removed: We also never sell the servicing rights to outstanding consumer balances, which allows us to manage the full consumer experience even in delinquency.
−Removed: • Flexibility and control.
−Removed: Instead of a “one-size-fits-all” approach, our solutions empower consumers to select how they wish to pay, including varying term options (e.g., biweekly, 3, 6, or 12 months) that best fit their needs, on a per-transaction basis.
−Removed: • Accurate credit pricing.
−Removed: Our risk model has consistently outperformed traditional credit models, enabling us to better help eligible consumers finance their purchases and power more transactions on our platform.
−Removed: T able of C ontents
−Removed: • Consumer confidence.
−Removed: We monitor merchants’ creditworthiness, consumer complaints and dispute rates, changes in consumer repayment, and other anomalies to give consumers the confidence that merchants integrated with Affirm are committed to delivering honest and delightful experiences .
+Added: We plan to further add to our solutions over time so that we may offer more benefits to our consumers and merchants.
Consumer features
−Removed: When purchasing from one of our partner merchants, consumers can choose Affirm as a payment method, giving them the option to pay over time with terms ranging from three to 60 months.
+Added: When purchasing from one of our partner merchants, consumers can choose Affirm as a payment method, giving them the option to pay over time with terms ranging from 6 weeks to 60 months.
+Added: We monitor merchants’ creditworthiness, consumer complaints and dispute rates, changes in consumer repayment behavior, and other data to give consumers the confidence that merchants integrated with Affirm are committed to delivering honest and delightful experiences.
+Added: • Consumer first borrowing.
Our frictionless solution makes it easy for consumers to apply for a loan and be approved on the spot.
Consumers receive either 0% APR, where they pay no interest, or simple interest loans, where they pay fixed amounts of interest that never compound.
+Added: We underwrite each transaction individually and—by never charging late fees—we do not profit when consumers fall behind.
+Added: Our success is fundamentally aligned with our consumers’ success.
+Added: Our proprietary risk model has consistently outperformed traditional credit models, enabling us to better help eligible consumers finance their purchases.
+Added: Consumers never pay more than what they agreed to at checkout, even if they miss or are late on a payment.
• Virtual card.
Consumers can apply at affirm.com or via the Affirm app and, upon approval, receive a single-use virtual card to use digitally online or in-store at merchants that accept Visa cards.
−Removed: This allows our consumers to use our pay-over-time solutions at merchants that are not yet fully integrated with Affirm.
+Added: Table o f Contents
+Added: our consumers to use our pay-over-time solutions at merchants that are not integrated with Affirm.
+Added: Merchants may also elect to use virtual cards as a method to facilitate the offering of the installment loans to allow their customer’s to pay over time.
• Affirm app and marketplace.
−Removed: Our app provides tailored and exclusive offers from merchants based on consumers’ spending and shopping habits.
−Removed: Consumers can also use the app to exercise control over their repayments, for example, by setting repayment dates that align with their monthly financial budgets.
+Added: Our app provides tailored and exclusive offers from merchants based on consumers’ preferences.
+Added: Consumers can also use the app to set repayment dates that align with their monthly financial budgets.
During the fiscal year ended June 30, 2022, 23% of our transactions occurred on the Affirm marketplace.
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Through the Affirm app and in partnership with Cross River Bank, we offer an FDIC-insured, interest-bearing savings account, with no minimum deposit requirements or fees.
−Removed: Our solutions benefit merchants in several ways:
−Removed: • More customers and better conversion .
−Removed: Our merchants report increased customer conversion when they offer Affirm.
−Removed: Our dollar-based merchant retention has consistently exceeded 100% for each cohort of merchants that joined our platform since 2016.
−Removed: • Increased AOV.
−Removed: By solving affordability for consumers, we are able to help merchants increase demand for higher net AOV items.
−Removed: We calculate AOV as our GMV divided by the number of transactions conducted on our platform.
−Removed: • Increased repeat purchase rate.
−Removed: We believe that the frictionless consumer experience and enhanced buying power facilitated by our platform often lead to improved repeat purchase rates for our merchants as they enjoy more satisfied customers.
−Removed: • Better data to inform personalized promotional strategies.
−Removed: We provide merchants with valuable data they can use to inform more tailored promotions and offers to consumers.
−Removed: • Broader target market.
−Removed: We enable merchants to achieve incremental sales and expand their target market by including customers who might not want to or be able to pay for an item up front, but can do so responsibly over time.
−Removed: • Ease of integration.
−Removed: Our direct application programming interface (“API”), designed for use by developers, allows for site integration with minimal merchant investment.
−Removed: Merchants can easily incorporate our platform into payment and product pages, and we provide a dedicated integration team to ensure that any issues are resolved.
−Removed: Once a merchant has integrated our API, we handle the regulatory aspect of the loans facilitated through our platform, irrespective of state, province, or jurisdiction.
−Removed: T able of C ontents
+Added: • Affirm Debit+ card.
+Added: Through a physical card and/or the customer’s mobile wallet, and in partnership with Visa, Affirm Debit+ allows consumers to pay upfront, from their bank account, or pay later, by using a unique post-purchase feature to instantly convert any eligible transaction into installments in the app.
Merchant features
−Removed: • Flexible marketing capabilities.
+Added: • Affirm at Checkout .
+Added: Through our direct application programming interface (“API”), designed for use by developers, merchants can easily incorporate Affirm into their payment and product pages, enabling merchants to achieve incremental sales, expand their target markets and increase customer conversion and loyalty by solving affordability for consumers.
+Added: Our dollar-based merchant retention rate has consistently exceeded 100% for each cohort of merchants that joined our platform since 2016.
+Added: We are also able to help merchants increase demand for higher net AOV items.
+Added: • Flexible offerings that address a wider range of transactions.
Merchants can offer either one or a combination of 0% APR and interest-bearing pay-over-time offerings.
Offering 0% APR financing to their customers is a compelling revenue accelerator for merchants, who are able to solve affordability for their customers without resorting to discounts.
−Removed: For interest-bearing financing, merchants have the ability to subsidize and determine the range of interest rates to be paid by their customers.
−Removed: • Brand-sponsored promotions.
−Removed: For large, diversified merchants, we have the ability to work with their suppliers on brand-specific promotional financing offers.
−Removed: These promotions are funded by the supplier and then made available through our merchants.
+Added: Merchants have the ability to subsidize and determine the range of interest rates to be paid by their customers.
+Added: • Brand-sponsored and other promotional strategies.
+Added: We have the ability to work with manufacturers on brand-specific promotional financing offers.
+Added: These promotions are funded by suppliers and then made available through our merchants.
The suppliers cover the costs of the lowered APR for their products, with no added costs to our merchants.
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At the same time, suppliers can sell through additional volume.
+Added: We also partner with merchants to reach consumers with other promotional strategies and offers.
• Merchant dashboard.
Our merchant dashboard provides a robust user interface through which each merchant can view transaction data, manage charges, access API keys, and manage and configure the merchant’s Affirm account.
−Removed: We provide merchants with insightful analytics that help them understand how their various products are performing and other key insights into their customers’ shopping habits to help merchants optimize customer conversion and customer acquisition costs.
+Added: We provide merchants with insightful analytics that help them understand how their various products are performing and other key insights to optimize conversion and customer acquisition costs.
• Client success support.
−Removed: Our high-touch client success team partners with our merchants to analyze and interpret the insights delivered through our merchant dashboard.
−Removed: Our team conducts in-depth user experience analyses of our merchants’ online storefronts and provides custom recommendations for the ideal mix and display of Affirm product offerings to present to customers in order to optimize AOVs and conversion rates.
+Added: Our high-touch client success team partners with our merchants to analyze performance and provides custom recommendations to optimize AOVs and conversion rates.
• Affirm app.
−Removed: Merchants also have access to Affirm's consumer base via our app, which allows them to provide personalized offers based on consumers’ spending patterns, shopping habits, and purchase intent.
−Removed: Consumer shopping activity on the Affirm app provides further insight into spending habits and other marketing optimization data points for merchants to leverage.
+Added: Merchants also have access to Affirm’s app, which provides a marketplace that allows them to efficiently reach customers.
+Added: Table o f Contents
• Affirm website and developer documentation.
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Prequalification also personalizes the shopping experience for consumers, since once prequalified they may receive customized offers based on their approval amount.
+Added: • Simple and Compliant Solution.
+Added: Our direct API, designed for use by developers, allows for site integration with minimal merchant investment.
+Added: Merchants can easily incorporate our platform into payment and product pages, and we provide a dedicated integration team to assist with issue resolution.
+Added: Once a merchant has integrated our API, we handle the regulatory aspect of the loans facilitated through our platform, irrespective of state, province, or jurisdiction.
• Returns management.
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Returnly’s offerings are designed to help merchants drive higher repurchase rates, increased revenue from returns and higher customer satisfaction.
−Removed: T able of C ontents
Our Competitive Advantages
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We benefit from self-reinforcing network effects, which are advantages that compound with each additional consumer and merchant that joins our network:
−Removed: • As consumers learn about the key benefits of our solution, we believe more and more will choose to use our platform, and our consumer base will continue to grow.
−Removed: • The larger our consumer ecosystem, the more valuable it is to merchants, and the more compelling it is for merchants to offer Affirm as an option.
+Added: • As consumers learn about the key benefits of our solutions, we believe more and more will choose to use our platform, and our consumer base will continue to grow.
+Added: • The larger our consumer ecosystem, the more valuable it is to merchants, and the more compelling it is for merchants to offer Affirm as a payment option.
• The more merchants integrated into our network, the more reasons consumers have to shop with Affirm.
• Our costs decrease as a percentage of GMV as our consumer ecosystem expands.
−Removed: For example, the additional data we have on repeat consumers enables us to make better underwriting decisions and therefore generally results in proportionately lower provision for credit losses expense.
+Added: For example, the additional data we have on repeat consumers enables us to make better underwriting decisions and therefore generally results in proportionately lower provision for credit losses expense on GMV from repeat customers than from first time customers.
+Added: For the fiscal years ended June 30, 2022 and 2021, 81% and 72% of the transactions facilitated through our platform were driven by repeat consumers.
• Improved direct expense efficiency enables us to create even more compelling offers for consumers and merchants, in turn attracting more consumers and merchants to our network.
−Removed: T able of C ontents
The net result is that we are building a consumer and merchant ecosystem on our platform that we expect to continue to grow and monetize over time.
+Added: Table o f Contents
Engineering and technology infrastructure
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Full integration can be completed very quickly, often within days after signing our merchant agreement.
−Removed: T able of C ontents
Data advantages that compound over time
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Our technology is built to handle the immense scale of our data-driven operations — we are capable of processing thousands of checkouts per minute.
−Removed: Our machine learning-based risk models are currently calibrated and validated on more than one billion individual data points, based on a complex set of variables, and are custom built to effectively detect fraud, price risk, and provide customized recommendations.
+Added: Our machine learning-based risk models are currently calibrated and validated on billions of individual data points, based on a complex set of variables, and are custom built to effectively detect fraud, price risk, and provide customized recommendations.
We consider data beyond traditional credit scores, such as transaction history and credit usage, to predict repayment ability, and leverage this with real-time response data.
−Removed: We are also able to access and leverage SKU-level data, which we believe gives us a proprietary data advantage.
+Added: In some cases, we also are able to access and leverage SKU-level data to assess and underwrite risk for individual transactions before extending access to credit.
Better outcomes generated by our proprietary risk models
−Removed: We believe our risk model informs our ability to assess risk better than our competitors.
+Added: We believe our risk model informs our ability to better assess risk.
Unlike legacy payment and credit systems, we can assess risk at a transaction level, rather than relying solely on a static consumer credit score.
−Removed: In other words, our integration with our merchant partners allows us to consider the product that the consumer is purchasing when we assess a credit application.
+Added: Our integration with our merchant partners allows us to consider the product that the consumer is purchasing when we assess a credit application.
We believe our proprietary risk model has translated this advantage into the ability to increase approval rates without deterring consumers with higher APRs or increasing our rate of expected credit losses, enabling us to facilitate a greater volume of transactions from a wider and more diverse segment of consumers.
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As data from new transactions are incorporated into our risk algorithms, we are able to more effectively assess a given credit profile.
−Removed: Our ability to quickly and accurately assess, price, and manage risk enables us to generate high quality assets that attract funding sources and generate predictable servicing and interest income as consumers repay over time.
+Added: Our ability to quickly assess, price, and manage risk enables us to generate high quality assets that attract funding sources and generate predictable servicing and interest income as consumers repay over time.
Our risk model is designed to comply with our originating bank partners’ credit policies and underwriting procedures and has been proven to lead to low fraud rates and higher approval rates compared to traditional credit underwriting models.
−Removed: Taken together, the strong demand for our assets from capital partners increases our gain (loss) on sales of loans and our servicing income, and decreases our funding costs.
−Removed: For more information on how our risk model automates the underwriting process for our originating bank partners, see “— Regulatory Environment — State licensing requirements and regulation.”
+Added: For more information on how our risk model automates the underwriting process for our originating bank partners, see “— Regulatory Environment — State and provincial licensing requirements and regulation.”
+Added: Table o f Contents
Deep capital markets expertise
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By maintaining access to a diversified array of long-term funding sources and leveraging our proprietary underwriting process at the point-of-sale, we are able to monetize high-quality financial assets at scale.
−Removed: T able of C ontents
Our Competition
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legacy payment methods, such as credit and debit cards, including those provided by card issuing banks such as Synchrony, J.P.
−Removed: Morgan Chase, Citibank, Bank of America, Capital One, and American Express;
+Added: Morgan Chase, Citibank, Bank of America, Capital One, Goldman Sachs, and American Express;
technology solutions provided by payment companies such as Visa and MasterCard;
−Removed: mobile wallets such as PayPal;
−Removed: and other pay-over-time solutions offered by companies such as Afterpay, which has entered into an agreement to be acquired by Square, and Klarna as well as new pay-over-time offerings by legacy financial and payments companies, including those mentioned above.
+Added: mobile wallets such as PayPal and Apple;
+Added: and other pay-over-time solutions offered by companies such as Block and Klarna as well as new pay-over-time offerings by legacy financial and payments companies, including those mentioned above.
Our technology-driven platform also faces competition from a variety of players, including those who enable transactions and commerce via digital payments.
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Our Growth Strategy
−Removed: Our multi-pronged growth strategy is designed to continue to build upon the momentum we have generated so far in order to create opportunities to create even greater value for consumers and merchants.
+Added: Our multi-pronged growth strategy is designed to build upon our momentum and unlock opportunities to create even greater value for consumers and merchants.
Expand solutions for merchants and consumers
• Innovate on new consumer product solutions .
−Removed: We are still at the beginning of our product roadmap, and plan to continue to innovate and bring new honest financial products to market for consumers.
−Removed: For example, we introduced a high-yield savings feature in our app and see further opportunities to offer shopping services and rewards.
−Removed: We have also announced plans to launch Affirm Debit+, the first U.S.
−Removed: debit card to have direct access to pay-over-time functionality.
+Added: We plan to continue to innovate and bring new honest financial products to market for consumers.
+Added: During fiscal 2022, for example, we launched the Affirm Super App and Browser Extension, and see further opportunities to offer shopping services and rewards.
+Added: We also launched beta releases for Affirm Debit+, a debit card that supports debit transactions and also enables consumers to split eligible purchases into installments via the app, and Crypto Savings, which enables consumers to have access to bitcoin via their Affirm Savings account.
• Increase merchant feature functionality.
As we continue to help merchants increase conversion rates, AOVs, and customer satisfaction, we plan to build new tools to help them optimize their customer acquisition strategies and achieve even greater results.
−Removed: For example, Returnly, which we acquired in May 2021, helps direct-to-consumer brands offer their shoppers an instant and seamless returns experience, which can help increase customer satisfaction and conversion rates.
+Added: For example, during fiscal 2022, we launched Adaptive Checkout™, which dynamically provides optimized biweekly and monthly payment options for
+Added: Table o f Contents
+Added: each transaction side-by-side in a single integrated checkout solution.
+Added: In May 2021, Affirm acquired Returnly, which helps direct-to-consumer brands offer their shoppers an instant and seamless returns experience, which can help increase customer satisfaction and conversion rates.
Expand to more higher frequency purchases
−Removed: We have successfully demonstrated how our solutions can enable and accelerate commerce for larger, more considered purchases.
+Added: We have successfully demonstrated how our solutions can enable and accelerate commerce for larger and considered purchases.
A key principle for our next phase of growth is expanding into higher frequency purchases, which we believe will position us to increase engagement with consumers and merchants.
We believe this will lead to increased transaction volume on our platform, as well as the expansion of our consumer and merchant network.
−Removed: T able of C ontents
+Added: As of June 30, 2022, we had approximately 3.0 transactions per active consumer, an increase of approximately 31% compared to June 30, 2021 and an increase of 41% compared to June 30, 2020.
Expand consumer reach
• Add more consumers to our network.
−Removed: We will continue to expand our marketing efforts across new and existing channels to increase brand awareness with consumers and highlight the value of our platform.
+Added: We will continue marketing across new and existing channels to increase brand awareness with consumers and highlight the value of our platform.
We believe this will attract new consumers to try Affirm as a payment option.
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• Drive repeat use.
−Removed: We aim to continue driving further repeat use of our platform as we serve consumers beyond their initial purchase via our tailored series of consumer-centric tools, personalized offerings, and the increased diversity of merchants on our network.
+Added: We aim to continue driving further repeat use of our platform as we serve consumers beyond their initial purchase via our consumer-centric tools, offerings and the increased diversity of merchants on our network.
Expand merchant reach
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Expand to new markets
+Added: We make our platform available to merchants and eligible consumers in the United States and Canada and, on a more limited basis, in Australia.
We will continue to evaluate expanding our platform to new markets.
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Our Technology
−Removed: Our products are built on a cloud-first platform engineered for temporally agnostic data aggregation, schematization, management, and decisioning, which enables our products to leverage years of deep behavioral, financial, shopping, and payment data across all facets of our platform, from fraud and pricing, to personalization and repayment.
+Added: Our products are built on a cloud-first platform engineered for temporally agnostic data aggregation, schematization, management, and decisioning, which enables our products to leverage years of deep behavioral,
+Added: Table o f Contents
+Added: financial, shopping, and payment data across all facets of our platform, from fraud and pricing, to personalization and repayment.
Our vertically integrated technology powers a rich data landscape across products, which drives increased efficiency that unlocks greater scale.
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We invest in technology to create this flywheel effect as we believe it builds an increasing and durable competitive advantage as we operate with higher confidence in our model decisions, lower costs of each transaction, and improve our ability to price transactions with a lower margin of error.
−Removed: The increasing scale is leveraged by our technology as increasing value delivered to participants in our network of merchants, consumers, and capital partners.
+Added: The increasing scale is leveraged by our technology as increasing value is delivered to participants in our network of merchants, consumers, and capital partners.
• Fraud detection capabilities.
To assess transaction fraud risk, we first seek to establish the consumer’s identity using basic information.
−Removed: The consumer is then evaluated by our fraud model, and we will then
−Removed: T able of C ontents
−Removed: either move forward in the approval flow, or request additional data from the consumer.
−Removed: Our sophisticated fraud models then utilize SKU-level data, where the item is being shipped, and approximately 40-80 other data points in order to make a near-instantaneous decision on whether to block a transaction.
−Removed: There are also secondary rules that, when triggered, are designed to ensure a transaction is sent to fraud investigators.
+Added: The consumer is then evaluated by our fraud model, and we will then either move forward in the approval flow, or request additional data from the consumer.
+Added: Our sophisticated fraud models utilize approximately 80 other data points in order to make a near-instantaneous decision on whether to block a transaction.
+Added: There are also secondary rules that, when triggered, are designed to send a transaction to fraud investigators.
• Credit check capabilities.
1 unchanged sentence
Our algorithms model out the repayment probability on a month-to-month basis, and combine these probabilities with the term length, purchase size, merchant, and item being purchased, in order to price and score risk.
−Removed: In the vast majority of cases, we can complete these checks and calculations in a matter of seconds, automating the underwriting process pursuant to our and our originating bank partners’ underwriting policies.
+Added: In the vast majority of cases, we can complete these checks and calculations in a matter of seconds, automating the underwriting process pursuant to our originating bank partners’ underwriting policies.
We use application and transaction data to train our model, including data from more than 71.0 million loans and over seven years of repayments.
1 unchanged sentence
Our high cadence for modeling, retraining, and recalibration translates into rapid improvements to our models over time.
−Removed: New data is regularly used to retrain each model, meaning they continue to improve as the numbers of consumers, merchants, transactions, and repayments we power on our platform grows.
+Added: New data is regularly used to retrain each model, meaning they continue to improve as the numbers of consumers, merchants, transactions, and repayments we power on our platform grow.
We also perform periodic larger scale updates to our core model and algorithms.
10 unchanged sentences
We maintain physical security measures designed to guard against unauthorized access to systems and use safeguards such as firewalls and data encryption.
−Removed: We also have deployed physical access controls to our buildings, and our policies authorize access to personal information only for those employees or agents who require it to fulfill the responsibilities of their jobs.
+Added: Table o f Contents
+Added: also have deployed physical access controls to our buildings, and our policies authorize access to personal information only for those employees or agents who require it to fulfill the responsibilities of their jobs.
Sales and Marketing
2 unchanged sentences
Brand marketing increases awareness among consumers and merchants, helping them understand the benefits of our platform.
−Removed: We have historically relied on the strength of our merchant relationships and positive user experience to develop our brand and grow the ubiquity of our network.
+Added: We have historically relied on the strength of our merchant relationships and positive user experience to develop our brand and grow our network.
We have achieved significant merchant and consumer adoption without investing heavily in sales and marketing relative to our competitors.
−Removed: In the near to medium term, we plan to increase our marketing efforts in order to drive further brand awareness and preference among both consumers and merchants as we aim to capture a greater share of our expanding market opportunities.
−Removed: We are focused on the effectiveness of sales and marketing spending and will continue to be strategic in maintaining
−Removed: T able of C ontents
−Removed: efficient consumer and merchant acquisition.
+Added: We are focused on the effectiveness of sales and marketing spending and will continue to be strategic in maintaining efficient consumer and merchant acquisition.
We also utilize dedicated sales teams to grow our merchant base in the United States and Canada, and leverage strategic partnerships with other platforms to expand our merchant and consumer base.
1 unchanged sentence
Historically, our revenue has been strongest during the second quarter of our fiscal year due to increases in retail commerce during the holiday season.
−Removed: Additionally, revenue associated with the purchase of home fitness equipment historically has been strongest in the third quarter of our fiscal year.
Adverse events that occur during these months could have a disproportionate effect on our financial results for the fiscal year.
21 unchanged sentences
Affirmers own problems and solutions, and we hold each other accountable.
+Added: Table o f Contents
• Simpler is better.
7 unchanged sentences
These values have helped us to attract, inspire, and harness the collective talent of exceptional technologists and business people.
−Removed: T able of C ontents
Diversity, equity, and inclusion
1 unchanged sentence
Our strategy involves embedding DEI into our processes, programs, and structures at Affirm across the employee life cycle — how we hire, develop, advance, and retain Affirmers, and in how we do business.
−Removed: In 2020, we created our Diversity and Inclusion Steering Committee (“DISC”), an internal committee made up of senior leaders from across Affirm.
−Removed: DISC provides oversight, support, and guidance to departments and teams on initiatives that may impact the ability to support diverse populations of key constituencies:
+Added: Our Diversity and Inclusion Steering Committee (“DISC”), an internal committee made up of senior leaders from across Affirm, provides oversight, support, and guidance to departments and teams on initiatives that may impact the ability to support diverse populations of key constituencies:
employees, consumers and merchants.
DISC is also responsible for reviewing that internal and external initiatives reflect our high bar for DEI, and the members help to amplify high-impact DEI efforts happening within their own departments.
−Removed: Additionally, in 2020, we made the decision to begin operating as a remote-first company throughout the United States and most of Canada for the majority of our teams.
−Removed: We expect this transition will enable us to hire Affirmers from a broad range of geographies and allow for a more diverse talent pool.
−Removed: We annually publish our DEI Report outlining our DEI goals, our progress toward them, our areas for improvement, and where we expect to focus our efforts.
+Added: Below are several highlights from our DEI work in calendar year 2021 (the latest year for which we have issued a DEI Report):
+Added: • Affirm launched the Upward Program, a six-month Software Engineering Apprenticeship Program that offers opportunities to individuals with non-traditional backgrounds (those who have developed technical proficiency through a coding school, online certification, etc.).
+Added: • We brought more Affirmers into our DEI work by expanding our DEI working groups, which are groups of Affirmers who create and work towards achieving specific DEI goals within their department.
+Added: In 2021, we started a new DEI working group in our commercial department and began work to stand up a DEI working group in our finance department, in addition to our engineering department working group (launched in 2020).
+Added: • Our Merchant & Partner Diversity team launched Affirm’s client-facing Merchant Diversity Survey.
+Added: Our goal is to establish our commitment to DEI within our merchant network, collect data on Affirm merchants owned by diverse communities, and share promotional opportunities with merchants that opt in.
+Added: We identified over 1,700 of Affirm’s merchant partners as certified as Women-, Veteran-, or Minority-Owned businesses and Promoted 50+ URG merchants through a quarterly series of internal and external-facing programs.
+Added: We annually publish our DEI Report, which discloses certain demographic information relating to our team and outlines our DEI goals, our progress toward them, our areas for improvement, and where we expect to focus our efforts.
The 2021 report is available at:
4 unchanged sentences
We pride ourselves on a culture that respects co-workers and values concern for others.
−Removed: Management regularly reports to our board of directors on human capital management topics, including corporate culture, safety, diversity and inclusion, employee development, and compensation and benefits.
+Added: Management regularly reports to our board of directors on human capital management topics, including corporate culture, safety,
+Added: Table o f Contents
+Added: diversity and inclusion, employee development, and compensation and benefits.
Our board of directors provides input on important decisions, including with respect to safety, talent retention and development.
Employee incentives and benefits
−Removed: We provide equity incentives to our employees through the grant of stock options and restricted stock units (“RSUs”) under our equity incentive plan to align their interests with stockholders as “owners” of our business.
−Removed: We believe this incentive program allows us to be competitive with comparable companies in our industry by giving us the resources to attract, motivate and retain talented individuals.
−Removed: In addition, we provide health, welfare, and retirement benefits, including medical, dental, vision, life insurance, paid time off, various voluntary insurance programs and our 401(k) retirement plan, which allow us to enhance employee productivity and loyalty through the provision of competitive benefits.
−Removed: Furthermore, our employee assistance program offers employees information, referrals, and short-term counseling for personal issues affecting their work or personal life in order to help protect the physical, emotional and financial well-being of our employees.
−Removed: T able of C ontents
+Added: We provide equity incentives to our employees through the grant of stock options and restricted stock units (“RSUs”) under our equity incentive plan to align their interests with stockholders as “owners” of our company.
+Added: We also have adopted an Employee Stock Purchase Plan (“ESPP”) pursuant to which eligible employees can purchase shares of our Class A common stock at a discount from the fair market value .
+Added: We believe these incentive programs allows us to be competitive with comparable companies in our industry by giving us the resources to attract, motivate and retain talented individuals.
+Added: We offer comprehensive benefits, including medical, dental, vision, life insurance, paid time off, various voluntary insurance programs, and a 401(k) retirement plan for U.S.
+Added: Our employee assistance program, financial wellness benefits, legal protection benefits, and identification theft protection benefits offer employees information, referrals, and short-term counseling for personal issues affecting their work or personal life as an added layer of protection.
+Added: In addition, we offer perks, such as employer-sponsored digital spending wallets, mental health benefits, family & fertility benefits and generous leave and time-off policies, which we believe enhance employee productivity, satisfaction and loyalty.
Regulatory Environment
We operate in a rapidly evolving regulatory environment and are subject to extensive regulation, both directly and indirectly, by way of our partnership with our originating bank partners, under U.S.
−Removed: federal and Canadian laws and the laws of the states in which we operate.
+Added: federal law, the laws of Canada, and Australia, and the laws of the states and provinces in which we operate, among others.
These laws cover all aspects of our business and include privacy laws, consumer protection laws, and contractual obligations.
1 unchanged sentence
These could include the need to obtain new and different types of licenses in order to conduct our business, such as for lending, brokering, servicing, collections, or money transmission.
+Added: For more information on the risks relating to our regulatory environment, see the section titled “ Risk Factors – Risks Related to Our Regulatory Environment.
Our lending programs are relatively novel and must comply with regulatory regimes applicable to consumer credit transactions.
1 unchanged sentence
New laws and regulations, as well as continued uncertainty regarding potential new laws or regulations, may negatively affect our business.
−Removed: Certain state laws may, if applicable, regulate interest rates and other charges and require certain disclosures, and may also require licensing for certain activities.
−Removed: In addition, other state laws, public policy, and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, servicing, and collection of the consumer loans.
+Added: Certain state and provincial laws may, if applicable, regulate interest rates and other charges and require certain disclosures, and may also require licensing for certain activities.
+Added: In addition, other laws, public policy, and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, servicing, and collection of the consumer loans.
Certain banking laws and regulations also apply to our originating bank partners.
1 unchanged sentence
Our operations must satisfy the laws and standards of each individual U.S.
−Removed: state and Canadian province in which we operate.
+Added: state and territory, Canadian province, and Australian state in which we operate.
This means that when individual states differ in how they allow financing to be provided and used, we must operate consistently in accordance with the most comprehensive requirements.
Our policies and practices approach these requirements with the goal of managing the long-term viability and flexibility of our business model.
−Removed: As such, we have established a business model pursuant to which we may originate loans directly through our platform under our lending, servicing, and brokering licenses across various jurisdictions in the United States and in Canada.
−Removed: and we may also purchase loans originated by our originating bank partners.
−Removed: A substantial majority of the loans facilitated through our platform are originated through our originating bank partners:
+Added: As such, we have established a business model pursuant to which we may originate loans directly through our platform under our lending, servicing, and brokering licenses across various
+Added: Table o f Contents
+Added: jurisdictions in the United States, Canada, and Australia, and we may also purchase loans originated by our originating bank partners through our platform.
+Added: A substantial number of the loans facilitated through our platform in the U.S.
+Added: are originated through our originating bank partners:
Cross River Bank, an FDIC-insured New Jersey state-chartered bank, and Celtic Bank, an FDIC-insured Utah state-chartered industrial bank.
−Removed: We are subject to state licensing and other requirements with respect to loans that we originate directly via our platform, and we have obtained or are in the process of obtaining necessary licenses to originate loans directly in the jurisdictions in which we do so.
−Removed: The licensing statutes vary from state to state and prescribe different requirements, including but not limited to:
−Removed: restrictions on loan origination and servicing practices (including limits on the type, amount, and manner of our fees), interest rate limits, disclosure requirements, periodic examination requirements, surety bond and minimum specified net worth requirements, periodic financial reporting requirements, notification requirements for changes in principal officers, stock ownership or corporate control, restrictions on advertising, and requirements that loan forms be submitted for review.
−Removed: We are also subject to supervision and examination by applicable state regulatory authorities in the jurisdictions in which we may service loans or originate loans directly.
−Removed: The application of state licensing requirements to our business model is not always clear, and while we believe we are in compliance as of June 30, 2021 with applicable licensing requirements, state regulators may request or require that we obtain additional licenses or other authorizations in the future, which may subject our business to additional restrictions or requirements.
−Removed: Through our partnerships with our originating bank partners, our risk model automates the underwriting process in accordance with our originating bank partners’ underwriting policy, which only our originating bank partners may change and which we must follow in reviewing, approving, and administering loans facilitated by our platform.
−Removed: When originating loans through our platform, our originating bank partners contract to charge interest
−Removed: T able of C ontents
−Removed: based on federal law (Section 27 of the Federal Deposit Insurance Act).
−Removed: Section 27 allows an FDIC-insured bank such as our originating bank partners to charge interest to consumers on a nationwide basis based on the rates allowed by the state where the bank is located.
−Removed: We rely on our originating bank partners’ authority under federal law to establish interest rates and charge interest on the loans our originating bank partners originate through our platform.
−Removed: The interest rates that are charged to consumers and that form the basis of payments on the loans facilitated through our platform are based upon legal principles detailed in the FDIC’s final rule relating to Federal Interest Rate Authority, published in the Federal Register on July 22, 2020.
−Removed: Cross River Bank and Celtic Bank generally allow a state-chartered bank and a consumer loan borrower to agree to any rate of interest up to 30% annually, calculated in accordance with the FDIC Federal Interest Rate Authority rule and other applicable law.
−Removed: Certain states have no statutory interest rate limitations on personal consumer loans, while other jurisdictions impose a maximum rate on such loans.
+Added: Certain states, provinces, and localities have adopted laws regulating and requiring licensing, registration, notice filing, or other approval by parties that engage in certain activity regarding consumer finance transactions, including facilitating and assisting such transactions in certain circumstances.
+Added: Furthermore, certain jurisdictions have also adopted laws requiring licensing, registration, notice filing, or other approval for consumer debt collection or servicing, and/or purchasing or selling consumer loans.
+Added: We have also received inquiries from regulatory agencies regarding requirements to obtain licenses from or register with those jurisdictions, including in states where we have determined that we are not required to obtain such a license or be registered with the state, and we expect to continue to receive such inquiries.
+Added: We are also subject to licensing requirements, supervision, and examination by applicable regulatory authorities in the jurisdictions in which we may service loans, solicit or offer loans, or originate loans directly through our platform, and we have obtained or are in the process of obtaining necessary licenses in the jurisdictions in which we do so.
+Added: Licensing statutes vary from state to state and prescribe different requirements, including but not limited to:
+Added: restrictions on loan origination and servicing practices (including limits on the type, amount, and manner of fees), solicitation activities, interest rate limits, disclosure requirements, periodic examination requirements, surety bond and minimum specified net worth requirements, periodic financial reporting requirements, notification requirements for changes in principal officers, stock ownership or corporate control, restrictions on advertising, and requirements that loan forms be submitted for review.
+Added: The application of state and provincial licensing requirements to our business model is not always clear, and while we believe we are in compliance as of June 30, 2022 with applicable licensing requirements, regulators may request or require that we obtain additional licenses or other authorizations in the future, which may subject our business to additional restrictions or requirements.
+Added: We and our originating bank partners may also be subject to state law interest rate limitations on personal consumer loans.
+Added: Certain states have no such limitations, while other jurisdictions impose a maximum rate on such loans.
In some jurisdictions, the maximum rate may be less than the rates applicable to the loans facilitated through our platform.
−Removed: If the laws of such jurisdictions were found to govern any of the loans facilitated through our platform with rates higher than that jurisdiction’s maximum rate, those loans could be in violation of such laws.
−Removed: This could result in such loans being unenforceable or reduce or extinguish the principal and/or interest (paid or to be paid) on such loans, or result in fees, damages, and penalties to us or our originating bank partners.
+Added: If any of the loans facilitated through our platform were found to impose rates higher than the maximum rate for the applicable state, such loans could be in violation of state interest limitation laws, which could result in such loans being unenforceable or reduce or extinguish the principal and/or interest (paid or to be paid) on such loans, or result in fees, damages, and penalties to us or our originating bank partners.
Out of an abundance of caution, however, we have sought to voluntarily cap the maximum interest rate we will propose for a loan to borrowers in certain states so that it is below the maximum interest rate that our originating bank partners would otherwise be permitted to charge under applicable law.
−Removed: For further discussion of how the true lender determination is relevant to our business, see the risk factor entitled “ Risk Factors — Risks Related to Our Regulatory Environment — If our originating bank partner model is successfully challenged or deemed impermissible, we could be found to be in violation of licensing, interest rate limit, lending, or brokering laws and face penalties, fines, litigation, or regulatory enforcement.
+Added: Through our partnerships with our originating bank partners, as well as through our state lending licenses to originate loans directly, where applicable, our risk model automates the underwriting process in accordance with our originating bank partners’ underwriting policies, which only our originating bank partners may change and which we must follow in reviewing, approving, and administering loans facilitated by our platform, and our direct lending entity’s underwriting policy.
+Added: When originating loans through our platform, our originating bank partners may contract to charge interest based on authority granted to state-chartered, FDIC-insured banks under federal law (Section 27 of the Federal Deposit Insurance Act) and based upon legal principles detailed in the FDIC’s final rule relating to Federal Interest Rate Authority, published in the Federal Register on July 22, 2020.
+Added: Section 27 allows an FDIC-insured bank such as our originating bank partners to charge interest to consumers on a nationwide basis based on the rates allowed by the state where the bank is located.
+Added: We rely on our originating bank partners’ authority under federal law to establish interest rates and charge interest on the loans our originating bank partners originate through our platform.
+Added: Cross River Bank and Celtic Bank generally allow a consumer loan borrower to agree to any annual rate of interest up to 30% or 36%, respectively calculated in accordance with the FDIC Federal Interest Rate Authority rule discussed above and other applicable law.
+Added: Table o f Contents
+Added: However, if the legal structure underlying our relationship with our originating bank partners was successfully challenged, we may be found to be in violation of state licensing requirements and state laws regulating interest rates and other aspects of consumer lending.
+Added: In the event of such a challenge or if our arrangements with our originating bank partners were to change or end for any reason, we would need to rely on an alternative bank relationship, find an alternative bank relationship, rely on existing state licenses, obtain new state licenses, pursue a federal charter, offer consumer loans, and/or be subject to the interest rate limitations and loan product requirement limitations of certain states.
+Added: There are two examples of claims that have been raised that could each, separately or jointly, result in this outcome in some or all states.
+Added: First, the FDIC stated that its Federal Interest Rate Authority Rule was promulgated in part to codify the “valid when made” doctrine due to court decisions such as the one in Madden v.
+Added: Midland Funding, LLC, 786 F.3d 246 (2d Cir.
+Added: denied, 136 S.Ct.
+Added: 2505 (June 27, 2016).
+Added: Midland Funding, the Second Circuit ruled that federal preemption generally applicable to national banks did not apply to non-bank assignees if the assignee was not acting on behalf of the bank, if the bank no longer had an interest in the loan, or such determination did not significantly interfere with the bank’s exercise of its federal banking powers.
+Added: Under this rationale, the Second Circuit did not preempt state interest rate limitations that might apply to the non-bank assignees.
+Added: The Second Circuit’s holding in the Madden case is binding on federal courts in the states of New York, Connecticut, and Vermont.
+Added: Following the Madden decision, there have been a number of lawsuits in other parts of the country making similar allegations.
+Added: Under the Federal Interest Rate Authority Rule promulgated by the FDIC, which is the interest rate authority of state-chartered banks (such as our originating bank partners), the interest rate applicable to a loan originated by a state-chartered bank on the date of origination will carry with the loan irrespective of ownership (i.e., the interest rate is “valid when made”).
+Added: The OCC issued a similar rule on May 29, 2020 with respect to loans originated by national banks.
+Added: State attorneys general of the states of California, New York and Illinois have filed a lawsuit against the OCC alleging that the OCC had no statutory authority to issue its May 29, 2020 rule regarding the permissibility of interest rates on loans purchased from a national bank and failed to follow required procedures in promulgating the rule.
+Added: State attorneys general of the states of California, Illinois, Massachusetts, Minnesota, New Jersey, New York, and North Carolina, together with the District of Columbia, filed a similar lawsuit against the FDIC regarding the FDIC Federal Interest Rate Authority Rule.
+Added: This lawsuit was decided in favor of the FDIC pursuant to the Northern District of California’s decision in California v.
+Added: FDIC, 2022 U.S.
+Added: LEXIS 22719 (N.D.
+Added: 8, 2022), in which the court expressly upheld the validity of the FDIC Federal Interest Rate Authority Rule, distinguishing it from the similar rule issued by the OCC.
+Added: However, it is uncertain whether these or other state attorneys general will file similar suits with respect to any other rule regarding the permissibility of interest rates by the FDIC, OCC or other regulators.
+Added: Second, there have also been both private litigation and governmental enforcement actions seeking to recharacterize a lending transaction, claiming that the named lender was not the true lender, and that instead another entity was the true lender or the de facto lender.
+Added: These claims are traditionally based upon state lending laws, other statutory provisions, or state common law through which a private litigant or governmental agency could seek to license, regulate, or prohibit the activities of the entity they consider the true lender or de facto lender.
+Added: Any such litigation or enforcement action with respect to a loan facilitated through our platform against us, any successor servicer, prior owners, or subsequent transferees of such loans (including our originating bank partners) could subject them to claims for damages, disgorgement, or other penalties or remedies.
+Added: On October 27, 2020, under the Trump Administration, the OCC promulgated a final rulemaking setting forth standards for determining the true lender of a loan issued by a national bank.
+Added: On June 30, 2021, President Biden signed a Congressional Review Act resolution to repeal the OCC's true lender rule, and the OCC may not issue any substantially similar rule without subsequent statutory authorization.
+Added: Further, it is unclear whether these rules will be given effect by courts and regulators in a manner that actually mitigates risks relating to state interest rate limits and related risks to us, our originating bank partners, any other program participant, or the loans facilitated through our platform.
+Added: We could be subject to litigation, whether private or governmental, or administrative action regarding the above claims.
+Added: The potential consequences of an adverse determination could include the inability to collect loans at the interest rates contracted for, licensing violations, the loans being found to be unenforceable or void, or the reduction of interest or principal, or other
+Added: Table o f Contents
+Added: penalties or damages.
+Added: Third-party purchasers of loans facilitated through our platform also may be subject to scrutiny or similar litigation, whether based upon the inability to rely upon the “valid when made” doctrine or because a party other than the originating bank is deemed the true lender.
federal consumer protection requirements
−Removed: We must comply with various federal consumer protection regimes, both as a service provider to our originating bank partners and as a loan originator with respect to loans we may originate directly, including those set forth in the risk factor entitled “ Risk Factors — Risks Related to Our Regulatory Environment — We are subject to various federal and state consumer protection laws.
−Removed: We are also subject to regulation by the Consumer Financial Protection Bureau ("CFPB") under the Dodd-Frank Act and other acts described herein, and we are subject to the CFPB’s enforcement authority with respect to our compliance with these requirements.
−Removed: The CFPB has enforcement authority with respect to the conduct of third-parties that provide services to financial institutions.
−Removed: The CFPB has made it clear that it expects non-bank entities to maintain an effective process for managing risks associated with vendor relationships, including compliance-related risks.
+Added: We must comply with various federal consumer protection regimes, both as a service provider to our originating bank partners and as a loan originator with respect to loans we may originate directly, including but not limited to the following laws and regulations:
+Added: • the Truth-in-Lending Act and Regulation Z promulgated thereunder, which require certain disclosures to consumers regarding the terms and conditions of their loans and credit transactions;
+Added: • Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive acts or practices in or affecting commerce, and Section 1031 of the Dodd-Frank Act, which prohibits unfair, deceptive, or abusive acts or practices (“UDAAP”) in connection with any consumer financial product or service;
+Added: • the Equal Credit Opportunity Act (the “ECOA”) and Regulation B promulgated thereunder, which prohibit creditors from discriminating against credit applicants on the basis of race, color, sex, age, religion, national origin, marital status, the fact that all or part of the applicant’s income derives from any public assistance program, or the fact that the applicant has in good faith exercised any right under the Federal Consumer Credit Protection Act or any applicable state law.
+Added: In addition to acts of intentional discrimination, the ECOA has been interpreted by federal regulators and courts to prohibit creditors from maintaining policies and practices that, while facially neutral, result in a disproportionate, adverse impact on applicants or consumers in protected groups.
+Added: For this reason, a loan decisioning or credit scoring model must not use any variable that may be deemed a proxy for a protected characteristic such as race, ethnicity, or sex.
+Added: Further, the variables used in the model must be supported by documented, legitimate business justifications where the model results in a disproportionate effect on applicants or consumers of certain demographic groups;
+Added: • the Fair Credit Reporting Act (the “FCRA”), as amended by the Fair and Accurate Credit Transactions Act, and Regulation V promulgated thereunder, which promote the accuracy, fairness, and privacy of information in the files of consumer reporting agencies;
+Added: • the Fair Debt Collection Practices Act, Regulation F promulgated thereunder, and the Telephone Consumer Protection Act, each of which provide guidelines and limitations concerning the conduct of certain creditors and third-party debt collectors in connection with the collection of consumer debts;
+Added: • the Gramm-Leach-Bliley Act (the “GLBA”), which includes limitations on use and disclosure of nonpublic personal information about a consumer by a financial institution;
+Added: • the Bankruptcy Code, which limits the extent to which creditors may seek to enforce debts against parties who have filed for bankruptcy protection;
+Added: • the Holder Rule, and equivalent state laws, which make Affirm or any other holder of a consumer credit contract include the required notice and become subject to all claims and defenses that a borrower could assert against the seller of goods or services;
+Added: • the Electronic Fund Transfer Act and Regulation E promulgated thereunder, which provide disclosure requirements, guidelines, and restrictions on the electronic transfer of funds from consumers’ bank accounts;
+Added: Table o f Contents
+Added: • the Electronic Signatures in Global and National Commerce Act and similar state laws, particularly the Uniform Electronic Transactions Act, which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures;
+Added: • the Military Lending Act and similar state laws, which provide disclosure requirements, interest rate limitations, substantive conduct obligations, and prohibitions on certain behavior relating to loans made to covered borrowers, which include both servicemembers and their dependents;
+Added: • the Servicemembers Civil Relief Act and similar state laws, which allows active duty military members to suspend or postpone certain civil obligations so that the military member can devote his or her full attention to military duties;
+Added: • new requirements pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted in response to the COVID-19 pandemic, including requirements relating to debt collection and credit reporting.
+Added: In addition, many states and local jurisdictions have consumer protection laws analogous to, or in addition to, the federal laws listed above, such as usury laws, state debt collection practices laws, and requirements regarding loan disclosures and terms, credit discrimination, credit reporting, money transmission, recordkeeping, the arranging of loans made by third-parties, and unfair or deceptive business practices.
+Added: We are also subject to data protection laws and regulations, such as the EU General Data Protection Regulation, Canada’s Personal Information Protection and Electronic Documents Act, Australia’s Privacy Act, and similar state laws such as the California Consumer Privacy Act (the “CCPA”), which includes limitations and requirements surrounding the use, disclosure, and other processing of certain personal information about California residents.
+Added: We are also subject to regulation by the Consumer Financial Protection Bureau ("CFPB") under the Dodd-Frank Act and other acts described herein, and we are subject to the CFPB’s enforcement authority with respect to our compliance with these requirements as a facilitator, servicer, acquirer, or originator of consumer credit.
+Added: The Dodd-Frank Act gives the CFPB supervisory authority over entities that are designated as “larger participants” in certain financial services markets.
+Added: The CFPB previously announced that it intends to expand its supervisory authority through the use of “larger participant rules” to cover the markets for consumer installment loans and auto title loans.
+Added: While the CFPB has not yet issued a “larger participant” rule applicable to us, the CFPB indicated in its January 2021 Taskforce on Federal Consumer Financial Law Report that it “believes it is time to articulate some clear standards for this important decision,” and that it recommends the “Bureau should revisit its larger participant rules to assess the cost and benefits of the rules in conducting effective supervision and promoting consumer protection.” In December 2021, the CFPB issued a Request for Information to five of the largest buy-now-pay-later providers, including Affirm.
+Added: This suggests that the CFPB may issue a proposed rule defining larger participants to include installment lending industry participants.
+Added: The CFPB may also issue proposed rulemaking or increase its enforcement authority over the Buy Now Pay Later industry, which could subject Affirm to more regulation, examination, and oversight.
+Added: Moreover, the CFPB recently announced its intention to conduct supervisory examinations over a greater number of nonbank financial technology companies that have engaged in “conduct that poses risks to consumers,” pursuant to its authority under the Dodd-Frank Act.
+Added: While there is no bright-line standard as to what conduct would constitute posing “risks to consumers” under this authority, the CFPB would be required to issue a Notice of Reasonable Cause that details its bases for concluding that a particular nonbank entity poses risks to consumers, which may include complaints collected by the CFPB or information from other sources.
+Added: Were the CFPB to promulgate a rule for the direct supervision of non-bank installment lenders, or conclude that Affirm engaged in conduct that poses risks to consumers, it is possible that the CFPB could be permitted to conduct periodic examination of our business, which may increase our risk of regulatory or enforcement actions.
+Added: The CFPB has also instructed that with respect to federal anti-discrimination laws, creditors are not permitted to use technology that prevents them from providing specific and accurate reasons for adverse actions, and that creditors’ use of complex algorithms should not limit enforcement of ECOA or other federal consumer financial protection laws.
+Added: Table o f Contents
+Added: CFPB Consumer Financial Protection Circular 2022-03, published May 26, 2022, clarified that creditors who use complex algorithms—including artificial intelligence or machine learning technologies—to engage in credit decisions must still provide a notice that discloses the specific, principal reasons for taking adverse action, and that there is no exception for violating the law because a creditor is using technology that has not been adequately designed, tested, or understood.
+Added: The CFPB has also made it clear that it expects non-bank entities to maintain an effective process for managing risks associated with vendor relationships, including compliance-related risks.
In connection with this vendor risk management process, we are expected to perform due diligence reviews of potential vendors, review their policies and procedures and internal training materials to confirm compliance-related focus, include enforceable consequences in contracts with vendors regarding failure to comply with consumer protection requirements, and take prompt action, including terminating the relationship, in the event that vendors fail to meet our expectations.
The CFPB may request reports concerning our organization, business conduct, markets, and activities, and also conduct on-site examinations of our business on a periodic basis.
−Removed: The CFPB is also authorized to collect fines and provide consumer restitution in the event of violations, engage in consumer financial education, track consumer complaints, request data and promote the availability of financial services to underserved consumers and communities.
+Added: The CFPB is authorized to collect fines and provide consumer restitution in the event of violations, engage in consumer financial education, track consumer complaints, request data and promote the availability of financial services to underserved consumers and communities.
The CFPB, through its enforcement authority, could increase our compliance costs, potentially hinder our ability to respond to marketplace changes, impose requirements to alter products and services that would make them less attractive to consumers and impair our ability to offer products and services profitably.
The CFPB is authorized to pursue administrative proceedings or litigation for violations of federal consumer financial laws.
−Removed: In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief) and
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−Removed: monetary penalties ranging from $5,953 per day for minor violations of federal consumer financial laws (including the CFPB’s own rules) to $29,764 per day for reckless violations and $1,190,546 per day for knowing violations.
+Added: In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief) and monetary penalties which, for 2022, range from $6,323 per day for minor violations of federal consumer financial laws (including the CFPB’s own rules) to $31,616 per day for reckless violations and $1,264,622 per day for knowing violations.
+Added: The CFPB monetary penalty amounts are adjusted annually for inflation.
Also, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations under Title X, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions for the kind of cease and desist orders available to the CFPB (but not for civil penalties).
+Added: In May 2022, the CFPB issued an Interpretive Rule to clarify the authority of states to enforce federal consumer financial protections laws under the Consumer Financial Protection Act of 2010 (“CFPA”).
+Added: Specifically, the CFPB confirmed that (1) states can enforce the CFPA, including the provision making it unlawful for covered persons or service providers to violate any provision of federal consumer financial protection law;
+Added: (2) the enforcement authority of states under section 1042 of the CFPA is generally not subject to certain limits applicable to the CFPB’s enforcement authority, such that States may be able to bring actions against a broader cross-section of companies than the CFPB;
+Added: and (3) state attorneys general and regulators may bring (or continue to pursue) actions under their CFPA authority even if the CFPB is pursuing a concurrent action against the same entity.
+Added: See CFPB Interpretive Rule regarding Section 1042 of the Consumer Financial Protection Act of 2010 (87 FR 31940, May 26, 2022).
If the CFPB or one or more state officials find that we have violated the foregoing laws, they could exercise their enforcement powers in ways that would have a material adverse effect on our business.
+Added: In addition, the Biden Administration has brought an increased focus on enforcement of federal consumer protection laws and appointed consumer-oriented regulators at federal agencies such as the CFPB, the OCC and the FDIC.
+Added: It is possible that such regulators could promulgate rulemakings and bring enforcement actions that materially impact our business and the business of our originating bank partners.
+Added: These regulators may augment requirements that apply to loans facilitated by our platform, or impose new programs and restrictions and could otherwise revise or create new regulatory requirements that apply to us (or our bank partners), impacting our business, operations, and profitability.
The federal regulatory framework applicable to online marketplaces such as our platform is evolving and uncertain, and additional requirements may apply to our business in the future.
−Removed: While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance is given that our compliance policies and procedures will be effective or will be adequate as laws change or are applied in a new manner.
+Added: While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance is given that our
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+Added: compliance policies and procedures will be effective or will be adequate as laws change or are applied in a new manner.
Other requirements
−Removed: In addition to the requirements described above, we are subject to and seek to comply with other state and federal laws and regulations applicable to consumer lending, including additional requirements relating to loan disclosure, credit discrimination, credit reporting, debt collection, and unfair, deceptive, or abusive acts or practices.
−Removed: These laws and regulations may be enforced by state consumer credit regulatory agencies, state attorneys general, the CFPB, and private litigants, among others.
−Removed: Given our novel business model and the subjective nature of some of these laws and regulations, particularly laws regulating unfair, deceptive, or abusive acts or practices, we may become subject to regulatory scrutiny or legal challenge with respect to our compliance with these requirements.
We have policies and procedures designed to prevent the financing of illegal products.
As part of our diligence process when vetting new partners, these policies and procedures instruct that we screen for products that violate the law or are on our prohibited business list in an effort to prevent risk to our business or harm to our consumers, merchants, and the payment system.
−Removed: Due to our partnership with our originating bank partners, we are subject to pass-through compliance obligations related to U.S.
−Removed: anti-money laundering (“AML”) laws and regulations.
−Removed: We have developed and currently operate an AML program designed to prevent our network from being used to facilitate money laundering, terrorist financing, and other financial crimes.
+Added: We are subject to compliance obligations related to U.S.
+Added: anti-money laundering (“AML”) laws and regulations due, in part, to our partnership with our originating bank partners.
+Added: With our international footprint, we are also subject to international AML laws and regulations.
+Added: We have developed and currently operate an enterprise-wide AML program designed to prevent our network from being used to facilitate money laundering, terrorist financing, and other financial crimes, and to enable us to comply with all applicable anti-money laundering and anti-terrorism financing laws and regulations, including the Bank Secrecy Act and the Patriot Act.
Our AML program is also designed to prevent our products from being used to facilitate business in certain countries or territories, or with certain individuals or entities, including those on designated lists promulgated by the U.S.
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sanctions authorities.
−Removed: Our AML and sanctions compliance programs include policies, procedures, reporting protocols, and internal controls, including the designation of an AML compliance officer to oversee the programs.
+Added: Our AML and sanctions compliance programs include policies, procedures, reporting protocols, and internal controls designed to identify, monitor, manage, and mitigate the risk of money laundering and terrorist financing, including the designation of an AML compliance officer to oversee the programs.
+Added: These controls include procedures and processes to detect and report potentially suspicious transactions, perform consumer due diligence, respond to requests from law enforcement, and meet all recordkeeping and reporting requirements related to particular transactions involving currency or monetary instruments.
Our programs are designed to address these legal and regulatory requirements and to assist in managing risk associated with money laundering and terrorist financing.
−Removed: We collect, store, use, disclose, transfer, and otherwise process a wide variety of information, including personally identifiable information, for various purposes in our business, including to help provide for the integrity of our services and to provide features and functionality to our consumers and merchants.
−Removed: This aspect of our business, including the collection, storage, use, disclosure, transfer, processing, and protection of the information, including personally identifiable information, we acquire in connection with our consumers’ and merchants’ use of our services, is subject to numerous privacy, cybersecurity, and other laws and regulations in the United States and foreign jurisdictions.
+Added: We are also required to maintain this program under our agreements with our originating bank partners, and certain state regulatory agencies have intimated they expect the program to be in place and followed.
+Added: We collect, store, use, disclose, transfer, and otherwise process a wide variety of information, including personal information, for various purposes in our business, including to help provide for the integrity of our services and to provide features and functionality to our consumers and merchants.
+Added: This aspect of our business, including the collection, storage, use, disclosure, transfer, processing, and protection of the information, including personal information, we acquire in connection with our consumers’ and merchants’ use of our services, is subject to numerous privacy, cybersecurity, and other laws and regulations in the United States and foreign jurisdictions.
+Added: We are subject to a variety of such laws, rules, directives, and regulations, as well as contractual obligations, relating to the processing of personal information.
Accordingly, we publish our privacy policies and terms of service, which describe our practices concerning the collection, storage, use, disclosure, transmission, processing, and protection of information.
+Added: The regulatory framework for privacy and data protection worldwide is rapidly evolving and, as a result, implementation standards and enforcement practices are likely to continue to evolve for the foreseeable future.
+Added: Legislators and regulators are increasingly adopting or revising privacy and data protection laws, rules, directives, and regulations that could have a significant impact on our current and planned privacy and data protection-related practices;
+Added: our processing of consumer or employee information;
+Added: and our current or planned business activities.
+Added: We are subject to the GLBA and implementing regulations and guidance.
+Added: Among other things, the GLBA (i) imposes certain limitations on the ability to share consumers’ nonpublic personal information with non-affiliated third-parties and (ii) requires certain disclosures to consumers about information collection, sharing, and security practices and their right to “opt out” of the institution’s disclosure of their personal financial information to non-affiliated third-parties (with certain exceptions).
+Added: Privacy requirements, including notice and opt out requirements, under the GLBA and the FCRA are enforced by the FTC and by the CFPB through UDAAP laws and regulations,
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+Added: and are a standard component of CFPB examinations.
+Added: State entities also may initiate actions for alleged violations of privacy or security requirements under state law.
+Added: Furthermore, an increasing number of state, federal, and international jurisdictions have enacted, or are considering enacting, privacy laws, such as the CCPA, which became effective on January 1, 2020, and the EU General Data Protection Regulation (“GDPR”), which regulates the collection, control, sharing, disclosure and use and other processing of personal information of data subjects in the EU and the European Economic Area.
+Added: The CCPA gives residents of California expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used, and also provides for civil penalties for violations and a private right of action for data breaches.
+Added: Meanwhile, the GDPR provides data subjects with greater control over the collection and use of their personal information (such as the “right to be forgotten”) and has specific requirements relating to cross-border transfers of personal information to certain jurisdictions, including to the United States, with fines for noncompliance of up to the greater of 20 million euros or up to 4% of the annual global revenue of the noncompliant company.
+Added: In addition, on November 3, 2020, California voters approved a new privacy law, the California Privacy Rights Act (“CPRA”), which significantly modifies the CCPA, including by expanding consumers’ rights with respect to certain personal information and creating a new state agency to oversee implementation and enforcement efforts.
+Added: Many of the CPRA’s provisions will become effective on January 1, 2023.
+Added: The CCPA, CPRA, GDPR, and any other applicable state, federal, and international privacy laws, may increase our compliance costs and potential liability.
Various regulatory agencies in the United States and in foreign jurisdictions continue to examine a wide variety of issues that are applicable to us and may impact our business.
−Removed: These issues include account management guidelines, anti-discrimination, consumer protection, identity theft, privacy, disclosure rules, electronic transfers,
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−Removed: cybersecurity, and marketing.
+Added: These issues include account management guidelines, anti-discrimination, consumer protection, identity theft, privacy, disclosure rules, electronic transfers, cybersecurity, and marketing.
As our business continues to develop and expand, we continue to monitor the additional rules and regulations that may become relevant in order to maintain compliance with applicable law.
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Any actual or perceived failure to comply with legal and regulatory requirements applicable to us, including those relating to privacy or security, or any failure to protect the information that we collect from our consumers and merchants, including personally identifiable information, from cyber-attacks, or any such actual or perceived failure by our originating bank partners, may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, regulatory or governmental investigations, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on our ability to continue to operate.
−Removed: For an additional discussion on governmental regulation affecting our business, please see the risk factors related to regulation of our business and regulation in the areas of privacy and data use under the section titled “ Risk Factors — Risks Related to Our Regulatory Environment.
−Removed: Our originating bank partners also operate in a highly regulated environment, and many laws and regulations that apply directly to our originating bank partners are indirectly applicable to us as a service provider to our originating bank partners.
+Added: Our originating bank partners also operate in a highly regulated environment, and many laws and regulations that apply directly to our originating bank partners are directly and indirectly applicable to us as a service provider to our originating bank partners.
Intellectual Property
2 unchanged sentences
However, these laws, agreements, and procedures provide only limited protection.
−Removed: As of June 30, 2021, we owned ten registered trademarks and 24 trademark applications in the United States, seven registered trademarks and nine trademark applications in various foreign jurisdictions, and three issued patent and 18 pending patent applications in the United States.
+Added: As of June 30, 2022, we owned 9 registered trademarks and 20 trademark applications in the United States, 24 registered trademarks and 36 trademark applications in various foreign jurisdictions, and 7 issued patent, 36 pending patent applications in the United States, and 4 pending patent applications in various foreign jurisdictions.
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Although we take steps to protect our intellectual property and proprietary rights, we cannot be certain that the steps we have taken will be sufficient or effective to prevent the unauthorized access, use, copying, or the reverse engineering of our technology and other proprietary information, including by third-parties who may use our technology or other proprietary information to develop services that compete with ours.
−Removed: See the section titled “ Risk Factors ” for a more comprehensive description of risks related to our intellectual property and proprietary rights.
+Added: See the section titled “ Risk Factors – Risks Related to Our Intellectual Property and Platform Development ” for a more comprehensive description of risks related to our intellectual property and proprietary rights.
Available Information
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Information found on, or accessible through, our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K.
−Removed: Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available, free of charge, on our website as soon as reasonably practicable after we file such material electronically with, or furnish it to, the Securities and Exchange Commission (the “SEC”).
+Added: Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our website as soon as reasonably practicable after we file such material electronically with, or furnish it to, the Securities and Exchange Commission (the “SEC”).
The SEC also maintains a website that contains our SEC filings.
The address of the site is www.sec.gov.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.