What changed in this filing

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Item 1. Business

2024-08-28 compared with 2023-08-25 · 103 added, 113 removed, 371 unchanged (37% of the section changed)

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Affirm was founded in 2012 with a mission to deliver honest financial products that improve lives.

We are building the next generation platform for digital and mobile-first commerce.

We are building the next generation payment network.

We believe that by using modern technology, strong engineering talent, and a mission-driven approach, we can reinvent payments and commerce.

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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 lower fraud rates, higher approval rates compared to traditional credit underwriting models, and lower credit losses.

Our models have been built on extensive data points, including data from almost 132 million loans.

Our approach to risk management is core to our business model and has led to lower fraud rates, higher approval rates compared to traditional credit underwriting models, and lower credit losses.

Our models have been built on extensive data points, including data from approximately 215 million loans.

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.

As of June 30, 2023, almost 36 million consumers have trusted Affirm as their transaction partner.

What this means for consumers is increased purchasing power with more control and flexibility.

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.

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.

For merchants, Affirm’s commerce solutions help drive growth by enhancing demand generation and consumer acquisition.

Our platform is explicitly designed and engineered to integrate with a wide range of merchants.

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.

As of June 30, 2023, we had approximately 254,000 active merchants, ranging from small businesses to large enterprises, direct-to-consumer brands, brick-and-mortar stores, and companies with an omni-channel presence.

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.

We have two loan product offerings:

Pay-in-4 and Core loans.

Pay-in-4 is a short-term payment plan with four biweekly 0% APR installments, while Core loans include all monthly interest-bearing installment loans and 0% APR installment loans.

This is a point of differentiation for us, as we can accommodate and partner with merchants to serve their payment needs across a wide variety of industries, size, average order value (“AOV”), or consumer profile.

As of June 30, 2024, we had approximately 303 thousand active merchants, ranging from small businesses to large enterprises, direct-to-consumer brands, brick-and-mortar stores, and companies with an omni-channel presence.

As used herein, “merchants” may reference merchants and/or e-commerce platforms.

Our merchants span a diverse range of industries, including sporting goods and outdoors, home and lifestyle, travel and ticketing, electronics, fashion and beauty, equipment and auto, and general merchandise.

We have three main loan product offerings:

Pay-in-4, 0% annual percentage rate (“APR”) monthly installment loans and interest-bearing monthly installment loans.

Pay-in-4 is a short-term payment plan with four biweekly 0% APR installments.

Our business model is designed to align with the interests of both consumers and merchants.

From merchants, we typically earn a fee when we help them convert a sale and power a payment .

From merchants, we typically earn a fee when we help them convert a sale and facilitate a transaction.

Merchant fees depend on the individual arrangement between us and each merchant and vary based on the terms of the product offering;

we generally earn larger merchant fees on 0% annual percentage rate (“APR ”) financing products.

For fiscal year ended June 30, 2023 , Pay-in-4 and Core 0% loans represented 19% and 13% , respectively, of total Gross Merchandise Volume (“GMV ” ) facilitated through our platform.

For fiscal year ended June 30, 2022, Pay-in-4 and Core 0% loans represented 22% and 21%, 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.

we generally earn larger merchant fees on 0% APR financing products.

For fiscal year ended June 30, 2024 , Pay-in-4 and 0% APR installment loans represented 15% and 11% , respectively, of total gross merchandise volume (“GMV”) facilitated through our platform.

For fiscal year ended June 30, 2023, Pay-in-4 and 0% APR installment loans represented 19% and 13%, respectively, of total GMV facilitated through our platform.

This revenue model incentivizes us to help our merchants convert sales and increase AOV through the commerce and technology solutions offered by our platform.

From consumers, we earn interest income on the interest bearing installment 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.

Because consumers are never charged deferred or compounding interest or late fees, we are not incentivized to profit from our consumers’ mistakes or misfortunes.

We also facilitate the issuance of virtual cards directly to consumers through our App as well as the Affirm Card, formerly “Affirm Debit+”, which allows consumers to shop with merchants that are not integrated with Affirm.

Interest rates charged to our consumers vary depending on several factors including 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.

Because consumers are not charged deferred or compounding interest or late fees, we are not incentivized to profit from our consumers’ mistakes or misfortunes.

For the fiscal years ended June 30, 2024 and 2023 , interest-bearing monthly installment loans represented 74% and 68% , respectively, of total GMV.

We also facilitate the issuance of virtual cards directly to consumers through our App, allowing them to shop with merchants that are not integrated with Affirm.

Similarly, we also facilitate the issuance of the Affirm Card, a debit card that can be used physically or virtually and which allows consumers to link a bank account to pay in full, or apply to pay over time for their purchase through the Affirm App.

Merchants may also elect to use the virtual card as a method to facilitate the offering of installment loans to allow their customers to pay over time.

Merchants are charged an interchange fee for each successful Affirm Card transaction, and a portion of this revenue is shared with us by our card-issuing partners.

We have already achieved significant scale, facilitating consumer purchases of $20.2 billion in GMV in fiscal year 2023.

Merchants are charged an interchange fee for each successful card transaction, and a portion of this revenue is shared with us by our card-issuing partners.

For the fiscal year ended June 30, 2024 we have facilitated consumer purchases of $26.6 billion in GMV.

Our business transforms the way consumers and merchants transact by creating a powerful platform built upon honest financial products.

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• 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.

We underwrite each transaction individually and—by never charging late fees—we do not profit when consumers fall behind.

Our success is fundamentally aligned with our consumers’ success.

Our products make it easy for consumers to apply for a loan and be approved instantaneously.

Consumers receive either 0% APR bi-weekly or monthly installments, where they pay no interest, or interest-bearing monthly installment loans, where they pay fixed amounts of interest that do not compound.

We underwrite each transaction individually and do not charge late fees.

Our proprietary risk model has consistently outperformed traditional credit models, enabling us to better help eligible consumers finance their purchases.

Consumers never pay more than what they agreed to at checkout, even if they miss or are late on a payment.

Under this model, consumers do not pay more than what they agreed to at checkout, even if they miss or are late on a payment.

• Affirm Marketplace.

Our Affirm app and website provides tailored and exclusive offers from merchants based on consumers’ preferences.

Our Affirm App and website provide tailored and exclusive offers from merchants based on consumers’ preferences.

Consumers can apply at affirm.com or via the Affirm App and, upon approval, receive a single-use virtual card to use online or in-store.

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• Affirm Card.

Affirm Card allows consumers to link a bank account to pay in full, or pay later by accessing credit through the Affirm App.

Users can take advantage of a unique in-app post-purchase feature that allows them to instantly convert any eligible debit transaction into an installment loan.

Affirm Card allows consumers to link a bank account to pay in full, or apply to pay over time through the Affirm App.

Users can take advantage of an in-app post-purchase feature that allows them to instantly apply to convert any eligible debit transaction into an installment loan.

Consumers can also apply for a pre-purchase installment loan via the Affirm App and, upon approval, use the Affirm Card online or in-store to complete their purchase.

Consumers can transact either via a physical debit card or a virtual card.

• High-yield savings account.

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.

Consumers can transact either via a physical debit card or a virtual debit card.

• Affirm Money Account.

Through the Affirm app and in partnership with Cross River Bank, we offer an FDIC-insured, high-yield savings account, with no minimum deposit requirements or fees.

Merchant features

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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.

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.

We provide merchants with insightful analytics that help them understand how their various products are performing and other key insights to optimize conversion and consumer acquisition costs.

• Client success support.

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• Affirm app and marketplace.

Merchants also have access to Affirm’s app, which provides a marketplace that allows them to efficiently reach customers through featured placements and personalized advertisements.

Merchants also have access to Affirm’s app, which provides a marketplace that allows them to efficiently reach consumers through featured placements and personalized advertisements.

• Affirm website and developer documentation.

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• Our costs decrease as a percentage of GMV as our consumer ecosystem expands.

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.

For example, the additional data we have on repeat consumers enables us to make better underwriting decisions and therefore generally results in lower provision for credit losses and processing and servicing expenses from repeat consumers than from first time consumers.

For the fiscal years ended June 30, 2024 and 2023, 92% and 88%, respectively, 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.

• Improved expense efficiency enables us to create even more compelling offers for consumers and merchants, in turn attracting more consumers and merchants to our network.

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.

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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.

Our integration with our merchant partners allows us to consider the product that the consumer is purchasing when we assess a credit application.

Unlike legacy payment and credit systems, we can assess and price risk at a transaction level, rather than relying solely on a static consumer credit score.

We believe our proprietary risk model has translated this advantage into the ability to facilitate a greater volume of transactions from a wider and more diverse segment of consumers.

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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.

Our risk model is designed to comply with our originating bank partners’ credit policies and underwriting procedures and has been proven to lead to lower fraud rates and higher approval rates compared to traditional credit underwriting models.

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.”

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technology solutions provided by payment companies such as Visa and MasterCard;

mobile wallets such as PayPal and Apple;

mobile wallets such as PayPal;

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.

Additionally, merchants are increasingly offering proprietary pay-over-time options to customers, and in some cases, these are presented parallel to our offerings at checkout.

Our technology-driven platform also faces competition from a variety of players, including those who enable transactions and commerce via digital payments.

Technology-enabled companies like ours are increasingly gaining market share from legacy financial institutions.

Additionally, some merchants are increasingly offering proprietary pay-over-time options to customers, and in some cases, these are presented parallel to our offerings at checkout.

We believe that we compete favorably based on our competitive advantages and are well-positioned to succeed in the market.

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• Innovate on new consumer product solutions .

We plan to continue to innovate and bring new honest financial products to market for consumers.

During fiscal 2023, for example, we rebranded our former Affirm Debit+ to Affirm Card and made the product generally available to all eligible consumers.

We plan to continue to innovate and bring new financial products to market for consumers.

• 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.

For example, during fiscal 2023, we continued to innovate on Adaptive Checkout TM , which dynamically provides optimized biweekly and monthly payment options side-by-side in a single integrated checkout solution and has driven a significant increase in conversion rates, optimized interest rates and have improved the overall user experience.

Additionally, we have offered merchants the ability to acquire new customers through improvements in our dynamic messaging capabilities designed to drive purchase intent, higher priced conversion packages that offer longer term 0% APR offers, and improved merchant support capabilities through self-service resources and capabilities in the merchant portal.

Increase Consumer Transaction Frequency

Increase Consumer Transaction Frequency and In-store Usage

We have demonstrated how our solutions can successfully enable and accelerate commerce for larger and considered purchases.

We aim to continue driving repeat use of our platform as we serve consumers beyond their initial purchase via our consumer-centric tools and offerings, and the increased diversity of merchants on our network.

We believe expanding into consumers’ daily and in-store spending will be a key in driving repeat usage

and will position us to increase engagement with both consumers and merchants.

Affirm Card is an important component of this strategy because consumers using Affirm Card often have higher transactions per user and greater in-store usage.

We believe expanding into consumers’ daily and in-store spending will be key in driving repeat usage and will position us to increase engagement with both consumers and merchants.

Affirm Card is an important component of this strategy because consumers using Affirm Card to date often have a higher transaction frequency per user and greater in-store usage.

If successful, we believe that this strategy will lead to increased transaction volume on our platform, as well as the expansion of our consumer and merchant network.

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We believe this will attract new consumers to try Affirm as a payment option.

As we add more consumers to our network, our models become more efficient and robust, allowing us to provide our platform (and the loans it facilitates) to a growing spectrum of consumers.

As we add more consumers to our network, we expect our models to become more efficient and robust, allowing us to provide our platform (and the loans it facilitates) to a growing spectrum of consumers.

The more consumers that we serve, the better our systems understand how to identify responsible consumers, and the more consumers we can acquire and approve.

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• Increase the number of our merchant partnerships .

We believe we have the opportunity to significantly increase the number of integrated merchants on our network through both our dedicated sales team and business-to-business marketing efforts.

Additionally, simple, direct API integration means bringing on new merchants is a seamless process.

We believe we have the opportunity to significantly increase the number of integrated merchants on our network through both our dedicated sales team and platform partner and merchant acquirer partnerships.

Additionally, simple, direct API integration means bringing on new merchants can be a seamless process.

As we continue to generate results for merchants, we believe more will join our platform in order to offer Affirm as an option to their customers.

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Our platform is broadly available to merchants and eligible consumers in the United States and Canada.

We will continue to evaluate expanding our platform to new markets.

We will continue to evaluate expanding our platform to new markets, including the United Kingdom (“U.K.”) where we expect to begin facilitating loans by the end of fiscal 2025.

Merchants and consumers anywhere can benefit from a more transparent, fair, and honest way to engage in commerce, and we see an opportunity to generate value in many new markets around the world through our platform.

Our Technology

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.

Our vertically integrated technology powers a rich data landscape across products, which drives increased efficiency that unlocks greater scale.

Increasing scale powers a flywheel that further drives incremental data capture and improves the efficiency of each transaction, and that efficiency allows us to more finely price transactions, measure risk, deliver value to our customers, and personalize consumer experiences.

Our products are built on a cloud-first platform engineered for data aggregation, schematization, management, and decisioning, which enables our products to leverage years of deep behavioral, financial, shopping, and payment data across 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 helps to unlock greater scale.

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.

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• Credit check capabilities.

Our risk model takes five top-of-mind data inputs and turns them into a total of over 500 data points in order to assess the credit risk of new consumers.

Our risk model takes five top-of-mind data inputs from the user and turns them into a total of over 500 data points in order to assess the credit risk of new consumers.

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.

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 almost 132 million loans.

We use application and transaction data to train our model, including data from approximately 215 million loans.

• Modeling improvements.

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Our models are designed to enable us to adjust our models quickly and efficiently in response to changes in the environment.

• Designed for constant innovation and flexibility.

• Designed for continued innovation and flexibility.

Our deep technological talent and capabilities have enabled us to strategically build core systems (including our own ledger) and infrastructure in-house, allowing us to gain what we believe is a significant competitive advantage as we continue to innovate and iterate, and develop new capabilities across multiple disciplines.

The flexibility of our custom-built technological infrastructure means we can incorporate new merchants, platforms, data sources, models, capital partnerships, and other elements without adding significant overhead.

• Data privacy and security .

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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.

We have achieved significant merchant and consumer adoption without investing heavily in sales and marketing.

We are focused on the effectiveness of sales and marketing spending.

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.

We experience seasonal fluctuations in our business as a result of consumer spending patterns.

Historically, our GMV has been the strongest during the second quarter of our fiscal year due to increases in retail commerce during the holiday season.

Despite these higher GMV levels, in fiscal 2023 and 2022, we generated less in period revenue as a percentage of GMV during our second fiscal quarter due to the comparatively higher proportion of interest bearing loans originated in the latter half of the period, which typically results in lower merchant network revenue, which is recognized in period, and higher levels of interest income, which is recognized over a longer time horizon.

We expect these seasonal patterns to continue in future periods, and any adverse events that occur during our second fiscal quarter could have a disproportionate effect on our financial results for the fiscal year.

We experience seasonal fluctuations in our business as a result of consumer spending patterns, including Affirm Card, which we expect to mimic the seasonality of our general business in the near term.

Historically, our GMV has been the strongest during our fiscal second quarter due to increases in retail commerce during the holiday season and our loan delinquencies are at their lowest during our fiscal third and fourth quarter, as consumer savings benefit from tax refunds.

Adverse events that occur during our second fiscal quarter could have a disproportionate effect on our financial results for the fiscal year.

Human Capital Resources

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As of June 30, 2024, we had a total of 2,006 employees, primarily located in the United States.

None of our employees are represented by a labor union or covered by a collective bargaining agreement.

None of our employees are represented by a labor union.

We have not experienced any work stoppages, and we consider our relations with our employees to be good.

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We believe that diversity, equity, and inclusion (“DEI”) are important as we scale and build our high-performing team.

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.

Our Diversity and Inclusion Steering Committee (“DISC”), an internal committee made up of senior leaders from across Affirm, provides 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 internal and external DEI initiatives, and DEI members help to amplify high-impact DEI efforts happening within their own departments.

Below are several highlights from our DEI work in calendar year 2022 (the latest year for which we have issued a DEI Report):

• Affirm added two new Community Groups (Neurodiversity and Southwest Asia & North Africa) in addition to the existing thirteen Employee Resource & Community Groups.

Affirm’s Employee Resource Groups (“ERGs”) support and advance Affirm’s values and business goals.

This includes the Company’s commitment to providing equal employment opportunities and facilitating a culture where all Affirmers feel like they belong.

ERGs include Affirmers from underrepresented groups (“URGs”) and their allies.

Affirm's Community Groups (“CGs”) help build belonging, community, and inclusion at Affirm.

Our CGs come together over common identities, shared characteristics, or shared life experiences.

• In 2022, we focused on supporting Affirmers around the world after hiring Affirmers in three countries (Spain, Poland, and Canada) in 2021.

This year, Poland-based Affirmers started chapters of our Women@ Affirm ERG and Mental Wellness Community Group.

More than 50% of Poland-based employees expressed an interest in joining Mental Wellness and Women@.

• In 2021, we promoted over 50 small or minority-owned businesses through various Affirm-sponsored promotional campaigns.

In 2022, we increased this by 130%, highlighting 115 small and minority-owned businesses across Affirm’s platforms, including the Shop Black-Owned Businesses page.

Our Diversity and Inclusion Steering Committee (“DISC”) is an internal committee made up of senior leaders from across Affirm.

DISC’s overarching purpose is to partner with the DEI team, to advance the DEI mission and strengthen Affirm’s culture.

This entails creating an environment where individuals from all backgrounds can thrive.

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.

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Our board of directors’ role in human capital resource management

Our board of directors believes that human capital management is an important component of our continued growth and success, and is critical to our ability to attract, retain, and develop talented and skilled employees.

Our board of directors believes that human capital management is an important component of our continued growth and success, and is helpful to our ability to attract, retain, and develop talented and skilled employees.

We pride ourselves on a culture that respects co-workers and values concern for others.

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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.

We also have adopted an Employee Stock Purchase Plan (“ESPP”) pursuant to which eligible employees can purchase shares o f our Class A common stock at a discount from the fair market value .

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.

We believe these incentive programs allow us to be competitive with comparable companies in our industry by giving us the resources to attract, motivate and retain talented individuals.

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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.

federal law, the laws of Canada, and the United Kingdom (“U.K.”), and the laws of the states and provinces in which we operate, among others.

federal law, the laws of Canada, and the United Kingdom, 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.

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Our operations must satisfy the laws and standards of each individual U.S.

state and territory and Canadian province in which we operate.

state and territory, Canadian province and U.K.

country in which we operate.

This means that when individual states, territories or provinces 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.

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 U.S., Canada, and U.K., and we may also purchase loans originated by our originating bank partners through our platform.

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 U.S., Canada, and U.K., and we may also purchase loans originated by our originating bank partners through our platform.

Substantially all of the loans facilitated through our platform in the U.S.

are originated through Celtic Bank, an FDIC-insured Utah state-chartered industrial bank.

are originated through Celtic Bank, an FDIC-insured Utah state-chartered industrial bank, and Lead Bank, an FDIC-insured Missouri state-chartered bank..

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, debt collection or servicing, and/or purchasing or selling consumer loans.

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Licensing statutes vary from state to state and prescribe different requirements, including but not limited to:

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.

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, 2023 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.

The application of state and provincial licensing requirements to our business model is not always clear, and while we believe we are in material compliance as of June 30, 2024 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.

State interest rate treatment

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The Second Circuit’s holding in the Madden case is binding on federal courts in the states of New York, Connecticut, and Vermont.

Following the Madden decision, there have been a number of lawsuits in other parts of the country making

similar allegations.

Following the Madden decision, there have been a number of lawsuits in other parts of the country making similar allegations.

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”).

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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.

While most enforcement and litigation has historically targeted high-interest rate programs (i.e.

While most enforcement and litigation has

historically targeted high-interest rate programs (i.e.

> 100% APR), which we consider to be inconsistent with our company mission and values, we nonetheless could be subject to litigation, whether private or governmental, or administrative action regarding the above claims.

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Affirm Payments is actively seeking additional licenses and certifications of this nature, but there can be no assurance we will be able to obtain them or the timeline with which this will happen.

As a licensed money transmitter, we have obligations and restrictions with respect to the investments of customer funds, recurrent reporting, and bonding.

As a licensed money transmitter, we have obligations and restrictions with respect to the investments of consumer funds, recurrent reporting, and bonding.

If found to have violated the laws or regulations covered under our licenses, we could be subject to liability and/or additional restrictions.

These include, but are not limited to, being forced to cease doing business with residents of certain

states or territories, forced to change our business practices, or required to obtain additional licenses or regulatory approvals.

These include, but are not limited to, being forced to cease doing business with residents of certain states or territories, forced to change our business practices, or required to obtain additional licenses or regulatory approvals.

Any of the aforementioned scenarios could impose substantial costs and or harm our business.

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through our U.K.

subsidiary, Skytech Capital Ltd (“Skytech”).

Skytech is authorized and regulated by the U.K.

subsidiary, Affirm U.K.

Limited (f.k.a.

Skytech Capital Ltd).

Limited is authorized and regulated by the U.K.

Financial Conduct Authority (“FCA”) and carries out regulated activity in the U.K.

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financial system, and (c) promoting effective competition in the interests of consumers.

The FCA regulates and supervises some or all of Skytech’s consumer credit activities.

The FCA regulates and supervises some or all of Affirm U.K.

Limited’s consumer credit activities.

The FCA adopts a pre-emptive approach to supervision based on making forward-looking judgments about a firm’s business model, product strategy and how the business is run.

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• 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.

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.

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.

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.

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We are also subject to data protection laws and regulations, such as the EU General Data Protection Regulation (“GDPR”), Canada’s Personal Information Protection and Electronic Documents Act, the U.K.’s Data Protection Act of 2018 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.

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.

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 supervision and enforcement authority with respect to our compliance with these requirements as a facilitator, servicer, acquirer, or originator of consumer credit.

As such, the CFPB has in the past requested reports concerning our organization, business conduct, markets, and activities, and we expect that the CFPB will continue to do so from time to time in the future.

In addition, we expect the CFPB to begin to supervise us in the immediate future.

The CFPB’s supervision of us will enable it, among other things, to conduct comprehensive and rigorous examinations to assess our compliance with consumer financial protection laws, which could result in investigations, enforcement actions, regulatory fines and mandated changes to our business products, policies and procedures.

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.

Additionally, the

CFPB’s supervision of us enables it, among other things, to conduct comprehensive and rigorous examinations to assess our compliance with consumer financial protection laws, which could result in investigations, enforcement actions, regulatory fines and mandated changes to our business products, policies and procedures.

The CFPB, through its supervision and 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.

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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).

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”).

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”).

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;

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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.

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.

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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.

On May 22, 2024, the CFPB issued an Interpretive Rule, “Truth in Lending (Regulation Z);

Use of Digital User Accounts to Access Buy Now, Pay Later Loans,” under the Truth in Lending Act (the “Interpretive Rule”) that extended to Buy Now, Pay Later (BNPL) providers certain dispute and refund requirements applicable to credit card providers.

The Interpretive Rule is an interpretation of existing law that “does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements,” thereby applying to past operations.

The Interpretive Rule may result in operational and compliance challenges and new litigation risks and scrutiny by federal and state regulators.

The Interpretive Rule was effective on July 30, 2024.

The CFPB has not provided any additional guidance since the Interpretive Rule was issued.

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.

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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.

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 U.S., 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.

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.

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.

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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.

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 SEC.

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 SEC.

The SEC also maintains a website that contains our SEC filings.

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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.

What changed 10-K

Item 1. Business