In a recent interview with Vishal Kapoor, Head of Product at Affirm, a payment network that promotes responsible spending and saving, he shared insights into Americans’ financial habits and the role of alternative payment methods.
According to Kapoor, Americans are feeling more resilient than expected, with three out of four feeling prepared for a recession due to changes they made in managing their finances earlier in the year. These changes included saving more and spending less, as reflected in the increase in the U.S. personal savings rate.
While Americans feel prepared, many still believe they could better manage their finances. For this reason, alternative payment options like “buy now, pay later” are gaining popularity. Kapoor explains that these options provide consumers with the flexibility to pay in smaller amounts, aligned with their budget and paycheck. Additionally, they offer a smarter way to access credit by evaluating the consumer’s ability to repay at the time of purchase, avoiding late fees and revolving debt.
To protect consumers from overextending themselves, Kapoor suggests that lenders should underwrite each transaction individually, rather than issuing a revolving line of credit. Affirm, for example, underwrites every transaction based on various data points like credit history, income, and purchase cost.
Regarding the use of AI, Kapoor highlights that Affirm has been utilizing machine learning for over a decade, particularly in underwriting technology. While generative AI is gaining attention, Affirm is cautious and ensures there is always a human in the loop. Currently, generative AI is being used for developer productivity and customer service.
Regarding the use of “buy now, pay later” for everyday essentials like groceries, Kapoor believes it can be a smarter choice for those struggling financially. Unlike credit cards, BNPL does not compound interest, and consumers won’t face late fees or hidden charges if the provider follows ethical practices.
In terms of regulation, Kapoor expresses Affirm’s support for efforts that promote choice and transparency for consumers. Consistent standards across the industry would create a level playing field and help the industry go mainstream.
Looking to the future, Kapoor is excited about expanding BNPL to brick-and-mortar stores, as the majority of retail still occurs in-store. Affirm’s new product, the Affirm Card, aims to bring BNPL to physical stores, giving consumers a seamless way to pay over time or in full.
Overall, alternative payment methods like BNPL provide consumers with greater control and flexibility in managing their finances, with the potential to revolutionize the retail industry both online and offline.
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