They loan money to people that have either bad understanding of money, or who no other lender will work with. A lot of their revenue also rely on discretionary spending on consumer goods (the kind of stuff that people stop buying first when things go badly).
They kept getting surprised by how many of their loans go unpaid on top of all that.
So they are lending to the riskiest consumers, and they kept underestimating the risk, though they might have fixed that. The past three quarters they have finally become profitable, but given their portfolio of risky consumer loans that are unsecured, any kind of economic downturn could really hurt them.
They aren’t really on their way out right now, but they are in a dangerous position if, say, some global economic event were to cause a massive economic shock…
Thank you. I think their biggest threat is rapidly rising interest rates but as you said, they are profitable currently, so I wouldn't say they will go under anytime soon.
You have no idea what you’re talking about. Affirm has some of the lowest delinquency rates of any BNPL and targets consumers that are more likely to repay their loans. In addition, the consumer spending dependency is remarkably resilient in both upturns and downturns, of course to a certain point - if we’re in a complete economic collapse affirm is not the only stock that will crater.
You seem to be speaking from what you’ve heard through social media and sheer ignorance.
They kept getting surprised by how many of their loans go unpaid on top of all that.
So they are lending to the riskiest consumers, and they kept underestimating the risk, though they might have fixed that. The past three quarters they have finally become profitable, but given their portfolio of risky consumer loans that are unsecured, any kind of economic downturn could really hurt them.
They aren’t really on their way out right now, but they are in a dangerous position if, say, some global economic event were to cause a massive economic shock…