Affirm and Sixth Street Strike $4B Loan Partnership
Hey Payments Fanatic!
Buy Now, Pay Later (BNPL) company Affirm has partnered with private credit giant Sixth Street on a $4 billion, three-year loan deal—the largest in Affirm's history. Sixth Street will provide upfront capital for Affirm to issue short-term installment loans, with repayments reinvested to extend up to $20 billion in loans over the partnership.
This deal highlights the growing synergy between fintech and private credit, with asset managers increasingly funding nonbank lenders like Affirm. Unlike banks, which rely on deposits, fintechs use diversified funding models like this forward flow agreement. Sixth Street will purchase Affirm-originated loans used for purchases on platforms such as Amazon and Apple.
While private credit is the main driver, traditional banks still play a role, indirectly financing loans through private-credit funds. Affirm's funding capacity has soared to $16.8 billion, growing 130% in three years, while its gross merchandise volume rose 34% in the first nine months of 2024.
Affirm offers APRs between 0%-36%, with no late fees for missed payments. As of September, its delinquency rate was just 2.8%.
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GOLDEN NUGGET
How is a credit card 𝐝𝐢𝐬𝐩𝐮𝐭𝐞 processed in the system? 👇
Dispute happens when a cardholder disagrees with a merchant’s charge.
A dispute is 𝐞𝐱𝐩𝐞𝐧𝐬𝐢𝐯𝐞: for every dollar in disputed transactions, an additional $1.50 is spent on fees and expenses [1]. The process/system complexity leads to the cost.
The diagram below shows how a dispute is processed in an eCommerce marketplace.
🔸 Steps 1-2: A customer files a dispute with the issuer or PSP (Payment Service Provider). The issuer or PSP sends the 𝐝𝐢𝐬𝐩𝐮𝐭𝐞 𝐧𝐨𝐭𝐢𝐟𝐢𝐜𝐚𝐭𝐢𝐨𝐧 to the eCommerce marketplace’s inbound gateway.
🔸 Steps 3-4: The inbound gateway sends the dispute notification to the correlation service, which correlates internal orders and payments with external bank information. Then the enriched notification gets sent to a messaging component.
🔸 Steps 5.1-5.2: The dispute notification is sent to the dispute service for the 𝐝𝐞𝐜𝐢𝐬𝐢𝐨𝐧-𝐦𝐚𝐤𝐢𝐧𝐠 process. It collects evidence from various internal systems to help make the decision. Meanwhile, the dispute notification is sent to the payment service to lock the refund and hold payment.
🔸 Steps 6-7: The decision (accept or defend) is sent to the outbound gateway, then sent to the issuer or PSP for 𝐚𝐫𝐛𝐢𝐭𝐫𝐚𝐭𝐢𝐨𝐧.
🔸 Steps 8-11: After arbitration, the bank or PSP sends the arbitration notification (win or lose) back, together with the settlement files. The reconciliation service reconciles arbitration result and settlement files. The arbitration result is sent to the dispute service. If there is a cost due to merchandise reasons for arbitration loss, the dispute service calls the payment service to 𝐫𝐞𝐜𝐨𝐮𝐩 the cost from the seller.
Source: Hua Li
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