Walmart will offer its customers point-of-sale loans for the first time — both on its website and in nearly 4,000 U.S. stores — under a partnership with the Silicon Valley lender Affirm.
The deal is a watershed moment for the consumer finance industry, as the nation’s largest retailer embraces a financing option that is being popularized by consumers who prefer not to put their big-ticket purchases on a credit card.
“Affirm is a great financing option for those customers who may prefer a fixed-term loan versus an open-ended revolving credit line to pay for larger baskets,” Walmart spokeswoman Marilee McInnis said in an email. “We want our customers to have choices that best meet their lifestyles.”
The partnership, which was announced Wednesday, is a coup for the privately held Affirm. The San Francisco company makes loans to customers of more than 2,000 merchants — including Expedia, Orbitz, Wayfair and Cole Haan — but Walmart is expected to quickly become its biggest retail partner.
Under the deal, Walmart shoppers will be able to get Affirm loans of three, six or 12 months to finance purchases ranging from $150 to $2,000. The loans are already being offered in Walmart stores, and they will be available to Walmart’s online shoppers in the coming weeks.
Financial terms between Affirm and the Bentonville, Ark.-based retail giant were not disclosed.
Affirm CEO Max Levchin said in an interview that it took almost a year for his company to build the technology to support the Walmart partnership. Previously, his 7-year-old company was mostly focused on making loans to online shoppers. When Affirm began working with Walmart, it had to figure out how to offer its loans in brick-and-mortar stores in a convenient manner.
The solution that was adopted will enable shoppers at Walmart Supercenters to apply for point-of-sale credit without having to talk to a store employee about their financing needs.
Shoppers will see signs next to certain items — the list of products that are eligible for financing through Affirm include electronics, furniture, sporting goods and more — directing them to a website where they can apply for a loan. From their mobile phones, applicants will be asked to provide their name, date of birth, email address, mobile phone number and the last four digits of their Social Security number.
“The underwriting process is basically instant. And once you’re approved, you get a bar code, which is what a cashier at Walmart can scan, and the transaction can close with that,” Levchin explained. “So it’s an extremely smooth process.”
Walmart customers will also be able to browse online and get preapproved for an Affirm loan before visiting a store to complete the purchase.
Affirm has positioned itself as a straight-shooting consumer lender — a firm that offers clear pricing terms and does not charge late fees. Its loans carry annual percentage rates ranging from 0% to nearly 30%, depending on the risk presented by a particular borrower.
Levchin, a PayPal co-founder, drew a contrast between the terms that Affirm offers and those available on credit cards. He has frequently criticized the card industry for keeping its customers in debt over a long period of time.
“I think, 10 years ago, if you’d told someone that credit cards are going to be challenged as the predominant way of paying for things, people would have laughed at you,” Levchin said.
“In some cases they’re wonderful tools, and in other cases they’re not. In fact, it’s kind of a blunt tool. And it’s a tool with no safety on. If you’re not careful, you’re going to end up revolving forever and paying a lot of interest.”
Levchin said that Walmart was interested in partnering with Affirm in part because his company offers a straightforward proposition to its customers. In 2017, Walmart announced that it was ending deferred interest financing on its credit cards, he noted.
Deferred interest credit cards offer 0% financing for a certain number of months, but then charge retroactive interest if the full balance has not been paid off in time.
The Walmart spokeswoman described Affirm’s loans as consumer-friendly. “Their commitment to transparent pricing, affordability with no hidden or late fees, and omni-convenience makes them a great partner,” she said.
Walmart still offers various other payment options to its customers, including credit cards. The retail behemoth announced last summer that it was ending a long-running card partnership with Synchrony Financial and signing an exclusive new deal with Capital One Financial.
