The Far-Reaching Impacts of Payments Innovation: Cedar Talks with Max Levchin
An investor in more than 100 startups, Max Levchin is founder and CEO of Affirm, co-founder and chairman of Glow and co-founder and general partner at SciFi VC. He helped start Yelp where he was the company’s first investor and chairman of the board until 2015, and has served on the boards of Yahoo! and Evernote.
In a recent Cedar Talk, Levchin shared his insights into how COVID-19 has changed the payment landscape and the need to revolutionize consumer finance with radical transparency.
Selected edited highlights from the talk are reproduced below. Watch the full discussion here.
Max Levchin’s entrepreneurial superhero origin story
With experience in dozens of startups, Max Levchin is nothing short of an entrepreneurial superhero. And every superhero has an origin story – usually one in which a scientific mastermind experiences a chance occurrence (think Iron Man or Spider-Man). Max Levchin is no different.
Hard at work in the middle of his undergraduate degree, already having planned his thesis and picked his advisor, two colleagues talked him into starting a company and he was hooked on the entrepreneurship bug. He “ran off to Silicon Valley” and subsequently started and led some of the biggest tech companies in history, founding PayPal in 1998 where he served as CTO until its acquisition by eBay in 2002.
Want to learn the psychology that fueled Levchin’s entrepreneurial passions? How he overcame family pressures to pursue a traditional doctorate? What drives his desire to “break the hardest puzzles”? Click here and navigate to 3:28.
Hooked on the challenge of “peeling the Band-Aid” off “gnarly fractal things”
According to Levchin, the challenge of cracking the payment “code” is what inspired him to move into that space. “It just turns out to be this gnarly kind of a fractal thing where the more you peel [off] the Band-Aid, the more you're like ‘Oh my god, it's even worse than I thought…this stuff was built with 15th century dark ages technology and now I’m trying to fix it!’ In many ways I keep on coming back to payments because it's one of the areas that I know [is] valuable – there’s a lot of money changing hands in the world and it's important to make it better. But it's also just really hard.”
According to Levchin, the desire to start Affirm was born of this impetus, but also “organic exploration” in the wake of his PayPal experience.
Despite achieving financial success as a Silicon Valley executive, Levchin’s credit score never improved. This led him down the path to consumer financing innovation.
“At PayPal, we had access to all this data. We knew if the consumers were good for the money or they couldn't afford a loan. And yet we'd always said credit cards are the source of funds and PayPal would just transfer the money. [We thought] shouldn’t we have touched this space? It evolved into a conversation around, ‘well, credit scores are kind of stupid.’ Shouldn’t there be a better way to think about this?”
From there, Levchin and his team started building a new kind of FICO score, but ran into red tape and brick walls in the traditional finance space. They reached out to a friend who began presenting Affirm next to credit card payment options on his website and it immediately started gaining massive traction.
The full details on this rollercoaster of Affirm’s “overnight” success are at 9:37.
Revolutionizing point-of-sale (POS) lending
And Levchin’s story, like the best superhero sagas, contains the hero’s vow to use their powers for good (15:38). Delving deeper into point-of-sale (POS) financing, Levchin realized how much of the industry was designed to “trap” and “harvest” consumers’ financial illiteracy. So he decided to do something about it.
“I went from ‘let's find a way to score credit better’ to ‘let's try to build something where consumers understand exactly what's going on.’” This became Affirm’s mission: help people make purchases they can feel great about while keeping them out of unhealthy debt by offering financial transparency, flexibility and fairness – completely devoid of late fees and penalties of any kind, ever.
To hear why Levchin feels he can “carry the banner for the next 50 years” on payments because it’s “so large and so broken,” what it was like taking Affirm public under COVID-19 and much more click here to watch the full discussion.
Cedar Talks is a thought leadership series focused on highlighting experienced entrepreneurs, tech innovators and healthcare leaders who are solving important problems by challenging the status quo. Recent Cedar Talks have included Clinton Foundation Vice Chair Chelsea Clinton, Peloton co-founder Graham Stanton, former President of Livongo Dr. Jennifer Schneider and venture capitalists Marc Andreessen and Scott Kupor of Andreessen Horowitz.
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