PayPal co-founder Levchin launches mobile payment startup Affirm
PayPal co-founder Max Levchin is going head-to-head with the digital commerce giant with the launch of Affirm, a new payment startup dedicated to streamlining the checkout process across smartphones and other connected mobile devices.
The Affirm application does not require consumers to manually input personal information like their credit card information and address, instead whittling transactions to two clicks: One tap on the Affirm button on participating merchant websites, and the other to confirm the purchase. "We are trying to get as close as possible to one-click, which has always been the case on the desktop," Levchin told All Things D. "In mobile, it has become an imperative to be able to buy it now or you lose a customer quickly."
Affirm will rely on Facebook (NASDAQ:FB) to authenticate consumers, leveraging other social and data signals to assess risk. Like a credit card, Affirm allows users 30 days to pay for their purchases, and generates revenue by charging participating merchants a small fee--it also will apply fees to consumers who fail to make scheduled account payments. "You will essentially be putting a purchase on a digital tab, and we are going to make it work for us by looking at all available data to determine if you are someone who will pay it back," Levchin explained.
Users can pay off their Affirm account balances via credit cards, bank transfers or physical checks. PayPal is not among the methods of payment that Affirm supports.
Levchin co-founded PayPal (originally dubbed Confinity) in late 1998 with Peter Thiel and John Bernard Powers, serving as its Chief Technology Officer for four years. After eBay acquired PayPal for $1.5 billion in 2002, Levchin founded Slide, a social media sharing service that Google (NASDAQ:GOOG) purchased for $182 million in August 2010 and shut down a year later.
Knocking off PayPal will not be easy: The company is expected to handle around $20 billion in mobile transactions this year. Its PayPal Here mobile payment platform enables small businesses and other users to process credit and debit transactions by swiping cards through a triangle-shaped dongle that attaches to their smartphone or tablet. PayPal also is teaming with retail chains including Home Depot, Abercrombie & Fitch, American Eagle Outfitters, JCPenney, Foot Locker, Office Depot and Toys "R" Us to trial mobile wallet services across more than 18,000 physical U.S. stores.
Affirm must also compete with Square, which has its own card reader dongle and in 2012 inked a payment processing agreement with coffeehouse chain Starbucks. Square now processes $10 billion in annual mobile payment transactions, and more than 2 million U.S. businesses and individuals use its services.
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