Dive Brief:
- Affirm Holdings is trying to start a bank in Nevada, and has applied for a charter in that state, the buy now, pay later company said Friday in a news release.
- The San Francisco-based company has submitted applications to the Nevada Financial Institutions Division and the Federal Deposit Insurance Corp. to start Affirm Bank, it said Friday.
- The entity will be a “Nevada-chartered industrial loan company,” Affirm said but was sparse on details.
Dive Insight:
Starting a bank will let Affirm “spur opportunities to introduce new products and services over time,” the company said in its release but did not elaborate.
An Affirm spokesperson declined to provide further details on the products and services the company would offer through the bank. Nor would the spokesperson provide more information on the expected timing of the application’s approval.
The FDIC on Thursday conditionally approved applications for automakers GM and Ford to receive industrial loan company charters. GM’s spent 3½ years in evaluation during the Biden administration before the company withdrew it, then resubmitted it last February.
“A banking subsidiary would strengthen and diversify Affirm’s platform, and help us bring honest financial products to more people,” Affirm CEO Max Levchin said in the news release.
Affirm already offers some services typically associated with banks, such as a debit card. The buy now, pay later firm provides consumers the BNPL industry’s signature pay-in-four financing — an interest-free installment loan repaid over a few weeks — and they can also take out longer-term, interest bearing loans through Affirm.
To offer its current lending services, Affirm works through several banks, including Fort Lee, New Jersey-based Cross River Bank and Salt Lake City-based Celtic Bank.
Affirm is hardly the only buy now, pay later player to intrude on territory traditionally dominated by banks.
Competitor Klarna has also made moves into the banking space in recent years, such as offering deposit accounts and its own debit card. Klarna even refers to itself as a “global digital bank” in its news releases.
Digital payments giant PayPal also applied for a bank charter in Utah in December.
Opponents of the ILC charter say the process allows nonbanks to exploit a “loophole” that “undermines the separation of banking and commerce” by skirting Federal Reserve oversight.
