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http://www.creditcardprocessingspace.com/paypal-founder-launches-new-online-payments-site-that-offers-credit/
PayPal co-founder Max Levchin is launching a new mobile-based online payments system called Affirm and it will offers its users credit, according to All Things Digital. Affirm will use Facebook as its authentication method and will use another company Levchin has invested in—Stripe—to process its credit card payments. An interesting aspect of Affirm is that besides just using traditional credit risk measures to determine if and how much credit it will extend to its users, it will also use “a number of other social and data signals to assess risk,” according to All Things Digital. Merchants who accept payments on credit through Affirm will pay Affirm a fee for this. How this will fit into the strict, government regulated credit market remains to be seen.
According to Levchin, “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.” What data this means exactly is not yet known. Will Affirm be looking through the Facebook information of its users to authenticate the account to see if they are deadbeats? How regulators and fair lending laws will react to this leaves the success of this whole process very murky.
“Payments online are still too hard — we started the revolution with PayPal and democratized payments for small businesses, but we stopped short of changing the system,” Levchin said. “The world is now awash in data and we can see consumers in a lot clearer ways.” But how “clear” do consumers want to be seen by their creditors? Levchin also said that income by zip code and users’ mobile device ID number will be used in the process.
Unlike traditional credit cards, Affirm does not make its money off of interest charged to its customers based on the balance of their credit accounts. Instead, the merchants will be footing the bill. If they want to offer customers credit for their purchases through Affirm, they pay Affirm a fee to do so. Whether or not these merchants will be the ones setting the criteria to extend credit is not yet known. Doing so could shift some of the regulatory risk away from Affirm. However, like traditional credit cards, users will have approximately 30 days to pay their balances. The popular online retailer 1-800-Flowers will be Affirm’s launch partner.
Right now, Affirm is financed by Levchin and some of his friends. Levchin worked for Google after selling his last company (Slide) to them but eventually left Google to pursue other startups. Affirm is the first company coming from Levchin’s technology company incubator—called Hard, Valuable and Fun—which is based in San Francisco.
Besides the obvious risks of a company offering credit, Affirm faces a stiff regulatory environment that has strict anti-discrimination policies and a reliance on Facebook for authentication of its users. Facebook will likely be ecstatic though at the prospect of having its users’ accounts linked to actual purchasing and credit histories. That alone could be a huge boon to its advertisement business. Another risk that Affirm faces is the abundance of competition in the online payments market. Though its unique business model of having retailers foot the bill for the credit could help it position itself apart from other online payment systems. Also, its reliance on mobile technology could help. It has streamlined the purchase process to two clicks on smartphone screens.
State the following sentences as true or false:
1. To process its credit card payments Affirm will use Facebook and Stripe.
2. Like traditional credit cards, Affirm does not make its money off of interest charged to its customers based on the balance of their credit accounts.
3. Affirm doesn’t face is competition in the online payments market.
Exercise 1. Read the definitions to the given key terms and analyze the context in which they are used:
| Acquirer | a company that buys other companies, usually to sell them for a profit A business with so much growth is sure to generate interest among potential acquirers. |
| Vendor | a person or company offering something for sale, especially a trader in the street For the past few months she's been working as a street vendor, selling fruit and veg. |
| Fiat | a formal authorization or proposition; a decree No company can set industry standards by fiat. |
| Cryptocurrencies | is a type of digital currency that is based on cryptography Because cryptocurrency transactions are anonymous and virtually untraceable, they have created a niche market for illegal transactions |
| Recoup | regain (money spent) through subsequent profits It takes a while to recoup the initial costs of starting up a business. |
| Billing | the process of sending people bills asking them to pay money owed British gas now offer paperless billing, and offer customers a £ 5 annual discount. |
| Merchants | a person or company involved in wholesale trade, especially one dealing with foreign countries or supplying goods to a particular trade A large proportion of the sidings were used for the conveyance of coal and coal merchants stood on the site until very recently. |
| Instantaneous | happening immediately, without any delay I have designed a small machine code routine which makes the transfer of two sets of graphics almost instantaneous. |
| E-payment systems | facilitates the acceptance of electronic payment for online transactions. Also known as a sample of Electronic Data Interchange (EDI), e-commerce payment systems have become increasingly popular due to the widespread use of the internet-based shopping and banking. E-payment systems require the consumer to enter his banking information and the process very time effective and easy to use. |
| PayPal | is a global e-commerce business allowing payments and money transfers to be made through the Internet. Online money transfers serve as electronic alternatives to paying with traditional paper methods, such as checks and money orders. E-bay requires to make the payments through PayPal because it is more safe and secure. |
| Digital currency | among its various names, is electronic money that acts as alternative currency. Currently, alternative digital currencies are not produced by government-endorsed central banks nor necessarily backed by national currency. The new trend, when it comes to digital currency, is that more and more people are now choosing Liberty Reserve. |
| Digital currency exchangers | are market makers which exchange fiat currency for electronic money, such as digital gold currency (DGC), and/or convert one type of digital currency (DC) into another, such as Liberty Reserve into Bitcoin. Exchangers apply either a commission or bid/offer spread to transactions. Some digital gold currency accounts, such as e-gold, do not provide an in-house service to purchase their private currency so it is necessary to use a third-party digital currency exchanger. |
| Financial cryptography (FC) | the use of cryptography in applications in which financial loss could result from subversion of the message system. Financial Cryptography is substantially complex, requiring skills drawn from diverse and incompatible, or at least, unfriendly, disciplines. |
| Cryptographer | One who uses, studies, or develops cryptographic systems and writings During World War II, he served as a cryptographer and glider pilot with the Army Air Forces. |
| Mobile banking | is a system that allows customers of a financial institution to conduct a number of financial transactions through a mobile device such as a mobile phone or personal digital assistant. Kenya's M-PESA mobile banking service, for example, allows customers of the mobile phone operator Safaricom to hold cash balances which are recorded on their SIM cards. |
| SMS banking | a type of mobile banking, a technology-enabled service offering from banks to its customers, permitting them to operate selected banking services over their mobile phones using SMS messaging. Now, with SMS Banking service, you are always in a position to detect unauthorized access to your account. |
| EFTPOS payment | electronic funds transfer at point of sale — is an electronic payment system involving electronic funds transfers based on the use of payment cards, such as debit or credit cards, at terminals located at points of sale. Those merchants that enter the EFTPOS payment system must accept debit cards issued by any Australian bank, and some also accept various credit cards and other cards. |
| Credit card | is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holder's promise to pay for them. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. |
| Anti-discrimination policy | refers to the law on the right of people to be treated equally. Some countries mandate that in employment, in consumer transactions and in political participation people must be dealt with on an equal basis regardless of sex, age, race, ethnicity, nationality, sexual orientation, gender identity and sometimes religious and political opinions. Government introduced new anti-discrimination policy for employment selection. |
| Authentication | to prove that something is real, true, or what people say it is They used carbon dating tests to authenticate the claim that the skeleton was two million years old. |
Exercise 2. Match the words with correct definitions:
| · Acquirer | · a company that buys other companies, usually to sell them for a profit |
| · Vendor | · someone who is selling something |
| · Fiat | · order given by a person in authority |
| · Cryptocurrencies | · type of digital currency that is based on cryptography |
| · Recoup | · to get back money that you have spent or lost: |
| · Billing | · the process of preparing or sending invoices |
| · Merchants | · a person whose job is to buy and sell products in large amounts, especially by trading with other countries |
| · Instantaneous | · happening immediately, without any delay |
| · E-payment systems | · subset of an e-commerce transaction to include electronic payment for buying and selling goods or services offered through the Internet. |
| · PayPal | · global e-commerce business allowing payments and money transfers to be made through the Internet |
| · Digital currency | · money in an electronic form, based either on ounces of gold or on fiat currencies. |
| · Digital currency exchangers | · market makers which exchange fiat currency for electronic money |
| · Financial cryptography (FC) | · the use of cryptography in applications in which financial loss could result from subversion of the message system. |
| · Cryptographer | · person who is writing or solving codes |
| · Mobile banking | · system that allows customers of a financial institution to conduct a number of financial transactions through mobile |
| · SMS banking | · a service that allows customers to access their account information via mobile phone. |
| · EFTPOS payment | · electronic funds transfer at point of sale |
| · Credit card | · a card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. |
| · Anti-discrimination policy | · right of people to be treated equally |
| · Authentication | · prove or show (something) to be true, genuine, or valid |
Exercise 3. Match the definitions with words:
| · a company that buys other companies, usually to sell them for a profit | · Vendor |
| · someone who is selling something | · Acquirer |
| · order given by a person in authority | · Merchants |
| · type of digital currency that is based on cryptography | · Digital currency |
| · to get back money that you have spent or lost: | · Recoup |
| · the process of preparing or sending invoices | · E-payment systems |
| · a person whose job is to buy and sell products in large amounts, especially by trading with other countries | · Cryptocurrencies |
| · happening immediately, without any delay | · instantaneous |
| · subset of an e-commerce transaction to include electronic payment for buying and selling goods or services offered through the Internet. | · Billing |
| · global e-commerce business allowing payments and money transfers to be made through the Internet | · Financial cryptography (FC) |
| · money in an electronic form, based either on ounces of gold or on fiat currencies. | · Digital currency exchangers |
| · market makers which exchange fiat currency for electronic money | · Fiat |
| · the use of cryptography in applications in which financial loss could result from subversion of the message system. | · PayPal |
| · person who is writing or solving codes | · Cryptographer |
| · system that allows customers of a financial institution to conduct a number of financial transactions through mobile | · SMS banking |
| · a service that allows customers to access their account information via mobile phone. | · EFTPOS payment |
| · electronic funds transfer at point of sale | · Authentication |
| · a card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. | · Mobile banking |
| · right of people to be treated equally | · Credit card |
| · prove or show (something) to be true, genuine, or valid | · Anti-discrimination policy |
Exercise 4. Complete the following scheme:
Exercise 5. Watch the video: http://www.youtube.com/watch?v=IPHNzh_T7b0
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