Comparing Zip US with AffirmRegarding bad debts:- Affirm makes...

Comparing Zip US with Affirm

Regarding bad debts:
- Affirm makes provisions against the value of all loans that are behind on repayments. To illustrate this point, at 31Dec 2025 they had a provision for expected credit losses of ~$364m against ~$358m of loans with any missed repayments (>100% coverage). For context, Zip US is now only providing for 64% of delinquent loans like these.
- Affirm includes the change in these provisions in the presentation of their profitability (i.e. treats them as a real expense).

Active customers:
- Affirm ~23% vs. Zip ~6% (YOY growth)
- Affirm 21m vs. Zip 4.2m (5x Zip's customers)

Regarding Pay-In-4 loans:
- Affirm does not charge customers interest on these loans. Zip charges ~2% interest or >30% annualised rate.
- Many of Zip's pay-in-4 customers are likely to have been declined from using interest free options (e.g. Affirm, Afterpay, PayPal). This is because it is not rational to choose to pay an interest expense if you don't have to.
- Therefore, the creditworthiness of Affirm's users is much stronger than Zip's users. This is illustrated by the bad debts relative to TTV (or GMV for Affirm).
- Affirm 0.5-1.0% vs. Zip 1.5-2.0% (of TTV/GMV). Affirms bad debt expense is significantly lower than Zip's for the equivalent loan product.


Balance sheet capacity:
- Affirm has a much stronger tangible equity to debt position (i.e. lower leverage than Zip).
- Zip has only one funding source (AR3LLC), Affirm has a diverse range (and also a lower cost of funding).
- Therefore, Zip requires additional capital (more debt and/or capital raise) much sooner than Affirm does to continue growing this rapidly in the US.

On the topic of Affirm, I encourage everyone to read the transcript of their Q2 earnings call (this is available on their investor website).

Quote taken from answer to final question in earnings call:
I think many a company got in trouble in the past by saying, “All we need to do to grow is just be a little bit looser with our credit standards.” That's the first step down into the proverbial hell of bad credit management, and we won't let that ever happen here.
Max Levchin, Founder and CEO