Affirm Holdings Inc

Previous wording

We are building the next generation platform for digital and mobile-first commerce. We believe that by using modern technology, superior engineering talent, and a mission-driven approach, we can reinvent payments and commerce. Our solutions, which are built on trust and transparency, make it easier for consumers to spend responsibly and with confidence, easier for merchants to convert sales and grow, and easier for commerce to thrive.

Current wording

We are building the next generation payment network. We believe that by using modern technology, strong engineering talent, and a mission-driven approach, we can reinvent payments and commerce. Our solutions, which are built on trust and transparency, are designed to make it easier for consumers to spend responsibly and with confidence, easier for merchants and commerce platforms to convert sales and grow, and easier for commerce to thrive.

Previous wording

Our point-of-sale solutions allow consumers to pay for purchases in fixed amounts without deferred interest, late fees, or penalties. We empower consumers to pay over time rather than paying for a purchase entirely upfront. This increases consumers’ purchasing power and gives them more control and flexibility. Our platform facilitates both true 0% APR payment options and interest-bearing loans. On the merchant side, we offer commerce enablement, demand generation, and customer acquisition tools. Our solutions empower merchants to more efficiently promote and sell their products, optimize their customer acquisition strategies, and drive incremental sales. We also provide valuable product-level data and insights — information that merchants cannot easily get elsewhere — to better inform their strategies. Finally, our consumer app unlocks the full suite of Affirm products for a delightful end-to-end consumer experience. Consumers can use our app to apply for installment loans, and upon approval, they can use the Affirm Card digitally online or in-stores to complete a purchase. Additionally, consumers can manage the pre and post purchase split of Affirm Card transactions into loan, manage payments, open a high-yield savings account, and access a personalized marketplace.

Current wording

Our point-of-sale solutions allow consumers to pay for purchases in fixed amounts without deferred interest, late fees, or penalties. We empower consumers to pay over time rather than paying for a purchase entirely upfront. This increases consumers’ purchasing power and gives them more control and flexibility. Our platform facilitates both true 0% APR payment options and interest-bearing loans. On the merchant side, we offer commerce enablement, demand generation, and consumer acquisition tools. Our solutions empower merchants to more efficiently promote and sell their products, optimize their consumer acquisition strategies, and drive incremental sales. We also provide valuable product-level data and insights — information that merchants cannot easily get elsewhere — to better inform their strategies. Finally, for consumers, our app unlocks the full suite of Affirm products for a delightful end-to-end consumer experience. Consumers can use our app to apply for installment loans, and upon approval, they can use the Affirm Card digitally online or in-stores to complete a purchase. Additionally, consumers can manage the pre and post purchase split of Affirm Card transactions into loan, manage payments, open a high-yield savings account, and access a personalized marketplace.

Previous wording

From merchants, we earn a fee when we help them convert a sale and facilitate a transaction. We have two loan product offerings: Pay-in-4 and Core loans. Pay-in-4 is a short-term payment plan with four biweekly 0% APR installments, while Core loans include all monthly interest-bearing installment loans and 0% APR installment loans. While merchant fees depend on the individual arrangement between us and each merchant and vary based on the terms of the product offering, we generally earn larger merchant fees on our 0% APR financing products. For the three and nine months ended March 31, 2024, Pay-in-4 represented 14% and 15%, respectively, of total GMV facilitated through our platform while 0% APR Core loans represented 13% and 11%, respectively. For the three and nine months ended March 31, 2023, Pay-in-4 represented 16% and 19% of total GMV facilitated through our platform, respectively, while 0% APR Core loans represented 15% and 14%, respectively.

Current wording

From merchants, we typically earn a fee when we help them convert a sale and facilitate a transaction. Merchant fees depend on the individual arrangement between us and each merchant and vary based on the terms of the product offering; we generally earn larger merchant fees on 0% APR financing products. For the three months ended September 30, 2024 and 2023, Pay-in-X represented 14% and 15%, respectively, of total GMV facilitated through our platform while 0% APR installment loans represented 11% for both periods.

Previous wording

From consumers, we earn interest income on the simple interest loans that we originate or purchase from our originating bank partners. Interest rates charged to our consumers vary depending on the transaction risk, creditworthiness of the consumer, the repayment term selected by the consumer, the amount of the loan, and the individual arrangement with a merchant. Because our consumers are never charged deferred or compounding interest, late fees, or penalties on the loans, we are not incentivized to profit from our consumers’ hardships. In addition, interest income includes the amortization of any discounts or premiums on loan receivables created upon either the purchase of a loan from one of our originating bank partners or the origination of a loan. For both the three and nine months ended March 31, 2024, interest bearing loans represented 72% of total GMV facilitated through our platform. For the three and nine months ended March 31, 2023, interest bearing loans represented 69% and 67% of total GMV facilitated through our platform, respectively.

Current wording

From consumers, we earn interest income on the simple interest loans that we originate or purchase from our originating bank partners. Interest rates charged to our consumers vary depending on the transaction risk, creditworthiness of the consumer, the repayment term selected by the consumer, the amount of the loan, and the individual arrangement with a merchant. Because our consumers are never charged deferred or compounding interest, late fees, or penalties on the loans, we are not incentivized to profit from our consumers’ hardships. In addition, interest income includes the amortization of any discounts or premiums on loan receivables created upon either the purchase of a loan from one of our originating bank partners or our direct origination of a loan. For the three months ended September 30, 2024 and 2023, interest bearing loans represented 75% and 74%, respectively, of total GMV facilitated through our platform.

Previous wording

In order to accelerate our ubiquity, we facilitate the issuance of virtual cards directly to consumers through our app, allowing them to shop with merchants that may not yet be fully integrated with Affirm. Similarly, we also facilitate the issuance of the Affirm Card, a debit card that can be used physically or virtually and which allows consumers to link a bank account to pay in full, or pay later by accessing credit through the Affirm App. When these cards are used over established card networks, we earn a portion of the interchange fee from the transaction.

Current wording

In order to accelerate our ubiquity, we facilitate the issuance of virtual cards directly to consumers through our app, allowing them to shop with merchants that may not yet be fully integrated with Affirm. Similarly, we also facilitate the issuance of the Affirm Card, a card that can be used physically or virtually and which allows consumers to link a bank account to pay in full, or pay later by accessing credit through the Affirm App. When these cards are used over established card networks, we earn a portion of the interchange fee from the transaction.

Previous wording

When a consumer applies for a loan through our platform, the loan is underwritten using our proprietary risk model. Once approved for the loan, the consumer then selects their preferred repayment option. A portion of these loans are funded and issued by our originating bank partners, which include Cross River Bank, an FDIC-insured New Jersey state-chartered bank, Celtic Bank, an FDIC-insured Utah state-chartered industrial bank, and Lead Bank, an FDIC-insured Missouri state-chartered bank. These partnerships allow us to benefit from our partners’ ability to originate loans under their banking licenses while complying with various federal, state, and other laws. Under this arrangement, we must comply with our originating bank partners' credit policies and underwriting procedures, and our originating bank partners maintain ultimate authority to decide whether to originate a loan or not. When an originating bank partner originates a loan, it funds the loan through its own funding sources and may subsequently offer and sell the loan to us. Pursuant to our agreements with these partners, we are obligated to purchase the loans facilitated through our platform that such partner offers us and our obligation is secured by cash deposits. To date, we have purchased all of the loans facilitated through our platform and originated by our originating bank partners. When we purchase a loan from an originating bank partner, the purchase price is equal to the outstanding principal balance of the loan, plus a fee and any accrued interest. The originating bank partner also retains an interest in the loans purchased by us through a loan performance fee that is payable by us on the aggregate principal amount of a loan that is paid by a consumer. See Note 13. Fair Value of Financial Assets and Liabilities in the notes to the interim condensed consolidated financial statements for more information on the performance fee liability.

Current wording

When a consumer applies for a loan through our platform, the loan is underwritten using our proprietary risk model. Once approved for the loan, the consumer then selects their preferred repayment option. A portion of these loans are funded and issued by our originating bank partners, which include Cross River Bank, an FDIC-insured New Jersey state-chartered bank, Celtic Bank, an FDIC-insured Utah state-chartered industrial bank, and Lead Bank, an FDIC-insured Missouri state-chartered bank. These partnerships allow us to benefit from our partners’ ability to originate loans under their banking licenses while complying with various federal, state, and other laws. Under this arrangement, we must comply with our originating bank partners' credit policies and underwriting procedures, and our originating bank partners maintain ultimate authority to decide whether to originate a loan or not. When an originating bank partner originates a loan, it funds the loan through its own funding sources and may subsequently offer and sell the loan to us. Pursuant to our agreements with these partners, we are obligated to purchase the loans facilitated through our platform that such partner offers us and our obligation is secured by cash deposits. To date, we have purchased all of the loans facilitated through our platform and originated by our originating bank partners. When we purchase a loan from an originating bank partner, the purchase price is equal to the outstanding principal balance of the loan, plus a fee and any accrued interest. The originating bank partner also retains an interest in the loans purchased by us through a loan performance fee that is payable by us on the aggregate principal amount of a loan that is paid by a consumer. Refer to Note 12. Fair Value of Financial Assets and Liabilities in the notes to the interim condensed consolidated financial statements for more information on the performance fee liability.

Previous wording

We are also able to originate loans directly under our lending, servicing, and brokering licenses in Canada and across several states in the U.S. through our consolidated subsidiaries. For thethree and nine months ended March 31, 2024, we directly originated approxi mately $1.1 billion, or 17%, and $3.3 billion, or 17%, respectively, of loans compared to approximately $0.9 billion, or 19%, and $2.8 billion, or 19%, of loans for the three and nine months ended March 31, 2023, respectively.

Current wording

We are also able to originate loans directly under our lending, servicing, and brokering licenses in Canada and across several states in the U.S. through our consolidated subsidiaries. We directly originated approxi mately $1.3 billion, or 17%, and $0.9 billion, or 17%, of loans for thethree months ended September 30, 2024 and 2023, respectively.

Previous wording

We act as the servicer on all loans that we originate directly or purchase from our originating bank partners and earn a servicing fee on loans we sell to our funding sources. In the normal course of business, we do not sell the servicing rights on any of the loans. To allow for flexible staffing to support overflow and seasonal traffic, we partner with several sub-servicers to manage customer care, first priority collections, and third-party collections in accordance with our policies and procedures.

Current wording

We act as the servicer on all loans that we originate directly or purchase from our originating bank partners and earn a servicing fee on loans held by third parties, including bank partners prior to loan purchase and third party loan buyers if subsequently sold as part of our funding strategy. In the normal course of business, we do not sell the servicing rights on any of the loans. To allow for flexible staffing to support overflow and seasonal traffic, we partner with several sub-servicers to manage consumer care, first priority collections, and third-party collections in accordance with our policies and procedures.

Previous wording

Our capital efficient funding model is integral to the success of our platform. As we scale the number of transactions on our network and grow GMV, we maintain a variety of funding relationships in order to support our network. Our diversified funding relationships include warehouse facilities, securitization trusts, forward flow arrangements, and partnerships with banks. Given the short duration and strong performance of our assets, funding can be recycled quickly, resulting in a high-velocity, capital efficient funding model. While we have continued to improve our equity capital efficiency, the percentage of our equity capital as a percentage of our total platform portfolio slightly increased from approximately 5% as of June 30, 2023, to approximately 6% as of March 31, 2024. The increase of less than half a percent was due to an increase in loans retained on our balance sheet, which may be funded through on-balance sheet securitizations and warehouse credit facilities. This funding mix reflects our ongoing strategy to optimize the balance between income and profitability, loan growth volume and cost of funds. The mix of on-balance sheet and off-balance sheet funding is a function of how we choose to allocate loan volume, which is determined by the economic arrangements and supply of capital available to us, both of which may also impact our results in any given period.

Current wording

Our capital efficient funding model is integral to the success of our platform. As we scale the number of transactions on our network and grow GMV, we maintain a variety of funding relationships in order to support our network. Our diversified funding relationships include warehouse facilities, securitization trusts, forward flow arrangements, and partnerships with banks. Given the short duration and strong performance of our assets, funding can be recycled quickly, resulting in a high-velocity, capital efficient funding model. As of September 30, 2024 and June 30, 2024, our equity capital as a percentage of our total platform portfolio has remained relatively unchanged at 5%. The mix of on-balance sheet and off-balance sheet funding is a function of how we choose to allocate loan volume, which is determined by the economic arrangements and supply of capital available to us, both of which may also impact our results in any given period.

Previous wording

The shifts in merchant volumes and products offered in any period affects our operating results. This mix impacts GMV, revenue, our financial results, and our key operating metric performance for that period. Differences in loan product mix result in varying loan durations, APR, and mix of 0% APR and interest-bearing financings.

Current wording

The shifts in merchant volumes and products offered in any period affect our operating results. These shifts impact GMV, revenue, our financial results, and our key operating metric performance for that period. Differences in loan product mix result in varying loan durations, APR, and mix of 0% APR and interest-bearing financings.

Previous wording

Product and economic terms of commercial agreements vary among our merchants. For example, our low average order value (“AOV”) products generally benefit from shorter duration, but also have lower revenue as a percentage of GMV when compared to high AOV products. Merchant mix shifts are driven in part by the products offered by the merchant, the economic terms negotiated with the merchant, merchant-side activity relating to the marketing of their products, whether or not the merchant is fully integrated within our network, and general economic conditions affecting consumer demand. Our revenue as a percentage of GMV in any given period varies across products. As such, as we continue to expand our network to include more merchants and product offerings, including Affirm Card, revenue as a percentage of GMV may vary. In addition, our commercial agreement with Shopify to offer Shop Pay Installments powered by Affirm, our Pay-in-4 and Affirm Card offerings may continue to impact the mix of our shorter duration, low AOV products. Differences in the mix of high versus low AOV may also impact our results. For example, we expect that transactions per active consumer may increase while revenue as a percentage of GMV may decline in the medium term to the extent that a greater portion of our GMV comes from Pay-in-4, Affirm Card and other low-AOV offerings.

Current wording

Product and economic terms of commercial agreements vary among our merchants, which may impact our results. For example, our low average order value (“AOV”) products generally benefit from shorter duration, but also have lower revenue as a percentage of GMV when compared to high AOV products. Merchant mix shifts are driven in part by the products offered by the merchant, the economic terms negotiated with the merchant, merchant-side activity relating to the marketing of their products, whether or not the merchant is fully integrated within our network, and general economic conditions affecting consumer demand. Our revenue as a percentage of GMV in any given period varies across products. As such, as we continue to expand our network to include more merchants and product offerings, revenue as a percentage of GMV may vary.

Previous wording

We experience seasonal fluctuations in our business as a result of consumer spending patterns, including Affirm Card, which we expect to mimic the seasonality of our general business in the near term. Historically, our GMV has been the strongest during the second quarter of our fiscal year due to increases in retail commerce during the holiday season. Adverse events that occur during our second fiscal quarter could have a disproportionate effect on our financial results for the fiscal year.

Current wording

We experience seasonal fluctuations in our business as a result of consumer spending patterns, including Affirm Card, which we expect to mimic the seasonality of our general business in the near term. Historically, our GMV has been the strongest during our fiscal second quarter due to increases in retail commerce during the holiday season and our loan delinquencies are at their lowest during our fiscal third and fourth quarter, as consumer savings benefit from tax refunds. Adverse events that occur during our second fiscal quarter could have a disproportionate effect on our financial results for the fiscal year.

Previous wording

We regularly monitor the direct and indirect impacts of the current macroeconomic conditions on our business, financial condition, and results of operations. Starting in fiscal 2023, the macroeconomic environment began to present a number of challenges to our business. In response to continued inflationary pressure, the U.S. Federal Reserve rapidly raised the federal funds interest rate from March 2022 through July 2023, and there is no certainty as to whether and to what extent the federal funds interest rate will remain at current levels, increase or decrease in future periods. Simultaneously, economic uncertainty and the prospect of economic recession has impacted consumer spending. These challenges have affected, and may continue to affect, our business and results of operations in the following ways:

Current wording

We regularly monitor the direct and indirect impacts of the current macroeconomic conditions on our business, financial condition, and results of operations. Starting in fiscal 2023, the macroeconomic environment began to present a number of challenges to our business. In response to continued inflationary pressure, the U.S. Federal Reserve rapidly raised the federal funds interest rate from March 2022 through July 2023. Despite the Federal Reserve’s decision to decrease the federal funds interest rate in September 2024, uncertainty remains as to whether and to what extent the federal funds interest rate will remain at current levels, increase or decrease in future periods. Simultaneously, economic uncertainty and the prospect of economic recession has impacted consumer spending. These challenges have affected, and may continue to affect, our business and results of operations in the following ways:

Previous wording

•Increased borrowing costs: Due to the elevated interest rate environment, our costs of borrowing have increased, resulting in higher transaction costs. Should the interest rate environment remain elevated, we may continue to experience higher transaction costs.

Current wording

•Increased borrowing costs: Our borrowing costs have remained elevated due to the interest rate environment, resulting in sustained higher transaction costs. Despite the Federal Reserve decreasing the federal funds interest rate in September 2024, the interest rate environment remains elevated and, as a result, we may continue to experience higher transaction costs.

Previous wording

•Volatile capital markets: During fiscal 2024, capital markets have shown improvement against recent periods, which has been evidenced by substantial additions across our funding channels due to our strong loan performance. However, despite these improvements, uncertainties remain in the macroeconomic environment, especially with regard to persistent inflation and the potential for increased unemployment rates. To address these uncertainties, we leverage our diverse funding channels and counterparties, which contribute to our resilience across various macroeconomic conditions and economic cycles.

Current wording

•Volatile capital markets: Since fiscal 2024, capital markets have shown improvement against recent periods, which has been evidenced by substantial additions across our funding channels due to our strong loan performance. However, despite these improvements, uncertainties remain in the macroeconomic environment, especially with regard to inflation and the potential for increased unemployment. To address these uncertainties, we leverage our diverse funding channels and counterparties, which contribute to our resilience across various macroeconomic conditions and economic cycles.

Previous wording

We continue to optimize our underwriting and take other actions to manage consumer loan repayment, increase collections and minimize losses. For example, we offer loan modifications to borrowers experiencing financial difficulty to provide greater flexibility for consumers to repay their obligations, through payment deferrals or loan re-amortizations. These loan modification programs also impact our delinquency rates, and such impact can vary over time. As disclosed in Note 4 - “Loans Held for Investment and Allowance for Credit Losses”, during the three months ended March 31, 2024, we expanded the eligibility of our loan modification programs, which resulted in a modest benefit to delinquency rates for loans held for investment as of March 31, 2024. As we continue to evaluate the effectiveness of these programs, we may modify, expand, or contract the usage of these programs, which may impact our delinquency rates in future periods.

Current wording

We continue to optimize our underwriting and take other actions to manage consumer loan repayment, increase collections and minimize losses. For example, we offer loan modifications to borrowers experiencing financial difficulty to provide greater flexibility for consumers to repay their obligations, through payment deferrals or loan re-amortizations. A payment deferral extends the next payment due date, and while a consumer may receive more than one deferral, the total deferral period may not exceed three months. A loan re-amortization lowers the monthly payments by extending the term, which may not exceed twenty-four months.

Previous wording

We are subject to the regulatory and enforcement authority of the Consumer Financial Protection Board (the “CFPB”) as a facilitator, servicer, acquirer or originator of consumer credit. As such, the CFPB has in the past requested reports concerning our organization, business conduct, markets, and activities, and we expect that the CFPB will continue to do so from time to time in the future. In addition, we are subject to supervision by the CFPB, which enables it, among other things, to conduct comprehensive and rigorous examinations to assess our compliance with consumer financial protection laws, which in turn could result in matters requiring attention, investigations, enforcement actions, regulatory fines and mandated changes to our business products, policies and procedures.

Current wording

We are subject to the regulatory and enforcement authority of the Consumer Financial Protection Bureau (the “CFPB”) as a facilitator, servicer, acquirer or originator of consumer credit. As such, the CFPB has in the past requested reports concerning our organization, business conduct, markets, and activities, and we expect that the CFPB will continue to do so from time to time in the future. In addition, we are supervised by the CFPB, which enables it, among other things, to conduct comprehensive and rigorous examinations to assess our compliance with consumer financial protection laws, which in turn could result in matters requiring attention, enforcement investigations and actions, regulatory fines and mandated changes to our business products, policies and procedures.

Previous wording

For the three and nine months ended March 31, 2024, GMV was $6.3 billion and $19.4 billion, respectively, which represented an increase of approximately 36% and 32%, respectively, as compared to the same periods in 2023. Overall, the increase in GMV was primarily driven by the expansion of our active merchant base and increases in active consumers and average transactions per consumer. The increase in GMV for the three and nine months ended March 31, 2024 also reflected increased consumer demand at our largest merchant partners by GMV and increased consumer demand in our travel and ticketing and general merchandise categories.

Current wording

For the three months ended September 30, 2024, GMV was $7.6 billion which represented an increase of approximately 35% as compared to the same period in 2023. Overall, the increase in GMV was driven by an increase in volume at our top five merchants and platform partners as well as overall increases in our active merchant base, active consumers and average transactions per consumer. The increase in GMV for the three months ended September 30, 2024, was diversified across categories and products. During the three months ended September 30, 2024, growth was primarily attributable to an increase in the general and merchandise categories. Additionally, consumer demand across our travel and ticketing, electronics, and equipment and auto categories grew more than 20% year over year.

Previous wording

For the three and nine months ended March 31, 2024, our top five merchants and platform partners represented approximately 42% and 45%, respectively, of total GMV, as compared to 40% and 42%, respectively, for the three and nine months ended March 31, 2023. GMV attributable to Amazon during the three and nine months ended March 31, 2024 represented 20% of total GMV. GMV attributable to Amazon during the three months ended March 31, 2023 represented less than 30% of total GMV.

Current wording

For the three months ended September 30, 2024, our top five merchants and platform partners represented approximately 47% of total GMV, as compared to 42% for the three months ended September 30, 2023. GMV attributable to Amazon during the three months ended September 30, 2024 represented 23% of total GMV. GMV attributable to Amazon during the three months ended September 30, 2023 represented less than 20% of total GMV.

Previous wording

We assess consumer adoption and engagement by the number of active consumers across our platform. Active consumers are the primary measure of the size of our network. We define an active consumer as a consumer who engages in at least one transaction on our platform during the 12 months prior to the measurement date.

Current wording

We assess consumer adoption and engagement by the number of active consumers across our platform. Active consumers are the primary measure of the size of our network. We define an active consumer as a consumer who completes at least one transaction on our platform during the 12 months prior to the measurement date.

Previous wording

As of March 31, 2024, we had approximately 18.1 million active consumers, which represented an increase of 13% compared to approximately 16.0 million active consumers as of March 31, 2023. The increase was primarily due to a high retention rate of existing consumers and the acquisition of new consumers through an expanding active merchant base, Affirm Card (our direct to consumer product) and platform partnerships.

Current wording

As of September 30, 2024, we had approximately 19.5 million active consumers, which represented an increase of 15% compared to approximately 16.9 million active consumers as of September 30, 2023. The increase was primarily due to a high retention rate of existing consumers and the acquisition of new consumers through an expansion in active merchants and platform partnerships as well as continued adoption of the Affirm Card.

Previous wording

As of March 31, 2024, we had approximately 4.6 transactions per active consumer, an increase of 27% compared to March 31, 2023. This was primarily due to platform growth and a higher frequency of repeat users driven by consumer engagement.

Current wording

As of September 30, 2024, we had approximately 5.1 transactions per active consumer, an increase of 25% compared to September 30, 2023. The increase was primarily due to platform growth, a higher frequency of repeat users driven by consumer engagement and growth of Affirm Card active consumers. As of September 30, 2024, Affirm Card represented approximately 11% of the total number of transactions compared to approximately 6% as of September 30, 2023.

Previous wording

(1)Upon purchase of a loan from our originating bank partners at a price above the fair market value of the loan or upon the origination of a loan with a par value in excess of the fair market value of the loan, a discount is included in the amortized cost basis of the loan. For loans held for investment, this discount is amortized over the life of the loan into interest income. When a loan is sold to a third-party loan buyer or off-balance sheet securitization trust, the unamortized discount is released in full at the time of sale and recognized as part of the gain or loss on sales of loans. However, the cumulative value of the loss on loan purchase commitment or loss on origination, the interest income recognized over time from the amortization of discount while retained, and the release of discount into gain on sales of loans, together net to zero over the life of the loan. The following tables detail activity for the discount, included in loans held for investment, for the periods indicated:

Current wording

(1)Upon purchase of a loan from our originating bank partners at a price above the fair market value of the loan or upon the origination of a loan with a par value in excess of the fair market value of the loan, a discount is included in the amortized cost basis of the loan. For loans held for investment, this discount is amortized over the life of the loan into interest income. When a loan is sold to a third-party loan buyer or off-balance sheet securitization trust, the unamortized discount is released in full at the time of sale and recognized as part of the gain or loss on sales of loans. However, the cumulative value of the loss on loan purchase commitment or loss on origination, the interest income recognized over time from the amortization of discount while retained, and the release of discount into gain on sales of loans, together net to zero over the life of the loan. The following table details activity for the discount, included in loans held for investment, for the periods indicated:

Previous wording

Comparison of the Three and Nine Months Ended March 31, 2024 and 2023

Current wording

Comparison of the Three Months Ended September 30, 2024 and 2023

Previous wording

Merchant network revenue increased by $40.3 million, or 34%, and $127.4 million, or 35%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The increase is primarily attributed to an increase of $1.7 billion and $4.7 billion in GMV for the three and nine months ended March 31, 2024, compared to the same period in 2023. The increase in GMV is a result of continued growth of our active merchant base and consumers, reaching approximately 292 thousand and 18.1 million, respectively, as of March 31, 2024, up from approximately 246 thousand and 16.0 million, respectively, as of March 31, 2023. Additionally, the average transactions per consumer increased from 3.6 as of March 31, 2023 to 4.6 as of March 31, 2024. The increase in consumers and average transactions per consumer is partially offset by a decrease in AOVs. For the three and nine months ended March 31, 2024, AOV was $293 and $292, respectively, down from $323 and $319, respectively, for the same period in fiscal 2023. The decrease in AOV is due to the diversification of our merchant base and our initiative to drive repeat usage of our platform beyond one-time high AOV purchases.

Current wording

Merchant network revenue increased by $38.4 million, or 26%, for the three months ended September 30, 2024 compared to the same period in 2023. The increase is primarily attributed to an increase of $2.0 billion, or 35%, in GMV for the three months ended September 30, 2024, compared to the same period in 2023. The increase in GMV is a result of continued growth at our top five merchants and platform partners representing approximately 47% and 42% as of September 30, 2024 and 2023, respectively. Our active merchant base and the number of active consumers also grew, reaching approximately 323 thousand and 19.5 million, respectively, as of September 30, 2024, up from approximately 266 thousand and 16.9 million, respectively, as of September 30, 2023.

Previous wording

$2.0 billion and $5.9 billion of GMV processed through our issuer processors, an increase of 41% and 43% for the three and nine months ended March 31, 2024, respectively, as compared to the same period in 2023. This was driven by increased card activity through Affirm Card and our single use virtual debit cards, as well as growth in existing and new merchants utilizing our agreement with card-issuing partners as a means of integrating Affirm services, which grew from approximately 1,200 merchants as of March 31, 2023 to 1,700 merchants as of March 31, 2024. Card network revenue is also impacted by the mix of merchants as different merchants can have different interchange rates depending on their industry or size, among other factors.

Current wording

Card network revenue increased by $14.0 million, or 42%, for the three months ended September 30, 2024 compared to the same period in 2023. Card network revenue growth is correlated with the growth of GMV processed by our card-issuing partners. As such, the increase is primarily driven by $2.5 billion of GMV processed through our card-issuing partners, an increase of 38% for the three months ended September 30, 2024 as compared to the same period in 2023. This was driven by increased card activity primarily through our single use virtual cards and Affirm Card, as well as growth in existing and new merchants utilizing our agreement with card-issuing partners as a means of integrating Affirm services, which grew from approximately 1,400 merchants as of September 30, 2023 to 4,700 merchants as of September 30, 2024. Card network revenue is also impacted by the mix of merchants as different merchants can have different interchange rates depending on their industry or size, among other factors.

Previous wording

Interest income increased by $137.4 million, or 77%, and $396.3 million, or 84%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. Generally, interest income is correlated with the changes in the average balance of loans held for investment, which increased by 44% to $5.4 billion and 56% to $4.9 billion for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The increase in loans held for investment on our interim consolidated balance sheet is in response to the current market environment and our ability to allocate loans to warehouse credit facilities and on balance sheet asset-backed securities transactions with better economic terms to optimize cost of funds. As a result of the increase in loans held for investment on our interim condensed consolidated balance sheet, interest income from interest-bearing loans increased from $147.8 million and $379.8 million for the three and nine months ended March 31, 2023, respectively, to $273.6 million and $748.0 million for three and nine months ended March 31, 2024, respectively. This increase was partially due to an increase in volume of interest bearing loans which increased to 72% of total GMV for both the three and nine months ended March 31, 2024, compared to 69% and 67%, respectively, of total GMV in the same period in 2023, in addition to recent pricing initiatives, including the increase of the maximum APR and merchant-subsidized low APR loans replacing previously non-interest bearing loans.

Current wording

Interest income increased by $114.4 million, or 44%, for the three months ended September 30, 2024, compared to the same period in 2023. Generally, interest income is correlated with the changes in the average balance of loans held for investment, which increased by 34% to $6.0 billion for the three months ended September 30, 2024 compared to the same period in 2023. As a result, interest income from interest-bearing loans increased by $111.0 million, or 49%, compared to the same period in 2023.

Previous wording

With respect to fair value adjustments, we remeasure the fair value of servicing assets and liabilities each period and recognize the change in fair value in servicing income. We utilize a discounted cash flow approach to remeasure the fair value of servicing rights. Because we earn servicing income based on the outstanding principal balance of the portfolio, fair value adjustments are impacted by the timing and amount of loan repayments. As such, over the term of each loan portfolio sold, fair value adjustments for servicing assets will decrease servicing income and fair value adjustments for servicing liabilities will increase servicing income. We discuss our valuation methodology and significant Level 3 inputs for servicing assets and liabilities within Note 13. Fair Value of Financial Assets and Liabilities.

Current wording

With respect to fair value adjustments, we remeasure the fair value of servicing assets and liabilities each period and recognize the change in fair value in servicing income. We utilize a discounted cash flow approach to remeasure the fair value of servicing rights. Because we earn servicing income based on the outstanding principal balance of the portfolio, fair value adjustments are impacted by the timing and amount of loan repayments. As such, over the term of each loan portfolio sold, fair value adjustments for servicing assets will decrease servicing income and fair value adjustments for servicing liabilities will increase servicing income. We discuss our valuation methodology and significant Level 3 inputs for servicing assets and liabilities within Note 12. Fair Value of Financial Assets and Liabilities in the notes to the interim condensed consolidated financial statements.

Previous wording

Servicing income increased by $3.9 million, or 18%, and $3.6 million, or 6%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The increase was primarily due to an increase in net servicing fee revenue which is calculated as a percentage of the unpaid principal balance of loans owned by third-party loan owners. The average unpaid principal balance of loans owned by third-party loan owners increased from $4.5 billion and $4.6 billion during the three and nine months ended March 31, 2023, respectively, to $5.1 billion and $4.7 billion, respectively, during the same period in 2024, an increase of 13% and 3%, respectively. The increase was partially offset by fair value adjustments related to servicing assets and liabilities, resulting in a $0.7 million and $1.9 million lower gain during the three and nine months ended March 31, 2024, compared to the same period in 2023.

Current wording

Servicing income increased by $5.8 million, or 29%, for the three months ended September 30, 2024, compared to the same period in 2023. The increase is primarily due to an increase in net servicing fee revenue which is calculated as a percentage of the unpaid principal balance of off-balance sheet loans. The average unpaid principal balance of off-balance sheet loans increased from $4.4 billion during the three months ended September 30, 2023 to $5.4 billion during the same period in 2024, an increase of 23%.

Previous wording

We purchase certain loans from our originating bank partners that are processed through our platform and put back to us by our originating bank partners. Under the terms of the agreements with our originating bank partners, we are generally required to pay the principal amount plus accrued interest for such loans. In certain instances, our originating bank partners may originate loans with zero or below market interest rates that we are required to purchase. In these instances, we may be required to purchase the loan for a price in excess of the fair market value of such loans, which results in a loss. These losses are recognized as loss on loan purchase commitment in our interim condensed consolidated statements of operations and comprehensive loss. These costs are incurred on a per loan basis.

Current wording

We purchase certain loans from our originating bank partners that are processed through our platform and put back to us by our originating bank partners. Under the terms of the agreements with our originating bank partners, we are generally required to pay the principal amount plus accrued interest for such loans and fees. In certain instances, our originating bank partners may originate loans with zero or below market interest rates that we are required to purchase. In these instances, we may be required to purchase the loan for a price in excess of the fair market value of such loans, which results in a loss. These losses are recognized as loss on loan purchase commitment in our consolidated statements of operations and comprehensive loss. These costs are incurred on a per loan basis.

Previous wording

Loss on loan purchase commitment increased by $12.9 million, or 41%, and $27.4 million, or 26%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. This increase was primarily due to an increase in total loans purchased. During the three and nine months ended March 31, 2024, we purchased $5.1 billion and $15.6 billion, respectively, of loans from our originating bank partners, compared to $3.7 billion and $11.7 billion, respectively, in the same period in 2023, representing an increase of 37% and 34%, respectively.

Current wording

Loss on loan purchase commitment increased by $19.4 million, or 56%, for the three months ended September 30, 2024 compared to the same period in 2023, primarily due to an increase in total volume of loans purchased. During the three months ended September 30, 2024, we purchased $6.4 billion of loans from our originating bank partners, compared to $4.6 billion in the same period in 2023, representing an increase of 40%.

Previous wording

Provision for credit losses increased by $56.0 million, or 85%, and $105.6 million, or 45%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023, driven by growth in the volume of loans held for investment. Loans held for investment as of March 31, 2024 was $5.5 billion, an increase of $1.7 billion, or 45%, as compared to the same period in 2023. The allowance for credit losses as a percentage of loans held for investment was 5.3% as of March 31, 2024, 5.0% as of December 31, 2023, and 4.7% as of March 31, 2023. The increase in the allowance rate from March 31, 2023 is primarily driven by adjustments in our credit criteria in light of increasing interest income generated by our loans and changes in the loan mix, including holding a higher percentage of seasoned and longer term loans on our balance sheet as of March 31, 2024.

Current wording

Provision for credit losses increased by $60.1 million, or 60%, for the three months ended September 30, 2024 compared to the same period in 2023, primarily driven by growth in the volume of loans held for investment. Loans held for investment as of September 30, 2024 was $6.3 billion, an increase of $1.8 billion, or 39%, as compared to the same period in 2023. The allowance for credit losses as a percentage of loans held for investment increased from 5.1% as of September 30, 2023 to 5.6% as of September 30, 2024. The increase in the allowance rate from September 30, 2023 is primarily driven by an increase in loans held on our balance sheet as well as adjustments in our credit criteria in light of increasing interest income generated by our loans and changes in the loan mix.

Previous wording

Funding costs increased by $39.3 million, or 77%, and $129.0 million, or 107%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The increase was primarily due to higher benchmark interest rates and an increase of funding debt and notes issued by securitization trusts during the three and nine months ended March 31, 2024. The average total of funding debt from warehouses and securitizations for the three and nine months ended March 31, 2024 was $4.8 billion and $4.4 billion, respectively, compared to $3.2 billion and $2.8 billion during the same period in 2023, an increase of $1.5 billion, or 46%, and $1.6 billion, or 55%, respectively. The increase was also attributable to a larger volume of on-balance sheet loans being retained during the period. The average on-balance sheet loan balance was $5.4 billion and $4.9 billion for the three and nine months ended March 31, 2024, respectively, an increase of 44% and 56% compared to $3.7 billion and $3.2 billion during the same periods in 2023, respectively.

Current wording

Funding costs increased by $30.2 million, or 41%, for the three months ended September 30, 2024 compared to the same period in 2023. The increase is primarily due to an increase of funding debt and notes issued by securitization trusts during the three months ended September 30, 2024. The average total of funding debt from warehouses and securitizations for the three months ended September 30, 2024 was $5.4 billion compared to $4.0 billion during the same period in 2023, an increase of $1.4 billion, or 34%. The increase was also attributable to a larger volume of on-balance sheet loans being retained during the period. The average on-balance sheet loan balance was $6.0 billion for the three months ended September 30, 2024, an increase of 34% compared to $4.5 billion during the same period in 2023.

Previous wording

Processing and servicing expense increased by $23.0 million, or 35%, and $68.0 million, or 37%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. This increase was driven primarily by an increase in payment processing fees of $16.7 million, or 47%, and $41.4 million, or 42%, for the three and nine months ended March 31, 2024, respectively, related to increased payment volume. Additionally, during the three and nine months ended March 31, 2024, our platform fees increased by $9.7 million, or 107%, and $30.1 million, or 111%, respectively, due to an increase in volume with a large enterprise partner. The increase was partially offset by a $2.9 million, or 50%, and $4.0 million, or 23%, decrease in personnel-related costs, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023 as a result of our reduction in force and cost management plans.

Current wording

Processing and servicing expense increased by $19.5 million, or 26%, for the three months ended September 30, 2024 compared to the same period in 2023. This increase is driven primarily by an increase in payment processing fees of $15.4 million, or 38%, related to increased payment volume for the three months ended September 30, 2024. Additionally, during the three months ended September 30, 2024, our platform fees increased by $6.0 million, or 39%, due to an increase in volume with a large enterprise partner.

Previous wording

Technology and data analytics expense decreased by $37.0 million, or 23%, and $85.9 million, or 19%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The decrease is primarily driven by a decrease of $40.4 million, or 44%, and $102.4 million, or 38%, in stock-based compensation and payroll and personnel-related costs for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023, due to higher capitalized compensation costs related to internally-developed software and a reduction in headcount. Additionally, data infrastructure and hosting costs decreased by $6.0 million, or 23%, and $25.7 million, or 28%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023, due to cost optimization initiatives as a result of improved contractual terms with several key vendors. The decrease is partially offset by amortization of internally-developed software which increased by $7.0 million, or 19%, and $36.0 million, or 48%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023, as a result of an increase in the number of capitalized projects. Capitalized projects grew by 86% from approximately 470 projects as of March 31, 2023 to 880 projects as of March 31, 2024.

Current wording

Technology and data analytics expense increased by $1.3 million, or 1%, for the three months ended September 30, 2024 compared to the same period in 2023. The increase is primarily driven by amortization of internally-developed software which increased by $13.5 million, or 44%, for the three months ended September 30, 2024 compared to the same period in 2023, as a result of an increase in the number of capitalized projects. Capitalized projects in service grew by 127% from approximately 440 projects as of September 30, 2023 to 1,000 projects as of September 30, 2024. The increase is partially offset by a decrease of $13.0 million, or 19%, in stock-based compensation and payroll and personnel-related costs for the three months ended September 30, 2024 compared to the same period in 2023, due to higher capitalized compensation costs related to internally-developed software.

Previous wording

Sales and marketing costs consist of the expense related to warrants and other share-based payments granted to our enterprise partners, salaries and personnel-related costs, as well as costs of general marketing and promotional activities, promotional event programs, sponsorships, and allocated overhead.

Current wording

Sales and marketing costs consist of the expense related to warrants and other share-based payments granted to our enterprise partners, salaries and personnel-related costs, costs of marketing and promotional activities.

Previous wording

Sales and marketing expense decreased by $8.0 million, or 6%, and $52.1 million, or 11% during the three and nine months ended March 31, 2024 compared to the same period in 2023. The decrease was primarily driven by a decrease of $4.4 million, or 28%, and $22.2 million, or 39%, in payroll and personnel-related costs during the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023, as a result of our reduction in force and cost management plans. Amazon warrant expense decreased by $1.2 million, or 1%, and $27.4 million, or 8%, during the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The decrease is primarily due to the renewal of the commercial partnership agreement in February 2024, which extended the amortization of the commercial agreement asset, as well as a decrease in the number of new users to the Amazon program in the current period, which is the basis for a portion of the warrant expense. Additionally, amortization of intangible assets decreased by $5.2 million, or 90%, and $1.0 million, or 10%, respectively, for the three and nine months ended March 31, 2024, compared to the same period in 2023, as a result of one-time acceleration of amortization of Returnly’s intangibles assets related to the wind down of our returns management platform during the three months ended March 31, 2023.

Current wording

Sales and marketing expense decreased by $1.6 million, or 1%, during the three months ended September 30, 2024 compared to the same period in 2023. The decrease is primarily driven by a $7.1 million, or 92%, decrease in the amortization of intangible assets for the three months ended September 30, 2024, compared to the same period in 2023, as a result of Returnly’s intangible assets being fully amortized during the three months ended September 30, 2023, related to the wind down of our returns management platform. Additionally, amortization expense related to the Amazon commercial agreement decreased by $5.2 million, or 50%, primarily due to the renewal of the commercial partnership agreement in February 2024, which extended the amortization period of the commercial agreement asset. The decrease is partially offset by an $11.4 million, or 12%, increase in Amazon warrant expense during the three months ended September 30, 2024 compared to the same period in 2023, primarily due to an increase in the number of new users to the Amazon program in the current period, which is the basis for a portion of the warrant expense. The amortization expense related to stock appreciation rights granted to an enterprise partner as part of a commercial agreement decreased by $2.1 million, as the expected benefit period ended during the prior fiscal year and the asset was fully amortized. We did not incur any expenses related to the stock appreciation rights during the three months ended September 30, 2024

Previous wording

Restructuring and other for the three and nine months ended March 31, 2024 decreased by $29.7 million and $28.0 million, respectively, compared to the same period in 2023. The restructuring and other expenses during the three and nine months ended March 31, 2024 included employee severance and related costs as a result of certain exit and disposal activities. The restructuring and other expenses during the three and nine months ended March 31, 2023 primarily related to the February 2023 Plan, which is complete. We do not expect future costs or payments related to the plan.

Current wording

Restructuring and other for the three months ended September 30, 2024 decreased by $1.9 million compared to the same period in 2023. During the three months ended September 30, 2024, we did not incur any costs related to exit and disposal activities. The associated restructuring and other expenses during the three months ended September 30, 2023 related to employee severance and other employment termination benefits offered in connection with the wind down of our returns management platform, Returnly.

Previous wording

Other income, net, decreased by $75.8 million, or 73%, and $104.1 million, or 59%, during the three and nine months ended March 31, 2024 compared to the same period in 2023. The decrease was primarily driven by a decrease in our convertible note repurchases. We repurchased convertible notes with a principal balance of $30.9 million and $299.1 million as of March 31, 2024 and 2023, respectively, resulting in a gain on the early extinguishment of our convertible debt of $5.4 million and $89.8 million, respectively, a reduction of $84.4 million year-over-year. Additionally, derivative instruments not designated in a hedge accounting relationship generated gains of $4.7 million and $2.9 million for the three and nine months ended March 31, 2024, compared to losses of $3.7 million and gains of $33.8 million for the same period in 2023. The decrease was partially offset by other income of $10.5 million during the nine months ended March 31, 2024, primarily related to the wind-down of the Returnly business and our partnership with a third-party return provider.

Current wording

Other income, net, decreased by $4.4 million, or 11%, during the three months ended September 30, 2024 compared to the same period in 2023, primarily driven by a decrease of $9.8 million in other non-operating income related to the wind-down of the Returnly business and our partnership with a third-party return provider during the three months ended September 30, 2023. Additionally, income from derivative instruments not designated in a hedge accounting relationship decreased by $7.9 million primarily driven by a decrease in the notional balance of the derivative instruments and a decrease in interest rates. We recognized a loss of $1.8 million on the change in fair value of liabilities, primarily related to our profit sharing liability, during the three months ended September 30, 2024 compared to a gain of $3.5 million during the same period in 2023, a decrease of $5.3 million. The decrease driven by each of these factors combined is partially offset by a $19.6 million gain recognized upon the repurchase of a portion of our 2026 Notes during the three months ended September 30, 2024.

Previous wording

We maintain a capital-efficient model through a diverse set of funding sources. When we originate a loan directly or purchase a loan originated by our originating bank partners, we often utilize warehouse credit facilities with certain lenders to finance our lending activities or loan purchases. We sell the loans we originate or purchase from our originating bank partners to whole loan buyers and securitization investors through forward flow arrangements and securitization transactions, and earn servicing fees from continuing to act as the servicer on the loans. We proactively manage the allocation of loans on our platform across various funding channels based on several factors including, but not limited to, internal risk limits and policies, capital market conditions and channel economics. With high interest rates and inflation, our excess funding capacity and committed and long-term relationships with a diverse group of existing funding partners help provide flexibility as we optimize our funding to support the growth in loan volume.

Current wording

We maintain a capital-efficient model through a diverse set of funding sources. When we originate a loan directly or purchase a loan originated by our originating bank partners, we often utilize warehouse credit facilities with certain lenders to finance our lending activities or loan purchases. We sell the loans we originate or purchase from our originating bank partners to whole loan buyers and securitization investors through forward flow arrangements and securitization transactions, and earn servicing fees from continuing to act as the servicer on the loans. We proactively manage the allocation of loans on our platform across various funding channels based on several factors including, but not limited to, internal risk limits and policies, capital market conditions and channel economics. Our excess funding capacity and committed and long-term relationships with a diverse group of existing funding partners help provide flexibility as we optimize our funding to support the growth in loan volume.