* Buy now, pay later startup Affirm is launching a high-yield savings account.
* It will launch with a 1.30% APY, with no fees nor minimum balance requirements.
* While a record number of Americans are unemployed due to the coronavirus pandemic, average savings rates are increasing.
* While Levchin has ambitions to launch more financial products with Affirm, he's not looking to build the next personal financial management app.
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The buy now, pay later space has surged amid the coronavirus pandemic, with consumers looking for ways to stretch their dollars and their spending shifting online.
And as demand for its installment product rises, Affirm is now adding a high-yield savings account to its platform.
"The majority of people use a buy now, pay later solution to stretch their dollar," Max Levchin, founder and CEO of Affirm told Business Insider. "And within that group they also have a need for savings products and our savings product speaks to that."
Available through its app, Affirm's savings account will launch with 1.30% APY — well above the national average savings rate of 0.06%, according to the FDIC — and will have no eligibility or minimum balance requirements. And like its buy now, pay later product, there are no fees.
"The mission of the company is to build financial products that make people's lives better," Levchin said. "In many ways, this is a natural progression."
Valued at $2.9 billion, Affirm has raised $800 million to-date from investors including Andreessen Horowitz, Lightspeed Venture Partners, and Spark Capital.
Levchin isn't looking to build the next personal financial management app
Beyond its installment offering and, now, savings, Levchin plans to continue building out Affirm's platform.
"We definitely have ambitions in the landscape of other financial products," Levchin said.
But he's not looking to build the next personal financial management app, typically used by consumers who are already managing their finances closely, Levchin said.
Affirm is targeting a different segment, focusing on consumers who are looking for a more transparent alternative to credit cards, which compound interest and sometimes have hidden fees.
"Whatever we launch next will speak to the consumer through this portal of: as easy as possible, on your side, you don't have to worry, we won't do something untoward or unexpected or nasty to profit from your missteps," said Levchin.
Since founding Affirm in 2012, Levchin has been vocal about the startup's commitment to transparency with its users. For one, it's never charged a late fee.
Now, Levchin is anticipating that the trust it's built with its users as a lender will carry over to deposits.
Anyone can sign up for an Affirm savings account, but Levchin expects that it will mostly be existing Affirm credit users who already have an established relationship.
"Our core user base is the group of people that trust us, and it's a very large group now," Levchin said.
Affirm has over 4.9 million customers, according to its website. Like many non-bank fintechs, Affirm is working with a partner bank (Cross River Bank, in this instance), who provides the FDIC insurance on the savings accounts.
Affirm isn't trying to compete in the high-yield savings race, either
Affirm isn't the only fintech to offer a high-yield savings product. Credit Karma launched its own last year, and fintech players like Betterment and Wealthfront also offer users higher savings rates than traditional consumer banks.
Often, these high-yield offerings are a way to attract new customers, with the cost of the high rates covered by other fee-bearing products these customers might use.
And while there are some consumers who move money around following the highest savings rate on the market, that's not Levchin's target segment.
"We don't offer the highest annual percentage rates and that is part by design," Levchin said. "I don't see it as competitive. I think it's a slightly different demographic. People that are signing up for this product are actually doing it for peace of mind purposes. They like Affirm and they think Affirm is trustworthy."
Savings become more important in a crisis
A record number of Americans are unemployed, and in times of economic uncertainty, many consumers rely on savings. But for many, saving is a challenge.
"The impetus behind it is the oft-repeated snap that Americans are generally not very good savers," Levchin said.
37% of Americans don't have the cash on hand to cover an unexpected $400 expense, according to the Federal Reserve. But consumers are starting to save more. In April, Americans saved 33% of their disposable income, up from 12% in March, according to the US Bureau of Economic Analysis.
"One thing that pandemics or crises in general do is they remind people that saving is something you should really care about," said Levchin.
SEE ALSO: Buy now, pay later startups are surging. But Affirm CEO Max Levchin says the industry will see a shakeout as the pandemic hits borrowers.
SEE ALSO: Buy now, pay later startups are 'having a moment' — here's why retailers like Walmart and Target are betting on installment payments to keep consumers spending
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