AFFIRM AUSTRALIA PTY LTD TARGET MARKET DETERMINATION
BUY NOW PAY LATER LOAN PRODUCT (INTEREST FREE)
This target market determination ("TMD") is designed to provide customers, merchants and Affirm Australia Pty Ltd ACN 648 970 629 ("Affirm") employees and agents with information to understand who this product has been designed for by describing the class of customers that comprise the target market for the product and other matters relevant to the product's distribution and review.
Key attributes of the product
This product is an interest free loan provided to customers of Affirm approved merchants in order for customers to finance the purchase of goods and/or services from those Affirm approved merchants. No fees or other amounts are charged to the customer, but merchants may separately pay a fee to Affirm. The loan is applied for and approved online either by link from the merchant's website or by a link sent to the customer's mobile or email once an enquiry is made in store. Customers repay the loans over time through equal scheduled principal repayments paid by direct debit from their bank account, authorised debit from a debit card or other approved payment method. The maximum loan term is 43 months and customers can prepay some or all of the principal at any time without penalty.
Target market for the product
The target market for this product is customers over the age of 18 years in Australia who want to buy goods and/or services and want and expect to be able to pay for those goods and/or services in multiple equal instalments over time.
Reasons why customers in the target market may choose to pay over time rather than upfront include:
- wanting to spread the cost of a significant purchase over time rather than absorbing the cost in one income or other relevant period i.e. expense smoothing;
- being obliged to engage in expense smoothing because they unable to pay the full cost upfront but would be able to pay if the cost were spread over time into fixed instalments with known payment dates that can be budgeted for; and/or
- being able to pay the upfront cost but wanting to defer payment so the customer's own funds can be used for other purposes (such as mortgage offset or investment) in the interim.
However, the specific reason why customers want to defer payment is not a defining feature of the target market, merely their desire to defer and forecast ability to repay.
The product may appeal more to younger customers, more technologically comfortable customers and/or customers looking for alternatives to other forms of credit (credit cards, personal loans, payday lending, layby, overdrafts, etc), but these are not defining features of the target market.
Meeting objectives, financial needs and situation
The product will likely meet the objectives of the target market because it enables them to purchase goods and/or services that they want or need and to pay for those purchases over time. Being at no additional cost means that the product better meets the financial needs of customers who must borrow as it is more affordable than many other forms of credit. This attribute also meets the financial needs of customers who choose to borrow since they are very likely able to get some financial benefit from using their own funds elsewhere until the payment falls due, at no additional cost to themselves. Having a fixed amortisation schedule without re-draw capacity assists customers to budget and plan for repayments, imposes a requirement to actually make those payments and thus prevents customers being trapped with the debt over the longer term.
The product is likely to be less suitable for customers (including because it is less likely to meet their objectives, financial situation and needs) who:
- need or want a pre-approved credit limit under a continuing credit contract to spend on unspecified future purchases (as the product is approved on a case by case basis in respect of a specific purchase);
- do not intend or are not able to amortise the principal significantly and evenly over the medium term (as the product requires at minimum linear amortisation over a term up to 43 months);
- want or need to purchase goods and/or services whose finance by the product is restricted or prohibited by Affirm, or which are offered by merchants not yet approved by Affirm;
- are not able or eligible to purchase the goods and/or services offered by the merchant;
- want or need to re-draw on their loan account or to have a repayment holiday (if a customer wants to make a subsequent purchase they can apply for a new loan product but can not re-draw on an existing product or use a new loan to repay a prior loan); or
- are not able or do not have access to the resources to apply for and otherwise deal with the product primarily online / by electronic communication and transactions.
Distribution conditions and controls
- Affirm will conduct due diligence on each approved merchant before agreeing to finance purchases from that merchant. Affirm needs to be satisfied that the goods and/or services offered by the merchant meet Affirm's criteria including not being restricted or prohibited and having a price that Affirm considers customers in the target market can reasonably pay off during the offered loan term(s). Affirm also needs to determine that the merchant has a good record of customer service so as to reduce the likelihood of disputes and ensure refunds will be processed promptly where relevant in order to pay off the loan.
- Once approved, merchants do not have a significant role in the product distribution controls, they merely provide a link for customers to access Affirm's online product distribution platform. Affirm takes primary responsibility for the product distribution controls and only distributes the product through its online platform.
- As part of the application process, Affirm confirms the customer's identity, including age, residential address, and Australian driver's licence information, so that products are reasonably likely to be provided to customers over the age of 18 located in Australia.
- Affirm may also ask customers questions as to income and certain expenses and conduct a credit check so as to make an assessment of their expected ability to repay the loan (so that products are reasonably likely to be provided to customers with capacity to repay). If a customer applies for a subsequent loan, this assessment is conducted again so as to ensure the customer continues to be expected to be able to repay its loans.
- The key attributes of the product, including the repayment schedule, are communicated clearly to the customer where relevant so they can assess whether the product meets their needs and compare it to other credit products they may be considering.
- Marketing materials, the Affirm website and other customer facing disclosures are assessed for appropriateness and compliance and to ensure that, where relevant, they focus on the target market.
- Appropriate training, policies and procedures are provided to employees and third party service providers, including to ensure they understand the key attributes of the product, its target market and the distribution conditions and controls.
- Systems and processes that support our eligibility assessments, and the delivery of other information relevant to the customer's understanding of the product and its suitability for them.
This TMD will be reviewed within 1 year from the last review to ensure it remains appropriate.
Review following review trigger
Affirm will also review this TMD if an event or circumstance (called a 'review trigger') occurs that would reasonably suggest that the TMD is no longer appropriate, or the product is no longer consistent with the likely objectives, financial situation and needs of customers in the target market, or the distribution conditions do not make it likely that the customers who acquire the product are in the target market.
Examples of review triggers may include:
- notification from the Australian Securities and Investments Commission (ASIC) requiring cessation or modification of the product distribution or particular conduct in relation to the product;
- material change to the product or its key attributes or its distribution;
- material change in Affirm's acceptance criteria for potential customers;
- material change in any other factor or information used to prepare this TMD;
- identification of a material deficiency in the product's documentation;
- material complaints or a recurring pattern of complaints which may indicate the product is no longer suitable for the described target market or is not being primarily distributed to the target market;
- significant dealings which indicate that the product is no longer suitable for the described target market; or
- material changes in key product and customer suitability metrics such as customer satisfaction, write offs and remediation payments and default rates, or other significant customer feedback.
Affirm will review this TMD within 10 business days of any review trigger.
Affirm must record all complaints received about this product and report on a quarterly basis (Complaints Reporting Period). Affirm must ensure merchants are required to provide written details of any complaints about the product they have received during the Complaints Reporting Period within 10 business days of the end of the period, together with any other reporting on key metrics required by their merchant contract.
Affirm will maintain records of the reasonable steps they have taken to ensure that this product is sold in a manner consistent with this TMD.
Affirm will also prepare and maintain complete and accurate records of decisions, and the reasons for those decisions, in relation to:
- all target market determinations for this product;
- identifying and tracking review triggers;
- setting review periods; and
- the matters documented in this TMD.
03 November 2021