When questioned about the contradictions of his money lending startup, Affirm, at the CB Insights Future of Fintech conference last week, PayPal co-founder Max Levchin had an unusual response: "I profoundly disagree with the notion that debt is bad," Levchin told Yahoo Finance editor-in-chief Andy Serwer.
Levchin's company, which serves as an alternative to credit cards, granting customers individual loans instead of a rolling line of credit, has been criticized for encouraging people to buy products they cannot afford. This statement may have blindly added fuel to the fire, but it was contextualized by the entrepreneur's defense that Affirm is making people's lives better, not worse.
"We will do our best to offer financial advice that is truly sound based on analytics, but if the answer is 'You should not borrow money,' we won't lend it to you," Levchin said.
It's unenviable to have to defend your company against criticism, but for many entrepreneurs it's perennial. How you respond will be what sets you apart. That makes Levchin's response rather instructive.
Here's his argument: Levchin founded Affirm to serve as an antidote to traditional banks. "We asked, 'What if we build a financial institution that is always aligned with its customers' best interests?" In other words, he wanted to build a company that didn't make money when its customers screwed up.
It may not sound like a revolutionary concept, but in contrast to the way traditional financial institutions run--making 40 percent of their income from late fees--this 2012 venture was relatively groundbreaking.
Levchin believes this service increases access to personal financing for communities that were previously burned by banks, or completely overlooked: young people, immigrants, people who have suffered financial "bumps" in the past.
But there is still debate over whether the product matches the pitch.
Despite complaints about Affirm's business model, the startup has raised ample funding, including $200 million in a growth round at the end of last year. And according to Levchin, the company has generally pleased its customers.
"The most important metric for me is the net promoter score of our borrows, or basically, the customer satisfaction score," Levchin explained. "If you look at the customer satisfaction score of a bank, if it's greater than zero, they're doing good. Ours is 83. The only one I know that's better is Tesla, and that's a religious cult."
This high customer satisfaction score, however, is coming from an admittedly modest pool of reviews. "We have single digit millions of customers," Levchin told the crowd. "It's a nice number."
Even so, they might be even happier with a service and a company's leadership that doesn't deflect criticism, but acknowledges it, and deals with it accordingly.
Consumers respond to honesty, after all. The best way to do this is to admit to your company's faults, when they are justified. Levchin didn't bat away criticism, but he also didn't seem to fully absorb it. That's one of the great challenges of selling your own brand. Believe in yourself, but don't deceive yourself.