Just in time for the holidays, a new form of payment is seeking to make inroads into your wallet. 

San Francisco's Affirm, announced Tuesday that it's widening the scope of its installment loan product to bricks and mortar stores. Until now, the consumer finance company's products could be used only at online stores.

The change may be useful ultimately for merchants who want alternatives to credit cards for payments, and who likewise want to tap into the enormous Millennial consumer market, which numbers about 75 million, according to the Pew Research Center. Plus, it beats having to manage your own layaway program.

Affirm, which launched in the summer of 2014, is aimed specifically at Millennials, who have a different attitude towards credit, Max Levchin told Inc. in 2014. As a co-founder of PayPal, he has a keen sense of how people like to make purchases. Many mistrust credit cards, which have allowed the older generation of Baby Boomers to rack up large amounts of debt in their pursuit of purchases, he said. Instead, they prefer more limited loans that they're sure they can pay off, and which won't run them into financial trouble.

Affirm's installment loans are capped at about $10,000, and they come with a fixed pay off date that can run for 3, 6, or 9 months from the date of origination. (The annual percent rate can run from 6 percent to a whopping 30 percent.) Affirm generates a decision on loans within seconds, using nontraditional data such as shopping history and other consumer data publically available, it says.

So far, more than 300 merchants, including consignment marketplace Tradesy and mattress store Casper, have partnered with Affirm to let consumers make purchases using Affirm loans online. In the next couple of months, Affirm says it will test two new payment options in bricks and mortar stores.

For the first test, Affirm said it will allow merchants who use First Data's Clover terminals, one of its most advanced lines that lets merchants download useful apps, to issue installment loans. Consumers can use it to purchase products at the register. Affirm's Brad Selby, vice president of merchant services, said the offering would be available before the end of the year, but he was unable to offer details on the number of merchants who would be eligible.

In the next two weeks, Affirm will also start testing a loan that functions like a stored value, or gift card. Customers throughout the U.S. will be able to apply for an Affirm loan online, and the site will then automatically generate a 16-digit code that consumers can use like a debit card for purchases in stores using a phone app, as well as online orders. (It's currently available for telesales.)

"Consumers will have access to our installment product wherever merchants are," Selby said. "So if you are a small furniture store, consumers can use Affirm to make purchases."

While financial service industry analysts have generally applauded Affirm's goal of giving younger consumers new, responsible ways to purchase using credit, Brian Riley, principal executive advisor at CEB TowerGroup, has questioned aspects of Affirm's business model. Specifically, it may be difficult to get enough merchants to establish yet another payment relationship, as opposed to just accepting credit cards.

Since founding, Affirm has raised $320 million in two rounds from investors including Khosla Ventures and Spark Capital.

Published on: Oct 27, 2015