As someone that had a similar experience with Transferwise (actually also a 5k transfer), I'll give you a piece of advice: sue them.
In the US, you can file a small claims easily and without a lawyer. Some jurisdictions will even let you file 100% online, and the filing fees are very low.
After 2 months of Transferwises' excuses, they wired the full amount + legal fees to my account within a few hours of them receiving the notice.
Depends on the jurisdiction. In many countries, yes there are insurance requirements. Even in ones where there aren't, most vessels owned by larger companies carry insurance for the same reason anyone else does.
On the other hand, since oceangoing ships are (mostly) regulated by the countries they're registered in, which is frequently a regulation-light jurisdiction like Panama, Liberia, or the Marshall Islands - there are a surprising number of situations where the owner of the ship just completely disappears and the ship is left to rot.
One of the most famous recent examples of this was the ship involved in the Beirut port explosion this year. After being impounded for being unseaworthy, it rotted at its moorings and eventually capsized in the Beirut harbor.
A quick trip through developing-country ports on Google Earth will have quite a few ships like this.
Curiously, this vessel appears to have been registered in the Marshal Islands, which is an independent nation with a rather unusual relationship [0] to the US that I hadn't heard of before. Presumably the law that requires US registration has a special provision allowing this? I wonder if the crew requirements are more relaxed with a Marshal Islands registration?
The difference is that the law only applies to ships that carry goods or passengers from one US port to another. Ships are allowed to (and often do) call at multiple US ports on a voyage, they just can't unload goods in one US port that were loaded in another.
For instance, the ship could have carried cars made at the Kia and Hyundai plants in Mexico to the US, and also loaded cars made at the plants in Georgia and Alabama for delivery to the Middle East.
Interesting. Overall, I agree with everyone else - Affirm looks like a healthy company.
Major takeaways:
1.5% write-off rate for their jan 2020 vintage is very healthy - comparable to the long-term trend for unsecured superprime consumer debt. Given the (I suspect) lower average creditworthiness of Affirm customers, this is a great number. I'd be curious to see their long-term trend for same-age vintages, however. In consumer credit it's well known that all the stimulus support in 2020 has significantly depressed defaults. It would be interesting to see if this is a fluke, or if this is actually what their charge-off rate actually looks like in a normal environment/part of a bigger trend.
I'm a little skeptical of their claim to use ML & build a data moat for significantly better underwriting decisions. Consumer credit laws in the US so severely restrict what you can use for credit scoring purposes that better underwriting through data is basically a lost cause, absent some specific customer segment that has special credit situations.
Finally, as others have noted, 30% of revenue just from Peloton is an enormous number.
> absent some specific customer segment that has special credit situations
It seems from the S-1 that Affirm has grown it's market quite a lot, but my first and primary exposure to them is in the car scene. Affirm entered this customer segment and dominated pretty quickly as the creditor integration of choice for long time-scale projects with up front costs like custom engine builds. I imagine to some degree they are able to make decisions partly based on the nature of what is being purchased.
Their S-1 indicates this is shifting, but I have historically seen Affirm in places where a more typical online consumer credit organization like PayPal Credit / BillMeLater / etc doesn't play. Affirm seemed to be focused on larger sized purchases which would otherwise be paid on an installment plan, but filling that gap. Exercise equipment like Peloton is a great example, just as engine builds is a similar type of transaction.
When you look at 30% of revenue from Peloton, and that their interest rate revenue is lower than merchant fees, it's basically companies paying to finance larger purchases for their customers because they get to book the full revenue on their books immediately, pay down the interest through merchant fees themselves, get higher numbers on their books, increase their market cap, and for consumers it's a benefit because why not finance it over a period of 39 months than be out of pocket immediately or finance it through a credit card with high interest rates.
So really it's a great way to take advantage of the credit markets and public company comps being extremely high while benefitting the customer.
> Consumer credit laws in the US so severely restrict what you can use for credit scoring purposes that better underwriting through data is basically a lost cause, absent some specific customer segment that has special credit situations.
Can I inquire what your background is or where you found that information? Many companies supplement credit scores with additional data to make these types of decisions.
I’ve worked in credit risk modeling and it is rather strict the predictors that can be used and well documented. Data comes in from a variety of sources and it is favorable to be skilled in established models than to try something obscure that isn’t intuitive. The models have to work across different sets of time and the varying business processes that may have been in place. Fraud modeling is more flexible, but seemed to have fairly similar results although more trendy things like random forests and neural nets would show up.
That is definitely changing in credit risk and underwriting as well. There are several companies like [1] applying deep neural nets to the credit risk problem. This on top of a lot of in house work in the big banks to “supplement” what is available on the open market
There is a big difference between dumping a dataset in the latest hot ML model and building something that offer some actual explainability, deal with intrinsic biases, have some stability over time and recalibration and that will go trough an unprecedented crisis for which you don't have any data to learn from. That mean the model usually has to go trough a lot of internal commities and different external agencies. I highly suspect that an external proprietary solution won't go very far in the credit rating field.
This is definitely a super interesting company/approach - thanks for the link! I'm definitely curious as to whether they're actually using things like neural nets (or any other more-sophisticated technical techniques). The traditional problem is that those models aren't explainable, and potentially have hidden biases in them, so I'd be really curious what their approach is.
It definitely depends heavily on the market you're living in - some are very heavily subsidized, others are not.
As a counterpoint, I recently had a $30 off promotion for uber eats. Ordered a couple of hamburgers, and the food tab came to $29 - which was zeroed out after the promotion.
Delivery fee + service fee + tip meant I still ended up paying $18 for the service. I can't imagine I'd ever be a buyer at the full price.
This is a little different than what Lehman got in trouble for in the US.
During the financial crisis, the core issue is that banks were making loans off their own balance sheet with reserves too small to cover the losses that eventually occurred. In other words, when borrowers defaulted the bank itself lost money. This made them insolvent and caused the whole collapse.
In the case of Ant on the other hand, they essentially function as a lead generation platform for banks - currently 98% of "their loans" aren't really theirs at all, but rather are funded by their partner banks; if the loan defaults, it's the partner bank's problem, not Ant's.
The reason this change is such a big deal is that forcing Ant to fund 30% of its own loans will require raising an absolutely enormous amount of fairly expensive capital, driving up costs and significantly decreasing the value of the company.
To expand on your comment here’s a good article that explains Ant and how it’s structured plus it’s issues with Chinese regulators by an excellent Chinawatcher.
Subscribed! I don't run into many people in the west that can have a nuanced view on what's happening in China and the place is just way too big and vibrant to deflect every topic into what's happening in one city or waaay on the other side of the Gobi desert. This doesn't happen on any other topic about any other country, and the other things going on are of keen interest to me.
It's not, the banks lend their excessive cash to a big tech company, Ant then use that money to make small/short-term loans with "big data" credit ratings to individuals unqualified for low-interest bank loans.
Why would partner banks accept trash loans without doing due diligence? Though thinking about the housing crisis, greedy short-sightedness comes to mind. It's amazing how some of the people who claim to be the smartest with money are actually the dumbest and riskiest. Are they actually smart or just lucky they won a bet?
Governments have a history of bailing out the financial system. Lenders take that into account and will take on riskier loans since they effectively have a put on them.
I don't think 30% is unreasonable, nor would it require them raising that much cash relative to a company of their magnitude or
Back of the envelope math:
Majority of their portfolio is very short term, let's assume 6 months duration which is a 0.5yr weighted average life
300B in annual originations
Assume they can get similar leverage as US securitization markets, which would be 95% advance rate (5% "skin in the game" for Ant)
Then the equity required would be:
300B0.530%5% = ~2.25B, and they were planning to raise $30B as part of this IPO
Basically, when you purchase something with a credit card the bank fronts the money to the merchant and bills you for purchases later. If a transaction is fraudulent, either the merchant or the credit card company take the hit, and you're never out any money, even temporarily. For credit cards the market has settled on 0 consumer fraud liability pretty much no matter the circumstances (and very hassle-free too).
On the other hand, with debit cards money is withdrawn from your account when a fraudulent purchase is made, and you need to wait for your bank to complete an investigation to reimburse you. They also tend to have rather stricter reporting standards in that if you don't report fraud promptly, you might be stuck with (some) liability.
Either way you'll typically get your money back, but the hassle is much reduced with credit cards.
Interestingly, this is pretty much the split we've seen regarding terrorist hostage-taking in North Africa. While European governments have generally paid ransoms for the return of their citizens, the US Government steadfastly refuses to pay.
In early years, this generally led to better outcomes for European citizens, but as time wore on, it's come to a point where the terrorists actively avoid kidnapping Americans and prefer Europeans. Assuming the these types of hacks are explicitly targeted, I imagine we'd see a similar dynamic play out.
I’ve traveled a lot in the Sahara and an old expression amongst the expats was “The French send troops, the Germans send money and the British send regrets”.
Pretty sure I heard on a NYT podcast that proxies are used for US citizens who are kidnapped. Specifically, a high-profile US citizen kidnapped by ISIS and they were returned via payment via a proxy.
Wealthy private citizens will pay, but the government says it will not. In the case of a private citizen paying a ransom for another you run into money laundering laws and trade restrictions.
The airlines have successfully squeezed banks a good deal more than that! At this point all the US-domestic carriers are charging their bank partners over 1 US cent per point.
Giving cash back creates wrong incentives and you sign up different audience than if you offer airline miles. Airline miles are in demand for people who travel often (affluent) in comparison to people who wants to get $150 after signing up for cc (poor).
That said there are offers to get cash for signing up. Some time ago First Republic Bank was giving $300 for cc sign up for Google employees (aka rich people).
(1) They work because the bank and airline partners are able to offer you something of high perceived value (a vacation, even in business or first class) for very low marginal cost.
(2) This means that (in my most recent redemption) the bank pays the airline $462 in rewards, that cost the airline $400 to deliver, and provides to you with $2500 in value.
(3) Points are great because people don't consider them "cash" but instead something they don't mind parting with. More of a rebate.
So the economics of it are that the bank collects $0.018 in interchange for every dollar spent on a card, converts that to a point that costs them $0.007 to deliver, which the airline services for $0.006 by disposing of inventory that would otherwise go unsold.
The airline wins again because they've created a secondary market for unsold inventory that they can sell to leisure travelers without undercutting the amount they can sell the same inventory for to business travelers.
It's a very nuanced and successful way of motivating people who have a choice to make the choice you want them to make.
On the other hand, $0.01 in cash back costs the bank $0.01, and then if you redeem for travel the airline gets paid $0.01, and you get $0.01 in value.
But conversely the value of points have to be discounted by the risk of loss of utility or future devaluation.
When the credit card says $200 in cash-back rewards, there's a lot less room to play games. 20,000 miles might buy a ticket today, but only an upgrade tomorrow. And that even assumes the ticket you wanted was available through the program you decided to back.
It’s 1 cent if you’re lucky. I’d probably value an airline mile (or hotel point) at $0.003 or less, based on my usage patterns and comparing the USD price versus the point/mile price.
It varies a lot depending on the program. $0.003 for you as a customer is way too low, since you can redeem them for actual goods on their websites for usually $0.007. That's still way too low if you actually want to fly anywhere. Benchmark value of points when redeeming for economy is between $0.01 and $0.015. When redeeming for business its $0.03-0.06. When redeeming for first, its $0.10-$0.20
In general rule of thumb is Alaska miles are worth $0.02, American are worth $0.013, United are worth around $0.013, Delta are worth $0.01 (since you can redeem them for $0.01 as cash towards paid tickets if you have one of their credit cards).
Hotel points are different, Hilton, IHG and Club Carlson are around $0.005, Marriott are worth around $0.009, and Hyatt are worth $0.016.
But I digress, that's value to the end user. We're debating what the credit card company pays the airline for it.
One of the few good things about redeeming Hilton and Marriott hotel points is the 5th night free benefit [1][2], which bumps the value of one's hotel points by around 20–25% in some cases.
Indeed Hilton is worth about $0.005 as I mentioned.
United, however, are worth substantially more. I just redeemed 77K for a one-way business class flight from SFO to IST non-stop on Turkish, which was priced at $2000 on a half-round-trip basis ($0.025).
It's actually quite easy to get $0.015 on United when redeeming for economy class. Maybe Pandemic pricing is messing with the numbers, but this shouldn't be too challenging most of the time. They don't impose fuel surcharges which helps a lot.
At least on an accounting basis though, airlines do actually make remarkable profits on their frequent flyer programs. In 2015 or so United disclosed their FFP business was earning ~67% margins, as against ~2% for the rest of the airline. I don't think they have disclosed more recent numbers, but margins are probably higher now.
That said, these profits are in part an accounting artifact. This is because up until very recently airline accounting rules only required carriers to realize the marginal cost of carrying a passenger when frequent flyer miles were redeemed. Since the marginal cost of a passenger is only ~$20 or so, this yields great margins.
These days however the overwhelming majority of airline miles are awarded for credit card spending rather than actually flying, though. As your second article notes, for United the split is 70/30 or so.
Does that mean they would make more money if their planes were filled entirely with frequent flyers, and not with regular passengers? I don't see how that makes sense. Flying the planes still costs the same. I doubt those frequent flyers pay significantly more (isn't the whole point that they get a discount?), so it's weird that they make so much more profit there.
I feel like one of those numbers includes all the costs while the other doesn't.
Your read is exactly correct - the frequent flyer costs aren't 'fully loaded', and accounting rules in the US have changed to more fully account for these costs.
That said, the logic behind structuring the rules this way isn't completely crazy. Essentially, award seats are intended to be seats that the airline cannot sell to paying passengers. Since those seats would otherwise earn the airline nothing, accounting for them on a strictly 'found-money' basis makes some sense.
This sometimes creates amusing situations when new loyalty program managers look at their margins and conclude massive sales make sense. For one example, see below - Garuda selling ~$20,000 first class tickets for ~$200 worth of points. On an internal accounting basis, this was still profitable for the program!
In the US, you can file a small claims easily and without a lawyer. Some jurisdictions will even let you file 100% online, and the filing fees are very low.
After 2 months of Transferwises' excuses, they wired the full amount + legal fees to my account within a few hours of them receiving the notice.