PayPal co-founder Max Levchin said people don’t trust traditional banks—especially millennials.
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“They have reason not to trust,” Levchin told the FOX Business Network. “If you look at something like a deferred interest product where it’s truly too good to be true and you get caught off guard and suddenly you owe almost twice as much as you thought you would, you find yourself going ‘wait a second, I thought I was getting a great deal and now I’m in debt and I might be in debt forever.’”
That’s why he’s now the CEO of Affirm, an online financial company that has just made its one-millionth loan, according to Levchin.
“People have been harmed by products that they can’t understand…The confusion that is created by a lot of these financial products offered to the point of sale and elsewhere is hurting people, and so offering them something that they can fundamentally understand has been very successful for us. We are growing very, very quickly,” he said.
In his opinion, banks need to upgrade their products to survive.
“Not all banks, not all financial institutions are created equal. I speak with a lot of them and I have a great degree of respect for them. I think many of them are finding out that the mobile age caught them off guard,” he said.
He also thinks transparency is critical.
“The requirement of transparency has caught them off guard among the new generation and the generations that have come before them realize that you don’t have to put up with the abusive practices and so a lot of larger banks have spoken to us and said ‘can we partner up?,’” he said.
Even so, Levchin said banks have potential.
“I think they still have a lot to offer including years and years of building out gigantic deposits, for example, which is a system that needs to be utilized smarter,” he said.