Investors, Merchants and Consumers Have Drastically Different Views of Affirm

With shares of Affirm shedding roughly 45% late last week and extending a three-month decline that is now approaching 70%, it is difficult to pay attention to anything other than the investor-lead view of the beleaguered buy now, pay later (BNPL) provider.

And yet, away from Wall Street, the San Francisco-based FinTech’s core consumer and merchant constituencies appear to have nothing but praise for the company, its technology, as well as its products and prospects.

Simply put, it’s a story that nobody wants to hear at the moment, and also one that few dare to tell in the face of an epic sell-off that more closely resembles a going-out-of-business sale — which is clearly not the case for Affirm or BNPL — than a recalibration after a conservative earnings outlook.

Strip away the profits, losses, expectations and multiples that investors have applied to the shares of this rapidly growing business, and instead, take a consumer and merchant view of Affirm, and you are left with a distinctly different perception.

Consumers Want More BNPL, Not Less

It is irrefutable that the concept of BNPL is becoming a more popular choice for consumers who prefer to have more options on how to pay for their purchases, and Affirm is one of many breakout pure play providers that have benefitted from this shift, including Klarna, PayPal, Sezzle, and Afterpay, the recently closed $29 billion blockbuster acquisition by Square.

According to a January PYMNTS study, 50 million consumers have used BNPL in the past year. And they have several options that can be used online or in brick-and-mortar stores. The study found Affirm is among the top four services, with 34% using it online and 30% taking advantage of it in-store.

“We’ve done very well. Indeed, our active consumer growth accelerated, growing by 150% to provide well north of 11 million people with a smarter way to pay,” Affirm founder and CEO Max Levchin said during the company’s earnings call on Thursday (Feb. 10).

In addition to more in-store opportunities for BNPL at checkout, PYMNTS research also points to another area of future growth by way of banks getting involved in offering payment plans.

According to the new PYMNTS study, Banking On Buy Now, Pay Later: Installment Payments And FIs’ Untapped Opportunity, 70% of consumers said they were open to using such products from their own banks if they were available.

There are also favorable demographic tailwinds for both the company and sector that appear to have been ignored amid the short-term sell-off.

Other PYMNTS data have shown that coveted young consumers are especially interested in the plans, with 11.5% of bridge millennials (those between 32 and 41 years old)  having already used BNPL, 38% or millennials who have not used installment plans yet said they were interested in using it if it was available within a digital wallet.

Adding Venues and Merchants

Affirm itself has been improving its product line to keep up with customer demand. In January, Affirm unveiled its super app, giving them the ability to access all of the company’s shopping, payments and financial services from the same place, while giving customers a simple snapshot into how much they might be able to spend, their cash-back earnings, their savings and outstanding payments.

The app also lets users browse exclusive offers from favorite stores, and shop online or in-store via a single-use Affirm virtual card.

At the same time, Levchin said Affirm had added 16,000 new merchants to its stable of locations in the final three months of last year, raising its total portfolio of retail partners to nearly 170,000 for the year.

“Affirm is as much a safe and transparent pay-over-time option for the buyer, as it is the ultimate marketing tool for the seller,” Levchin said after the company’s fiscal Q2 earnings report.

“We help our partners drive meaningful incremental sales without needing to resort to gimmicks or discounting,” he added, noting the number of active merchants on our platform had significantly expanded the company’s reach, and delivered a 20x increase from a year ago.

Amazon and Others

As for its relationship with merchants, Affirm recently partnered with Verifone to offer customers the ability to use installment plans online and in-store while also offering a range of payment options, including bi-weekly and monthly payments.

In August, Affirm and Amazon announced that the eCommerce giant was entering the BNPL space and had reached an exclusive agreement to offer installment payments on purchases over $50 through January 2023.

While terms of the deal were not disclosed, having access to Amazon’s unmatched share of eCommerce is clearly a desirable account to win, albeit one that comes with a merchant that is notorious for squeezing suppliers, vendors and payment processors for better terms — and rightly so, given its unique clout.

While analysts focused on how the purported tighter Amazon terms were impacting Affirm’s margins and profits, it is safe to say that had it not reached an agreement — or ended the existing one — any one of the top BNPL players would have rushed to fill the void.

While all of this plays out in the market, one thing is clear; when it comes to Affirm, there is a sharp disconnect between the opinion of investors, and the experience of consumers and merchants.