Affirm Holdings which uses a very old concept — buy now, pay later — recently had a presentation where it announced products that will expand its market in the consumer sector. The bigger message, though, is that Affirm might have the ambition and possibility to become more than just a buy now pay later giant.
With their technology, they may remind investors of a much larger and more established fintech company, PayPal. Here are two reasons why Affirm might eventually grow to be a giant PayPal-like stock.
1. It’s quickly building its network
Affirm’s growth depends on how it can increase the network of merchants and the amount of consumers who use its platform. In other words, they have to deeply penetrate the landscape.
Normal credit card companies have long kept a grip on short-term borrowing, but buy now pay later has become a popular alternative. Affirm allows consumers to make purchases with a set number of installments without fees, charges or interest rates. Merchants join with Affirm, where consumers usually buy more often and spend more for every order. Shoppers average a 85% higher order value, and a 20% repeat purchase rate when compared to other retailers.
Affirm’s value as a tool has caused major merchants to signon as partners, including Amazon, Walmart and Shopify. These are all relatively new partnerships; Amazon is testing, Shopify opened its installment program (Shop Pay) recently, and Walmart said it was replacing its layaway program with Affirm’s services.
2. New products beyond buy now pay later
Affirm management recently led an investor forum, revealing several new services and products that give a look at its long-term road map. The top one was Affirm Card, which connects to a consumer’s existing checking account. Users can then pay for things using the Affirm Card just as they would with a debit card but will have more options, like the ability to break certain transactions into buy now pay later installments.
Affirm also announced its SuperApp, which could work as an “all-in-one” smartphone app where customers can use different financial services. It also announced plans to have cryptocurrency investing. CEO Max Levchin did not give many details during his presentation. Still, it seems as if the company wants to expand well beyond buy now pay later lending, and further into the broader ecosystem of consumer finance. Exactly like PayPal did early on.
Author: Scott Dowdy
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