Affirm Holdings Inc. (AFRM) is a financial technology company that offers buy now, pay later (BNPL) solutions to consumers, allowing them to make purchases and pay over time with no hidden fees or late charges. The company partners with a wide range of merchants to provide transparent and flexible payment options, aiming to enhance consumer spending power and promote responsible credit usage.

The company is one of many in the BNPL space that caters to consumers who want to finance purchases but are wary of credit cards.

As dollars are increasingly spent digitally, with an estimated 91% of transaction in the US taking place online in 2024, buy now, pay later (BNPL) firms are strategically positioned to take a larger chunk of this digital pie. Affirm aims to do so in 2 ways:

• First, through expanding access and usage of its Affirm Card, which is a debit card combined with a financing plan. In Q3 Affirm counted more than 1 million card users and noted its recent users are more engaged than its initial users, who are using the card for daily transactions at restaurants, gas stations, and grocery stores.

Improvements to the cards interface have helped to improve engagement, and this adoption is actually leading to higher pay now rates, with 10% of AFRM users paying now (vs. 6% previously).

• Second, through expanded partnerships, like the one recently announced with Apple. Earlier this week Apple announced it was shutting down its Apple Pay Later service in favor of a partnership with AFRM. Affirm doesn't expect the partnership to have any material impact on its profit and loss statement for the upcoming year, but will certainly expand its service exposure to a larger audience. Consumers will now have the option to use AFRM when they make purchases via Apple Pay.

To give scale for the potential user shift, Apple's Apple Pay Later was launched in March 2023, and roughly 1/5 BNPL customers had used the service by July of that year.

Other partnerships that facilitated growth last quarter included those with experience providers like Booking.com and Royal Caribbean.

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