Interview Synopsis

Affirm – partnership growth & competitive positioning

  • Public Equity
  • Financials
  • Global

Affirm Holdings Inc is one of a growing number of buy now, pay later (BNPL) companies, a segment that is now worth an estimated USD 3.7bn. Third Bridge Forum spoke to a former divisional leader at the US-based company for an industry update and how Affirm fits in.

BNPL competition heating up

One of the first points made by the expert was that “rising competition is certainly a pretty key trend”, with merchant adoption having also grown substantially. Another big trend is marketplaces, “where you see Afterpay, Klarna and Affirm, specifically, but others as well, starting to figure out what to do with all the customers they’ve acquired at the point of sale for next to nothing”.  

After explaining the routes to profitability of said marketplaces, the expert outlined how merchants’ costs are expected to trend long term, while commenting that “it’s unlikely that anyone, at this point, will be able to increase MDRs [merchant discount rates]”. They explained that “there are lots of cost centres… and the goal is to reduce costs over time. With that being said, it can’t be a race to zero.” While co-marketing budgets used to be rare, “now, it’s very common. Co-marketing budgets that go well into the millions”. 

Regarding Affirm’s positioning relative to its peers, the expert said there is “substantial overlap” in customer networks and “fairly limited loyalty to any one platform”. However, they added: “Affirm is a bit cleaner in that they’re always honest, transparent to the customer and do things that actually are beneficial to the consumer that the consumer likely doesn’t even  know or care about.” The expert believes that the best way for Affirm to gain an edge is by offering ancillary or add-on services, partially through acquisitions. 

The Interview also considered the threat from merchant acquirers such as Global Payments, which are offering BNPL credit card solutions that are embedded into the checkout flow, with no third party such as Affirm. The expert acknowledged that while this is attractive for prime and super-prime users, it “doesn’t cover the whole spectrum”. The impact of the Apple Pay Later launch on Affirm and its peers, as well as its Shopify partnership, were also discussed.

Click here to view a recent Third Bridge article on BNPL. 

To access all the human insights in Third Bridge Forum’s Affirm – partnership growth & competitive positioning Interview, click here to view the full transcript. 

The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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