Former executive at Affirm Holdings Inc
- Affirm’s (NASDAQ: AFRM) growth strategy and broader buy now, pay later adoption drivers – market sizing and 1-5-year outlook
- BNPL (buy now, pay later) offering differentiators across the competitive landscape and open- vs closed-loop models
- MDR (merchant discount rate) trends and how MDRs are being driven by product diversification
- Regulatory environment update and increased focus from credit bureaus
What’s your high-level overview of Affirm’s operating environment and any key trends or drivers you think we should be monitoring?
Can you elaborate on the different operating models for the closed-loop vs open-loop? What are some primary advantages or disadvantages of each?
Could you give more details about Affirm’s underwriting model and what data points or key metrics are used to justify a credit purchase from the consumer and merchant ends?
What are the broader considerations on the merchant end? How are buy now, pay later operators approaching merchants from a risk and underwriting standpoint?
What’s your market growth outlook? How should investors think about growth moving forward? It seems many of the pandemic-related tailwinds are behind us, whether digital adoption or stimulus payments, and buy now, pay later offerings seem to be converging. What do you see as the primary growth drivers over the next 1-3-5 years?
How might the transition towards merchant services or merchant solutions model play out? What do you think the fully realised model looks like for Affirm or other buy now, pay later players? What structural challenges stand between now and reaching that goal?
Market growth is obviously prone to changes in the broader macroeconomic environment, so how might buy now, pay later pure-players or closed- vs open-loop systems perform in a recessionary environment?
Over 40% of Affirm’s GMV was attributable to 0% APR products in 2021. How might this percentage contribution evolve over the next 1-2 years, especially as we enter this rising interest rate environment which nullifies some of the benefits on these offerings?
What’s going on with merchant discount rates in the buy now, pay later space? How might it evolve over the next 1-2 years?
Are MDRs [merchant discount rates] experiencing some outsized pressure with competition ramping up and a couple of players coming in from different beachheads? We have Block’s AfterPay acquisition alongside the potential for other entrants, and players such as Adyen in the payment processor space. Do you see a race to the bottom as it relates to MDRs going forward?
How might Affirm’s product offering portfolio evolve over the next one, three and five years? The company traditionally offers product categories centred around retail purchases but it’s quickly shifting towards healthcare and travel. Which specific product or service segment might see outsized focus from either Affirm or broader buy now, pay later players?
When assessing growth going forward, do you think Affirm or buy now, pay later will only capture the anti-credit card audience for developing its TAM? Could customers be taken from traditional payment methods in a meaningful way, whether in the credit card space or other consumer finance?
How should investors assess the recent intensifying focus from credit rating agencies as it relates to Affirm and other buy now, pay later providers?
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