Affirm results: BNPL is here to stay, growth will slow

They may have taken Wall Street investors by surprise, but for consumers, traders and retailers, the Affirm results are the latest assertion that the seismic shift to buy now, pay later (BNPL) continues to carry its toll. fruits, customers more often using the payment option.

Even though the current economic outlook has muddyed the waters in the short term, BNPL’s long-term uptrend is still intact.

More frequent transactions

The company’s growth rate in terms of the number of transactions per average customer has accelerated. In the last quarter, transactions increased by 31%, compared to a growth rate of 8% a year ago, with the typical BNPL user making three transactions per customer, compared to two a year ago.

To get an idea of ​​just how pervasive and persuasive the BNPL has become, consider this statistic fresh from the latest PYMNTS BNPL Monthly Tracker.

More than 46% of baby boomers and seniors and 71% of BNPL users with incomes over $100,000 have increased their use of BNPL in the past year.

They are the wealthiest consumers, those with relatively more financial firepower than other cohorts.

We are well past the days when BNPL could have been described as a bit of, shall we say, low-end, a credit tool used by those who might not have access to traditional credit.

As readers of this space are well aware by now, we are a nation that, by and large, lives paycheck to paycheck (about 61% of us do).

Staggering monthly payments over time gives some breathing room to get what we want or need, and be able to pay for it all. Ease and convenience are at the forefront in enticing consumers to use BNPL.


Ease of use leads, naturally, to a level of comfort in using offers again and again.

Industry-wide, according to information from Affirm, the gross merchandise mix has been skewed towards general merchandise at around a quarter of the gross merchandise value of $4.4 billion, where GMV has increased 477% year over year in the quarter; and fashion and beauty (19% of the mix), up 68%. Eighty-five percent of consumers transacting on the company’s platform, Affirm said, are repeat customers.

The mix is ​​consistent with the PYMNTS chart which indicates that most activity is at general cargo operators – but too highlights the relatively low penetration of BNPL, at least for now (i.e. low single digit percentages).

And CEO Max Levchin said on the earnings conference call that the numbers were buoyant, although housewares were down. Travel agencies offering BNPL soared amid the grand reopening, and Affirm noted on the call that travel and ticketing, at 14% of GMV, gained 87% year on year. other. The number of merchants stands at more than 234,000, according to company data, up 13% year-over-year, thanks in part to Shopify.

The urgency for merchants to offer BNPL at their desired point of sale is there, given the inroads BNPL has made as a popular payment method, as shown below.

As for the outlook:

“Despite what you may have heard elsewhere, people are still buying things online,” he said. But the economy is likely at the start of a slowdown, he said, and credit performance remains a “non-negotiable safeguard” for the company.

Credit quality – a key and heavily watched metric – is still strong, Chief Financial Officer Michael Linford said, although management also said there were signs of stress among some low-credit consumers. Delinquency levels remain healthy, he said, and the earnings release shows an allowance for credit losses as a percentage of loans held for investment at 6.2%, up from 3, 8% seen a year ago, but lower than the 9.2% seen two years ago in the depths of the pandemic.

Levchin and Linford expressed confidence in the current state of the credit portfolio and also indicated that there remain a number of levers that can be adjusted, such as requiring larger down payments when initiating a loan. BNPL.

And yet: macro headwinds appear in the forecast. Growth estimates assume continued momentum with Amazon and Shopify, and there will be holiday-focused seasonal spending trends that have been seen in the past. Seasonality will cause revenue to decline as a percentage of GMV. GMV’s forecast of $20.5 billion to $22 billion would imply growth of 20% to about 41% from the most recent fiscal year, where that rate was 77% in the last quarter.

Investors sent shares down more than 12% after hours trading.



About: Results from PYMNTS’ new study, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy,” a collaboration with PayPal, analyzed responses from 9,904 consumers in Australia, Germany, UK and USA. and showed strong demand for one super multi-functional app rather than using dozens of individual apps.

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