Affirm’s Chief Financial Officer Michael Linford extended an olive branch Tuesday to skeptics raising concerns about the long-term viability of the company and the buy now-pay later industry.

The San Francisco-based BNPL provider is among those likely to feel the effects of Apple’s recent decision to enter the fast-growing installments market. But Linford shrugged that off, saying the potential for growth in the BNPL market is so large that there is room for many players to be successful.

“We think this is just another data point on the inevitability of the shift away from traditional payment methods towards products like ours,” Linford argued Tuesday during a fireside chat hosted by Autonomous Research. “You can think of it as this product going mainstream, or you can think of it as just another data point along this journey.” 

Apple Pay Later, which the tech giant announced last week, allows users to split the cost of an Apple Pay purchase into four equal payments over a six-week period, with no interest or fees. The new function is built into Apple’s digital wallet and it’s available to U.S. consumers.

BNPL financing is expected to account for about $438 billion, or 5.3%, of global e-commerce transaction value by 2025, up from $157 billion, or 2.9%, in 2021, according to a March report from payments processor Fidelity National Information Services.

Still, Affirm's stock price decline since late last year has mirrored that of its one-time largest customer, stationary bike-maker Peloton, which has seen revenue fall in recent months as consumers left their homes for exercise following a drop in COVID-19 cases.

Earlier this year, Peloton cut 2,800 jobs and replaced its chief executive officer. The exercise equipment maker is now reportedly trying to sell a minority stake, according to a report last month in The Wall Street Journal.

Shares of Affirm have been pounded this year along with the rest of the market. The stock changed hands in late morning trading Thursday just over $16, well under its 52-week high of $176.65.

Wall Street appears concerned about the potential impact that Apple may have on Affirm and other stand-alone BNPL companies.

Affirm recently became the second-most downloaded BNPL app in the U.S., knocking Block’s Afterpay to third place, according to market research firm YipitData. Klarna is the most downloaded BNPL app in the U.S., according to YipitData.

Like other BNPL companies, Affirm isn’t profitable, but it hasn’t made some of the big restructuring moves that a larger rival has. Klarna cut 10% of its workforce last month, or 700 employees.

Affirm is keen to hire engineers because “we have the opportunity of a lifetime ahead of us,” Linford said. “The market is very big and growing very fast and we want to be well-positioned when we get through this economic cycle to be well ahead of the pack.”

Affirm has forged partnerships with some of the largest U.S. e-commerce sites, including online juggernauts Amazon and Shopify as well as the more traditional retailers Target and Walmart. The company’s arrangement with Amazon ends after the 2022 holiday season, according to Linford. 

“We have a partner who's invested in our growth and will benefit from our growth,” he said of Amazon. “It's so large, given just the breadth of products that they help sell, as well as the number of consumers who touch it, and so we're very interested to learn what works for the brands who sell on Amazon.”

Affirm has high hopes for a new debit card, which will be available to eligible customers by the end of the year and allow them to finance more purchases in installments. CEO Max Levchin recently told investors that the company wants that Debit+ card to be "top of the wallet" for consumers’ household expenses like groceries and gas. That effort comes as inflation skyrockets to multi-decade highs.

Critics of the industry have argued the ease with which consumers can access credit through BNPL services like Affirm encourages people to overextend themselves, taking on too much debt by purchasing goods through installments. The Consumer Financial Protection Bureau, the federal agency that oversees the industry, has echoed those concerns, but industry executives have rejected the criticisms.

“If you think about it, 70%-plus of commerce is still being conducted offline,” Linford said. “And the reality is, until the industry figures out a way to create a really great offline experience, we're not going to move the needle.”

By Jonathan Berr on June 15, 2022
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