Payments

Affirm’s launch of a physical debit card propels BNPL into daily and offline spending

Affirm Card represents the most direct challenge yet to the credit card business from the “buy now, pay later” sector

The introduction by fintech company Affirm of a debit card represents the most direct challenge yet to the credit card business from the “buy now, pay later” sector, an industry analyst says.

“A big part of that is the delivery mechanism — the Affirm debit card will be a physical card that cardholders can use in stores or online, much like a credit card,” said Ted Rossman, credit card analyst at Bankrate and CreditCards.com. “Unlike most ‘buy now, pay later purchases,’ Affirm debit cardholders won’t need to reapply or requalify for each individual purchase.”

On February 25, Affirm unveiled the Affirm Card, which Rossman characterized as blurring the line between a debit card and credit card. Affirm’s “buy now, pay later” (BNPL) debit card will let consumers pay upfront from a bank account or pay later by splitting eligible purchases over $100 into four interest-free payments. If payments stretch out over a longer period, Affirm will offer a loan with an APR (annual percentage rate) ranging from 10% to 30% through Celtic Bank, Cross River Bank or Affirm Loan Services.

Affirm, which went public in January at a valuation surpassing $12 billion, plans to roll out the no-fee card later this year.

“We know consumers are looking for financial control and flexibility. In the last year, we’ve seen two key trends: huge growth of ‘buy now, pay later’ transactions, and consumer preference shift to debit cards over credit cards,” Max Levchin, founder and CEO of Affirm, said in a news release. “The Affirm Card combines the two, allowing Affirm to meet consumers where they are and empowering them to pay on their own terms.”

As Rossman noted on the Bankrate website, even before Affirm announced its debit card, a consumer could take advantage of its BNPL service through any retailer that accepts Visa cards by securing a one-use virtual card number from Affirm. In addition, Affirm has BNPL lending arrangements with retailers like Casper, Peloton, Walmart and Warby Parker.

“‘Buy now, pay later’ is a red-hot trend that hit critical mass in the 2020 holiday season, so this seems like a really good time for Affirm to launch something like this,” said Matt Schulz, chief credit analyst at LendingTree.

Rossman and Schulz expect other fintech companies to embrace BNPL debit cards like Affirm’s. Fintech rivals Afterpay and Klarna will closely watch the performance of Affirm’s card, they said.

“I see this as more of an evolution than a game changer. It’s a smart move for Affirm to broaden their offering and deepen their customer relationships. They’re giving people more choice and flexibility,” Rossman said.

“I could definitely see them adding more features over time. Rewards would be very interesting. Maybe they could take a page from other fintechs and have their own checking account, investing platform or peer-to-peer payments service, too,” he added.

Schulz described the BNPL market as the “Wild West,” populated by numerous players.

“What something like the Affirm Card has the potential to do is give Affirm a leg up on Klarna and other competitors by giving it something that really differentiates it. That type of thing will be key for companies that want to survive in the long run,” Schulz said.

The Affirm debit card comes along as the BNPL market continues to soar. A U.S. survey taken in October by Affirm found 54% of consumers were interested in embracing BNPL in 2021. A July survey by The Ascent, a personal finance website, showed nearly 38% of U.S. consumers had used a BNPL service like Affirm.

In a recent report, professional services firm KPMG predicted strong growth this year in embedded finance, including BNPL programs. “Embedded finance will emerge as the new North Star,” the report says.

Affirm’s first earnings report since its $1.3 billion IPO highlights the rise of BNPL. In the second quarter of its fiscal year, Affirm posted a 57% jump in revenue compared with the same time a year earlier and notched a 52% increase in active customers. Meanwhile, gross merchandise volume — a key measurement of sales activity — grew 55%.

Now, Affirm’s debit card should help it gobble up a bigger slice of the BNPL pie. That’s because the card expands the number of places where consumers can use Affirm’s BNPL offering, Schulz said. A recent report from Insider Intelligence forecasts the global BNPL market will ring up $680 billion worth of transactions in 2025, which would represent a nearly 140% surge versus 2018.

Chris Brendler, senior equity analyst at Seaport Global Securities, summed up the BNPL market this way during Affirm’s Feb. 11 earnings call: “It seems like there’s a little of a land grab right now with ‘buy now, pay later’ really taking off here in the U.S. and around the world.”

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