Affirm’s first earnings present the increase from the BNPL growth

  • Affirm reported an increase in gross sales and active customers.
  • But it has to cope with increased competition and regulatory scrutiny to keep growth going.
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U.S.-based Affirm Buy Now, Pay Later (BNPL) reported a 55% increase in gross merchandise volume (GMV) annually, hitting 2 in the second quarter of fiscal 2021 (ended Dec 31, 2020), $ 1 billion earnings report since going public in January 2021.

Percentage of US consumers who have used a BNPL service

Affirm reported a 55% annual increase in gross merchandise volume as consumers turn to BNPL services.


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The company closed 2020 with 4.5 million active customers, an increase of 52% over the previous year, while the dealer base grew 90% annually over the same period. Looking at customer activity, Affirm said that its customers made an average of 2.2 transactions over the reporting period, an annual increase of 7%. Affirm’s latest results are due to the growing popularity of BNPL services throughout the coronavirus pandemic as consumers turn to flexible payment options.

Despite its 2020 success, Affirm could face some challenges as competition intensifies and regulators scrutinize BNPL services.

  • More and more companies are entering the BNPL space – which may make it harder for Affirm to stand out. The market has been inundated with companies keen to capitalize on the BNPL wave, including financial institutions and banks: PSCU and Chase are two recent examples. These types of market participants in particular could make it difficult for traditional BNPL providers like Affirm to stand out because they have an existing customer and customer base to market their installment loan services to.
  • Global regulators are starting to crack down on BNPL providers as the consumer risks associated with these offerings increase. The UK was the first country to adopt the BNPL regulation to protect consumers from debt as the offering continues to grow in popularity across the country. In the meantime, the Central Bank of Singapore is reviewing its regulatory approach to BNPL offerings, indicating that restrictions may be on the way. And in Affirm’s home market, U.S. lawmakers could seek to regulate the BNPL market after worryingly reports that 40% of U.S. consumers who used a BNPL service missed a payment. Increased global control can lead to operational changes that can affect Affirm’s volume potential.

Carving out a niche could help Affirm differentiate itself from the competition and position itself for growth when BNPL regulation comes in the pipeline. It might be beneficial for Affirm to focus on part of the retail sector rather than trying to compete with the multitude of other BNPL vendors in the space for total retail market share.

For example, according to Max Levchin, CEO of Affirm, the company could focus its business on the fitness and outdoor segment, which made up the bulk of its business in 2020. This would be especially good for Affirm, as sportswear and home fitness products have taken off during the pandemic.

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