Affirm Makes Smaller Purchases BNPL's Next Growth Test

Affirm’s latest quarter shows buy now, pay later (BNPL) moving deeper into everyday spending, where affordability depends less on financing one large purchase and more on giving consumers flexibility across a growing number of transactions. That pattern showed up clearly in the numbers for the fiscal fourth quarter released Thursday (Aug. 27). Gross merchandise volume rose 36% year over year to $14.1 billion in the latest quarter, while transactions rose faster, up 41% to 53 million. Average order value fell 4%. Revenue increased 33% to about $1.2 billion. Part of the lower-ticket activity came from Pay in X, Affirm’s short-term 0% installment product. Pay in X volume grew 41%, helped by large merchants funding selected offers on an ongoing basis. CEO Max Levchin described the appeal in affordability terms during the analyst Q&A. “Free use of money is valuable to all consumers,” he said, adding that one use case is helping a shopper fit “a considered purchase” into monthly outflows. The merchant economics sit behind many of those 0% offers. Levchin said retailers, manufacturers and brands can absorb the financing cost when they want to complete a sale, move inventory or support product-upgrade cycles. Longer-duration 0% offers also place more weight on underwriting because the consumer isn’t supplying interest revenue to offset credit risk. Basket size helps determine which financing option appears. A merchant with lower average order values may lean toward Pay in X, while larger purchases can support three-month or other 0% installment structures. Affirm Card Changes Where BNPL Gets Used Affirm Card is widening the addressable transaction set. Card GMV rose 124% to $2.8 billion, while active cardholders increased 125% to 5.2 million. Card attach reached about 19% of active Affirm consumers, up nine percentage points from a year earlier. Direct-to-consumer GMV grew 49% to $4.7 billion. Levchin said Affirm wants both higher card adoption and more spending per cardholder, but he framed the objective around credit control. “Your job is to help someone spend money responsibly,” he said. That becomes more important as frequency rises. Active consumers increased 21% to 27.8 million, while transactions per active consumer rose 20% to 7.0 over the trailing 12 months. Thirty-day-plus delinquencies on monthly installment loans excluding Pay in X and Peloton were 2.5%, down from 2.8% in the previous quarter but up from 2.3% a year earlier. Sixty-day delinquencies were 1.5%, compared with 1.4% a year ago, while 90-day delinquencies were unchanged at 0.6%. Recent monthly installment cohorts are tracking toward roughly 3.5% ultimate net charge-offs, consistent with Affirm’s historical cohorts, while recent Pay in 4 vintages remain below 1% of GMV, according to the company. Levchin said the company’s consumer “is doing fine,” but he pushed back on the idea of broadly l...