The giant Affirm from , buy now, pay later (BNPL extension), launches in the UK, its first market outside North America.
Its long-awaited arrival comes as UK lawmakers mull new rules to bring BNPL companies in line with other traditional consumer credit services, although such laws are not expected to come into force until at least 2026That's plenty of time for Affirm to build traction and win favor with consumers and regulators alike.
Founded in 2012, Affirm emerged from a startup incubator called HVF, created by the co-founder of PayPal.Max Levchin, who eventually took the reins of Affirm in 2014 to boost its business momentum. The company expanded beyond the U.S. and Canada in 2022. and has built lucrative partnerships with major e-commerce companies over the years. Affirm has been Shopify’s primary financial partner for nearly a decade, not to mention Walmart and Amazon, which chose Affirm as Amazon Pay’s first BNPL partner in the US last year. More recently, Affirm also landed the mighty Apple as a customer.
Normalizing the debt
The BNPL model is simple: customers are invited to buy goods on credit, paying off the debt in several interest-free installments, and the BNPL provider monetizes through merchant fees. Or, where the customer requires a longer repayment period, the loan may also include interest.
The BNPL market has long been on the UK regulatory radar, with incumbents such as Klarna and clearpay often criticized for encouraging impulse buying and normalizing the debt. The UK's Financial Conduct Authority (FCA) has so far had some power to keep BNPL providers in check But there are key exemptions, such as services involving interest-free credit, where fixed-sum agreements stipulate that debts must be repaid within 12 months.
But new rules in the works could bring BNPL companies fully in line with other consumer credit companies. The Labour government last month announcing a new review into BNPL, with plans to introduce regulations to “ensure that people using BNPL products receive clear information, avoid unaffordable loans and have strong rights when problems arise”.
It’s clear that Affirm is already pushing to position itself favorably with both funders and the powers that be. Indeed, the company notes for the UK launch that its interest-bearing payment options will not involve compounding interest; instead, interest will be fixed and calculated entirely on the original amount borrowed.
It is also worth noting that Klarna started charging late fees in the UK last year, and this is one area where Affirm is aiming to differentiate itself: It says it won't charge extra for late payments or any other "hidden fees."
Face to face
It’s been a tough few years for the BNPL sector. Klarna was valued at over $45 billion in 2021, a figure that quickly plummeted by 85% to $6,5 billion following the major post-pandemic “correction” endured by many companies. It has increased again to 14.600 billion dollarsIt has been a similarly turbulent time for Affirm, whose ups and downs have followed a trajectory reminiscent of that of its European rival.
Following its 2021 IPO, Affirm saw its market cap reach a dizzying height of $47 billion, but its stock took a huge hit, with its market cap falling below $3 billion last year. However, Affirm stock has surged to over $13.000 billion by 2024, and the NASDAQ-listed company is looking to expand its portfolio to $XNUMX billion. recently reported a 48% year-over-year increase in fourth-quarter revenue and a drop in losses from $206 million to $45 million. Levchin also predicted profitability in 2025.
We've known for some time that the UK would likely be Affirm's next port of call outside the US and Canada, and the company's chief revenue officer Wayne Pommen said which would target markets where some of its most important partners already have a presence.
For its UK launch, there aren’t any of the same big-name brands it has domestically, but the fact it counts Amazon, Shopify and Apple as US customers means that wouldn’t be a huge problem right now – Affirm is set to service the likes of flight booking site Alternative Airlines and payments processor Fexco, with “other UK and international brands expected to follow”.
In the run-up to today's launch, Affirm said it has already hired about 30 employees, including Ruth Spratt who is leading the local charge, while also looking to increase its headcount during the rest of the year. And similar to its Digital First spirit elsewhere Workers are not tied to a particular physical facility.
The company did not confirm its future growth plans in Europe or elsewhere, but said it would “take the same disciplined approach” it has always applied to any future expansion.
