Affirm Makes Smaller Purchases BNPL’s Next Growth Test

Affirm's latest financial results illustrate the buy now, pay later (BNPL) provider expanding its reach into smaller, everyday purchases. In the most recent fiscal quarter, gross merchandise volume surged 36% year over year to $14.1 billion, while transactions increased even more dramatically by 41% to 53 million. Average order value declined 4%, bringing revenue up by 33% to about $1.2 billion.

A significant factor in this shift towards smaller transactions was the company's Pay in X product, which grew by 41% in volume. This 0% installment financing option attracted large merchants looking to fund selected offers on an ongoing basis, allowing them to complete sales, move inventory, or support product upgrade cycles without passing the financing cost onto the consumer.

CEO Max Levchin emphasized the affordability factor, stating that "free use of money is valuable to all consumers." He added that using Pay in X can help shoppers fit a considered purchase into their monthly outflows. Manufacturers, brands, and retailers can absorb the financing cost when they want to close a sale or move inventory.

Affirm's merchant ecosystem also expanded, with active merchants increasing by 51% to 571,000. Spending now occurs across a broader range of categories, including general merchandise, travel and ticketing, fashion and beauty, and services. Affirm Card, the company's credit card, saw a 124% increase in gross transaction value to $2.8 billion and a 125% increase in active cardholders to 5.2 million. Card attach reached 19% of active Affirm consumers, up nine percentage points from a year earlier.

While active consumers increased 21% to 27.8 million and transactions per active consumer rose 20% to 7.0, 30-day-plus delinquencies on monthly installment loans (excluding Pay in X and Peloton) dropped to 2.5%, down from 2.8% in the previous quarter but up from 2.3% a year earlier. Overall, Affirm's consumer base is performing well, with recent monthly installment cohorts tracking toward roughly 3.5% ultimate net charge-offs, consistent with the company's historical cohorts.