Affirm delivers triple-digit volume growth in its fiscal Q4 and hints at new solutions

The news: US-based buy now, pay later (BNPL) provider Affirm posted a strong fiscal Q4 (ended June 30, 2021) and provided insights on key factors that drove recent growth.

• Gross merchandise volume (GMV) surged 106% year over year (YoY), outpacing fiscal Q3’s 83% (ended March 31, 2021). On the company’s earnings call, CEO Max Levchin called out increased brand awareness, especially among younger consumers, as one of the factors that contributed to higher GMV.
• Revenues rose 71% YoY in Q4, slightly outperforming the previous quarter, when they increased 67% annually. Levchin said acquiring Canadian BNPL provider PayBright in January brought new business, which likely elevated revenue growth.
• Active merchants skyrocketed 412% YoY to hit 29,000, up from nearly 12,000 merchants in Q3. This growth was thanks in part to an expanded partnership with Shopify—which Affirm claims brought several thousand new merchants onto its platform—as well as other tie-ups with retailers like Dick's Sporting Goods and Neiman Marcus.
• Active consumers increased 97% YoY, reaching 7.1 million. This outpaced Q3, when active consumers grew 60% YoY. Expanded solutions like Affirm’s high-yield savings account, which Levchin highlighted in the company earnings call, helped increase engagement and may have also attracted new customers.

What’s next? A number of partnerships and products in the works should help Affirm carry growth in the coming months.

• Levchin said Affirm is testing the Affirm Debit+ card. The debit card—which Affirm may have hinted at in February—will integrate with existing checking accounts and let customers turn any transaction into installments through an accompanying app. The card could bolster GMV by providing customers easier access to Affirm’s pay later products—and giving Affirm a direct pathway to in-store retail.
• Affirm recently scored a key partnership with Amazon as the etailer’s first direct BNPL partner. The tie-up should help boost GMV and bring more users to Affirm, propping up the provider’s US share of BNPL users, which has gradually decreased over the past three years—contracting from 24% in 2019 to an estimated 13.4% this year, per our forecasts.

Our take: Rising concern surrounding BNPL—one-third of US consumers who’ve used a BNPL service have fallen behind on at least one payment, per Credit Karma—might increase the possibility of future US regulation. Although this may mitigate risks for consumers, it could also hinder growth for BNPL providers like Affirm.

Related content: Interested in learning more about BNPL and its position in the payments space? Check out the Alternative Credit section of The Payments Ecosystem report.