Affirm and Zip forge new growth pathways as BNPL competition heats up

The news: Two buy now, pay later (BNPL) players made announcements this week that should help them maintain their market positions as other firms get involved in the space.

Affirm will enter the cryptocurrency space with a trading feature. CEO Max Levchin revealed plans to let customers buy and sell cryptos from their Affirm savings accounts, which launched last June, per CNBC—just weeks after BNPL competitor Zip said it would let merchants accept Bitcoin payments and eventually enable crypto trading.

• The integration can help Affirm keep up with Zip—as well as PayPal and other companies dabbling in both BNPL and cryptos. It should also help Affirm draw more customers to its savings app and give the provider more customer touch points, which may increase their spending potential.
• It can also help Affirm maintain a close-knit relationship with Gen Z and millennial consumers, which make up almost 75% of US BNPL users, according to our forecasts. This demographic also comprises 32% of crypto owners in the US, per Logica Research—making them likely to go for Affirm’s new solution and potentially other financial products, like its debit card.

Zip partnered with Adyen to scale its BNPL solution across Adyen’s global network. The BNPL provider will let the payment processor’s merchants—which include retailers like Microsoft and Gap—in Australia, New Zealand, the UK, and the US offer its BNPL service to their customers, per Finextra. Under the agreement, Adyen will also become Zip’s payment processing partner.

• Adyen reported $246 billion (EUR 216 billion) in processed volume in H1 2021, up 67% year over year (YoY)—reflecting the company’s vast scale. Partnering with Adyen could give Zip a major volume and visibility boost.
• The partnership may also help diversify Zip’s partner network by giving the BNPL provider access to nonretail companies like Booking.com and KLM—letting Zip take advantage of niche BNPL segments like travel.

The challenge: Product and geographic expansion are becoming increasingly necessary for incumbent BNPL providers like Affirm and Zip as new entrants join the space and threaten to eat up market share.

Just this month, Mastercard became the latest financial giant to enter the BNPL space with a proprietary BNPL solution in the US, the UK, and Australia planned for early 2022. Visa and major banking brands also jumped into the space—and their existing customer and merchant connections give them a market advantage against BNPL providers. Tie-ups and new products can help BNPL providers sustain customer engagement and open up new pathways to revenue growth.

Related Content: Interested in getting a deeper look at BNPL’s global growth outlook? Check out this BNPL chart report, where we give our take on market growth and potential challenges ahead.