Affirm introduces new buy-now-pay-later options to capture more daily spending

By Dejah Miles

New options allow consumers to have more flexibility in their payback

Affirm Holdings Inc. is introducing new installment options to add flexibility and benefit customers who get paid semimonthly or monthly.

One new option will let customers pay in two installments, and another will let customers pay back in full whenever they can within 30 days, both without interest. As of now, users have the option to pay in four interest-free installments or make monthly paybacks either with or without interest.

"People love choices, especially in checkout," Vishal Kapoor, the company's head of product, said in an interview.

See also: Affirm's upbeat earnings reflect differentiated buy-now-pay-later approach

Government data show that 30% of nonfarm payroll employees receive paychecks either on a semimonthly or a monthly basis, meaning that the existing options aren't always inclusive of the ways that employees get paid. Paying in two installments could help consumers purchase items with the intention of using their next paycheck to settle their balance more efficiently.

Affirm (AFRM) is best known for being a buy-now-pay-later service that lets customers pay in installments, trusting that they'll be able to pay back the full amount within a certain period of time. The service is popular with customers who don't have credit cards or who are worried about high-interest credit-card debt.

Kapoor thinks the new options will help Affirm move toward lower "cart floors," meaning getting shoppers to use Affirm for more of the items that they purchase, especially lower-priced ones.

"Now we are shifting very meaningfully into daily and everyday spending," Kapoor said.

Max Levchin, Affirm founder and chief executive, previously said the company is looking to "unbundle all payments," diversifying the amount of options individuals have by moving beyond the traditional pay-in-four or monthly payback options.

Affirm ran tests for these new options. Those confirmed that customers are interested in having more flexible options and that these make consumers more likely to go through with a purchase.

Around the globe, there was an 18% rise in e-commerce transaction value using buy-now-pay-later services generally over the course of 2022 to 2023, according to Worldpay's Global Payments Report. The report projects a compound annual growth rate of 9% for buy-now-pay-later through 2027.

Out of all e-commerce transaction value, buy-now-pay-later made up a 5% share.

Read: Why Afterpay says it's primed for success as buy-now-pay-later moves offline

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06-06-24 0843ET

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