How Affirm hopes to ward off the growing BNPL competition

With more banks and fintech companies offering buy now/pay later lending, Affirm is trying to differentiate itself by making it easier for merchants to integrate its product.

The San Francisco-based company is an early adopter of a Fiserv point-of-sale technology that places BNPL offers into the checkout flows of thousands of merchants.

"We want to be able to offer Affirm access with just a few clicks and not a lot of integration work," said Geoff Kott, chief revenue officer at Affirm. 

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Fiserv is supporting the direct integration of BNPL into products such as its Carat omnichannel commerce system for larger businesses and its Clover point of sale business management tool for small to mid-sized businesses. 

"Consumers are really attracted to BNPL, they find it to be a valuable payment option, and we want to make it simple for merchants to add these options," said Mark Hennin, a senior vice president and head of value-added services at Fiserv.

Fiserv's deal with Affirm is not exclusive, and Fiserv will sell its BNPL bundle to other fintechs and financial institutions in its client network in an effort to make it easier for merchants to offer a variety of BNPL options alongside general payment processing. 

"If [merchants] can do a one-time integration, they can have access to Carat, Clover and BNPL providers," Hennin said. 

Affirm is battling a growing range of competitors in the BNPL market.

Visa recently added BNPL to its "Visa Ready" program, which connects card issuers to technology firms. The BNPL addition, which is designed to allow more banks to offer the fast-growing product, also includes access to the payment technology companies ACI Worldwide and FIS, as well as card-issuing platforms. Mastercard is also making it easier for banks to offer BNPL through partnerships with digital card technology providers.  

Meanwhile, the BNPL provider Splitit, which works more directly with banks than other fintechs, is pitching its ability to support BNPL lending in the background for card issuers. 

"There can only be a few BNPL options at the point of sale, so you want to be able to quickly acquire merchants at scale," said Ariana-Michele Moore, an advisor in Aite-Norvarica's retail banking and payments practice. 

Affirm's strategy is to connect through direct merchant integrations, and through strategic partnerships that accelerate its ability to reach consumers.  It's also hoping to enter new markets and cement its position as the so-called top-of-wallet BNPL choice for younger consumers.

As more consumers flock to BNPL, younger people are particularly interested in the product. About 75% of BNPL users are millennials and members of Generation Z, and these groups are expected to remain the primary BNPL borrowers for the next three years, according to eMarketer.

"These younger consumers won't complete a purchase unless there's a BNPL option at checkout," Affirm's Kott said.  

By working with Fiserv at this early stage, Affirm hopes to get a jump on reaching consumers and merchants in the health care and travel markets, where BNPL is starting to take hold as a payment and financing option. Affirm and Klarna have both recently entered partnerships with travel companies.  

"We want to be able to offer Affirm access with just a few clicks and not a lot of integration work, particularly with inflation taking off and people looking for financing alternatives," Kott said.

He noted that Fiserv's technology enables 12,000 financial transactions per second. Such scale should help fuel Affirm's growth, he said.

"We want to be able to get BNPL to merchants through their own operating system," Kott said.

Affirm struck a similar partnership with the Dutch payment processor Adyen in 2020. It placed Affirm as a BNPL option at the point of sale for Adyen's merchants.

Affirm has an existing roster of more than 207,000 merchants, including Walmart, Williams Sonoma, Target, Shopify and Peloton. It has 12.7 million active consumers. 

Notably, Affirm is also Amazon's fintech BNPL provider, giving Affirm potential access to Amazon Prime's 200 million subscribers. In addition, Affirm recently introduced Debit+, a new Visa debit card that gives consumers 24 hours to split any eligible purchase of up to $1,000 into an interest-free loan repayable within four installments due every two weeks. Groceries are an early use case for Debit+, according to Affirm.

Big-name clients such as Amazon are important, but they are not the whole market. "[Fiserv's] Clover targets small to medium-sized businesses, so that helps Affirm target that segment," Moore said. 

FIS, a direct competitor of Fiserv, did not answer a request for comment on its involvement with Visa Ready and its general BNPL strategy. Both Fiserv and FIS have added merchant technology to their existing slate of products through acquisitions. Fiserv bolstered its merchant acquiring capabilities when it acquired First Data in 2020, giving the company access to Clover and other merchant technology. 

Among payment technology firms, PayPal has the largest share of the U.S. BNPL market at just under 50%, according to research from Arizent, American Banker's publisher. Affirm has 12% of the market, as does Block's Afterpay. Klarna has just under 10%.

BNPL lending is traditionally positioned as an alternative to credit card debt. While traditional card issuers have not played a major role in the BNPL market so far, that is changing, as large banks like Synchrony Financial, Capital One Financial, U.S. Bancorp and JPMorgan Chase are pursuing the market.  

"They're all competing for the top of the market, and there's so many firms out there," Moore said. 

Kate Fitzgerald contributed to this story.