Consumers Embrace 'Buy Now, Pay Later' Trend; Affirm CEO Optimistic About Economy

Max Levchin, CEO of Affirm Holdings Inc. AFRM, asserts that the economy shows signs of resilience, contrary to popular belief. Consumers are not shying away from spending and are leveraging flexible payment options like Buy Now, Pay Later (BNPL). 

"The economy is in a better shape than popular opinion will have you believe … From where we sit, people are spending," said Levchin in an interview with Yahoo Finance. 

He also emphasized that the narrative around persistent high interest rates negatively impacting Affirm is misleading.

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"There is an oft-repeated narrative that it’s a huge problem for Affirm that the rates are not coming down. And that’s just plain inaccurate," Levchin said during the interview. "So long as we are keeping job losses in check, people are able to spend, people are able to transact, people are also able to pay their bills, and that’s really good for Affirm."

Affirm’s Buy Now, Pay Later service allows consumers to make purchases with an initial interest-free period of two weeks. A 15% annual percentage rate (APR) is applied if payments extend beyond this period.

Despite economic challenges and inflation increasing by 3.5%, Affirm’s model continues to attract and retain consumers. Its approach seems to resonate with consumers, as reflected in its financials and user growth.

Over the past year, the number of active users on Affirm's platform surged by 18%, from 15.1 million to 17.8 million. 

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The company also saw a substantial 51% increase in revenue during the same period, suggesting a robust consumer shift toward using debt as a means to manage spending on retail goods.

However, this trend does highlight broader economic pressures. 

With the average American now saving just 4.51% of their disposable income, the reliance on credit facilities like those offered by Affirm is becoming more pronounced.

Tools like Affirm’s BNPL are making it easier to spend during tough economic times, making them indispensable for many. However, with retail prices rising, the long-term impacts of this increasing dependency on deferred payment plans are yet to be fully realized.

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