Affirm’s Remarkable Turnaround in 2023
A year ago, Affirm was facing a bleak future due to rising interest rates, recession fears, and weakening consumer spending. However, in 2023, the point-of-sale lender experienced a remarkable turnaround. Its stock skyrocketed by 430%, outperforming all other U.S. tech companies valued at $5 billion or more. The company’s improved performance can be attributed to factors such as the Federal Reserve’s indication of interest rate cuts, increased adoption of Affirm’s buy now, pay later (BNPL) offerings by retailers, and a significant partnership with Amazon.
Created in 2012 by PayPal co-founder Max Levchin, Affirm competes with other BNPL companies like Klarna, Afterpay, and Zip. The BNPL model allows consumers to split their purchases into installments without accruing compounding interest. This payment option benefits both consumers and retailers.
Affirm’s Challenging Past and Recent Successes
When Affirm went public in January 2021, the COVID-19 pandemic drove the adoption of BNPL services. However, the company faced challenges in 2022 as its share price plummeted and interest rates soared. To navigate these difficulties, Affirm made strategic moves such as cutting its workforce and expanding into sectors beyond retail. The company’s recent successes include securing new merchant deals and offering BNPL loans at Walmart’s self-checkout kiosks.
Despite its impressive rebound, Affirm shares are still significantly below their peak in November 2021. Looking ahead to 2024, Affirm aims to retain users through international expansion and the introduction of new financial services products.
Skeptics and Regulatory Scrutiny
While many are optimistic about Affirm’s future, skeptics believe the company faces stiff competition from established players like PayPal and credit card companies that have entered the BNPL space. Additionally, concerns about users failing to make payments on time and the potential risks associated with BNPL loans have attracted regulatory attention.
Despite these challenges, Affirm remains confident in its ability to retain users and make data-driven lending decisions. The company’s default rates are low compared to industry peers, and it continues to enhance its offerings and partnerships.
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