Buy now, pay later (BNPL) giant Affirm is launching in the UK, its first market outside of North America.
Its long-awaited arrival comes as British lawmakers consider new rules to bring BNPL companies in line with other traditional consumer credit services, although those laws are not expected to come into force until at least 2026 – long enough to that Affirm can gain ground, and attract the favor of consumers and regulators.
Founded in 2012, Affirm grew out of a startup incubator called HVF, created by PayPal co-founder Max Levchin (pictured above), who eventually took the reins of Affirm in 2014 to drive its commercial push . The company has expanded beyond the United States and into Canada in 2022, and has formed lucrative partnerships with major e-commerce companies over the years. Affirm has been Shopify’s primary financial partner for nearly a decade, not to mention Walmart and Amazon, which have used Affirm. as Amazon Pay’s first BNPL partner in the US last year. More recently, Affirm also secured the mighty Apple as a client.
“Normalize the debt”
The BNPL model is simple: customers are invited to purchase goods on credit, repaying the debt in interest-free installments, with the BNPL provider monetizing through merchant fees. Or, when the customer may require a longer repayment period, the loan may also include interest.
The BNPL market has long been on the radar of UK regulators, with incumbents such as Klarna and Clearpay often criticized for encouraging impulse buying and normalizing debt. The UK’s Financial Conduct Authority (FCA) has until now had some power to police BNPL providers, but there are key exemptions, such as services that involve interest-free credit, for which agreements fixed amount stipulate that debts must be repaid within 12 months.
But new rules in the works could bring BNPL companies fully in line with other consumer finance companies. The Labor government announced a new consultation on BNPL last month, with the intention of introducing regulation to “ensure that people using BNPL products receive clear information, avoid unaffordable borrowing and have robust rights when problems arise.”
It’s clear that Affirm is already working to position itself favorably with customers and the powers that be. Indeed, the company notes for the UK launch that its interest-bearing payment options will not involve compound interest. Instead, interest will be fixed and calculated entirely on the original amount borrowed.
It’s also worth noting that Klarna started charging late fees in the UK last year, and this is an area where Affirm is looking to differentiate itself: it says it won’t charge late fees or any other “hidden fees”.
Face to face
The last few years have been difficult for the BNPL sector. Klarna was valued at over $45 billion in 2021, a figure that quickly fell 85% to $6.5 billion following the great post-pandemic “correction” suffered by many companies – however, the News emerged last week that Klarna’s valuation increased again to $14.6 billion. . It’s been a period of similar turbulence for Affirm, whose ups and downs have followed a trajectory reminiscent of its European rival.
After its IPO in 2021, Affirm saw its market capitalization reach the dizzying heights of $47 billion, but its shares took a major hit, with its market capitalization falling below $3 billion last year. However, Affirm shares have soared to over $13 billion in 2024, with the NASDAQ-listed company recently reporting a 48% year-over-year jump in fourth-quarter revenue and losses widening from $206 million. at $45 million. Levchin also predicted profitability in 2025.
We’ve known for some time that the UK would likely be Affirm’s next port of call outside of the US and Canada, with the company’s chief revenue officer, Wayne Pommen, publicly stating that he would target markets where some of its largest existing partners are already present.
For its UK launch, it doesn’t have the same big brands it has domestically, but the fact it counts Amazon, Shopify and Apple as customers in the US means it doesn’t It wouldn’t be a huge effort to expand such business partnerships in the UK. For now, however, Affirm will market products such as flight booking site Alternative Airlines and payment processor Fexco, with “other UK and international brands expected to follow”.
In the lead-up to today’s launch, Affirm told TechCrunch that it has already hired about 30 employees, including Ruth Spratt who is leading the local charge, and is also looking to increase its headcount until the end of the year. And like the telecommuting philosophy elsewhere, workers are not tied to a particular physical center.
The company did not confirm its upcoming growth plans in Europe or elsewhere, although it said it would “take the same disciplined approach” it has always followed for any future expansion.