An interesting article from WSJ on BNPL - Amazon Is Doing It. So Is Walmart. Why Retail Loves ‘Buy Now, Pay Later.’ - https://www.wsj.com/articles/amazon-is-doing-it-so-is-walmar…
The article highlights a growing trend as retailers move to installment plans because they increase sales and customer acquisition.
The benefits/impact of BNPL:
- Afterpay expects to see an increase of $8.2 billion in sales this year.
- Affirm said last year, purchases were on average 85% larger.
- Banks are starting to offer installment options on their credit cards.
- Citigroup saw a 700% increase in the dollar amount of credit-card purchases converted to installment loans (July 2021 vs July 2020).
- BNPL companies can approve more customers than banks (including little to no borrowing history) - 53 million adults in the US don’t have a traditional credit score.
As has been noted in the earlier discussion on this board, Affirm has a partnership with Walmart and Amazon. It should be noted, Walmart ended its 10-year credit card partnership with Synchrony Financial because it increased loan approvals with BNPL. Walmart’s goal is “financial inclusion for all.”
Amazon is reviewing proposals to determine if they will continue to use JPMorgan Chase and & Co for their credit card. Amazon is seeking for “commitments to underwrite competitively to widen the acquisition funnel.” [G here: Is Affirm the only company that is competing for BNPL with Amazon?]
Synchrony, the largest US store-credit card issuer, will launch a BNPL plan in October. Capital One will test later this year. Wells Fargo, Bank of America, and Visa are exploring installment plans on their credit cards.
My take/thoughts: There will be a lot of competition as major credit card companies move into BNPL. How does this impact Affirm? Other than a first-mover advantage, I don’t understand how Affirm wins in this space to maintain hypergrowth. I’d be interested to hear from those that follow Affirm closely.
G