Affirm Soars as Strong Holiday Shopping Propels BNPL Lender to Top Estimates

As the holiday shopping season heats up, Affirm is riding the wave of buy now, pay later (BNPL) demand, reporting a remarkable 40.7% revenue increase. With a growing network of over 320,000 merchant partners, can this fintech giant navigate the challenges of profitability while reshaping consumer spending habits?



Affirm's impressive growth can be attributed to several key factors:

1. Growth in Gross Merchandise Volume (GMV): Affirm's GMV grew by 77% in the fourth quarter of fiscal 2022 compared to the same period in fiscal 2021. This significant increase in GMV is a strong indicator of the company's success in facilitating transactions between consumers and merchants. (Source: "GMV for the fourth quarter of fiscal 2022 was $4.4 billion, an increase of 77%.")
2. Expansion of Active Merchant Base: Affirm saw a substantial increase in its active merchant base, growing from 29,000 to 235,000 merchants. This expansion is primarily driven by the adoption of Shop Pay Installments by merchants on Shopify's platform. A larger merchant base means more opportunities for Affirm to facilitate transactions and generate revenue. (Source: "Active merchants saw an increase from 29,000 to 235,000, driven primarily by the adoption of Shop Pay Installments by merchants on Shopify's platform.")
3. Increase in Active Consumers and Transactions: Affirm's active consumer base grew by 96% to 14.0 million, and total transactions grew to 12.0 million for the quarter, representing a 139% increase. This growth in active consumers and transactions indicates a higher demand for Affirm's services and a larger user base to generate revenue from. (Source: "Active consumers grew 96% to 14.0 million... Total transactions grew to 12.0 million for the quarter, an increase of 139%.")
4. Mix Shift Towards Lower Take Rate Programs: Affirm's revenue growth was also driven by a mix shift towards lower take rate programs such as Split Pay and large enterprise partnerships in the general merchandise category. This shift contributed to the 477% GMV growth in the general merchandise category. (Source: "Total revenue was $364.1 million, a 39% increase, driven primarily by continued GMV growth... offset by mix shift towards lower take rate programs such as Split Pay and large enterprise partnerships in the general merchandise category, which saw GMV growth of 477%.")
5. Improved Credit Metrics: Affirm's credit metrics have improved, with 30-plus-day delinquencies into December 2024 at 2.5%, the same rate seen before the pandemic. This improvement in credit quality can lead to better risk management and potentially lower provision for credit losses, contributing to Affirm's revenue growth. (Source: "30-plus-day delinquencies into December 2024 were 2.5%, the same rate that had been seen before the pandemic, at the end of 2019.")



These trends suggest that Affirm's revenue growth can continue in the future, driven by:

* Further expansion of the merchant base and consumer user base
* Increased GMV and transactions
* Continued mix shift towards lower take rate programs and strategic partnerships
* Improved credit metrics and risk management
* The growing demand for buy now, pay later (BNPL) services and Affirm's strong position in the market

As Affirm continues to grow and expand its reach, investors can expect the company to maintain its impressive revenue growth and solidify its place in the fintech industry. With a strong holiday shopping season and a growing network of merchant partners, Affirm is well-positioned to navigate the challenges of profitability and reshape consumer spending habits.