Affirm's Strong Execution Amid Pandemic, Buy Now Pay Later Secular Trend

Affirm has demonstrated strong execution since its IPO in 2021. Despite the pandemic's impact on fintech, the company has shown that buy now, pay later is a secular trend with strong and growing demand. However, the stock has been downgraded due to the company's valuation and competition from larger players. Despite this, Affirm's execution and growth potential make it an attractive investment for the long-term.

Sweden-based Klarna Group (KLAR) is set to make a significant entry into the public market with its initial public offering (IPO). The company, a major player in the buy now, pay later (BNPL) consumer financing market, aims to raise up to $1.27 billion. This IPO will see Klarna's shares priced between $35 and $37 and listed on the New York Stock Exchange.

Klarna has grown rapidly since its inception in 2005, becoming one of the largest commerce networks in the world. As of June 30, 2025, the company serves approximately 111 million active consumers and 790,000 merchants in 26 countries, facilitating $112 billion of gross merchandise volume in the last twelve months. In its most recent fiscal year ended June 30, 2025, Klarna reported total revenue of $3 billion, representing a 17% year-over-year growth. Despite an operating loss of $225 million, the company achieved an adjusted operating profit of $151 million, marking a 29% decrease and a 148% improvement year-over-year, respectively [1].

Klarna's IPO comes amidst intense competition in the BNPL market. Affirm Holdings (AFRM), another major player, has seen its stock advance 45% in 2025. Affirm operates mainly in the U.S., while Klarna's biggest market is Europe. Both companies have recently secured new deals with Apple (AAPL), further intensifying the competition. Other notable competitors in the BNPL space include Afterpay, PayPal Holdings (PYPL), Sezzle, and Block's Afterpay, among others.

The BNPL market is poised for significant growth, driven by increasing consumer demand for flexible payment options, the rise of e-commerce, and advancements in financial technology. The market is expected to continue expanding, with emerging markets presenting substantial growth opportunities. However, the market faces challenges such as regulatory scrutiny and concerns over consumer debt. The European Union has introduced regulations aimed at enhancing consumer protection in the BNPL sector, which could impact market growth [2].

Despite the competition, Klarna's strong market presence and innovative services make it an attractive addition to the BNPL landscape. Its recent partnership with Walmart (WMT) and other major retailers underscores its commitment to expanding its reach and market share. As the BNPL market continues to evolve, Klarna's IPO signals a new phase of growth and innovation in the fintech sector.

References:
[1] https://www.investors.com/news/technology/klarna-klar-ipo-affirm-stock-bnpl-market/?mod=newsviewer_click&refcode=aflMarketWatch&src=A00619
[2] https://www.globenewswire.com/news-release/2025/09/02/3142840/28124/en/Buy-Now-Pay-Later-Market-Outlook-to-2030-with-Detailed-Profiles-of-Afterpay-Klarna-Affirm-PayPal-Sezzle-FlexiPay-PayLater-Pro-SplitIt-EasyPay-Later-and-BuyNow-PayLater-Solutions.html