In a striking demonstration of its market dominance, Affirm has established itself as the undisputed leader in the United States’ buy-now-pay-later (BNPL) sector, capturing more than half of the industry’s revenue and a third of transaction volumes. The announcement came during the company’s fiscal first quarter earnings call, where CEO Max Levchin detailed the company’s remarkable growth trajectory and expanding market presence.
The financial technology giant reported impressive growth across key metrics, with total revenue surging 41% to reach $698 million. This substantial increase was accompanied by a notable improvement in the company’s revenue as a percentage of Gross Merchandise Volume (GMV), climbing to 9.2% from 8.8% in the previous year. The company’s GMV showed robust growth of 35% year-over-year, reaching $7.6 billion, significantly outpacing overall e-commerce sector growth.
The company’s expansion story is particularly evident in its user base and merchant network. Affirm’s active consumer count grew by 21% to 19.5 million, while its merchant network expanded at the same rate to include 323,000 active merchants. Perhaps more telling of the platform’s increasing consumer engagement is the 25% year-over-year increase in transactions per active consumer, which reached 5.1.
A standout performer in Affirm’s portfolio has been the Affirm Card, a Visa debit card that has shown remarkable momentum in the direct-to-consumer segment. The card generated $607 million in GMV, marking a 20% increase from the previous quarter and an impressive 171% surge year-over-year. The cardholder base has grown to exceed 1.4 million users, representing a 19% quarter-over-quarter increase. The card’s success is further emphasized by the growth in annualized GMV per user, which rose from $2,500 to over $3,000, while in-store usage significantly increased from approximately 25% to 45% during the fiscal year.
During the earnings call, Levchin emphasized the company’s strong unit economics, attributing the improved revenue performance to increased interest income and merchant fees. The company’s funding capacity has also seen improvement, rising to $16.8 billion from $16.1 billion in the fourth quarter. Levchin noted the robust market for whole loan purchasers and highlighted how favorable credit performance and private credit trends have created an advantageous environment for the company.
In terms of category performance, Affirm reported broad-based growth across most segments. The general merchandise category led the way with 47% growth, while electronics, equipment, and auto categories all exceeded 25% growth year-over-year. The only exception was the sporting goods and outdoors category, which experienced slight declines.
The company has also set its sights on international expansion, with a recent launch in the United Kingdom. Levchin identified a significant market opportunity in the UK for longer-term payment solutions, particularly for big-ticket items. He emphasized Affirm’s competitive advantage in this space, citing the company’s sophisticated underwriting capabilities and data infrastructure as key differentiators from traditional banks.
Addressing regulatory concerns, particularly regarding increased scrutiny of sponsor banks, Levchin expressed confidence in Affirm’s position. He emphasized the company’s established relationships with regulators and substantial investments in compliance, noting that regulatory scrutiny primarily impacts smaller, lesser-known players in the space.
Looking ahead to the holiday season, Affirm appears well-positioned for continued growth. The company reported strong merchant interest in 0% promotions and is working on harmonizing its financial programs across various channels, including fixed APRs, reduced APRs, and 0% APR offerings. This standardization effort extends to both card and digital wallet platforms, suggesting a more streamlined and consistent user experience across all payment methods.
Despite the positive earnings report and strong operational performance, Affirm’s shares experienced a modest decline of approximately 3% in after-hours trading. However, this slight dip comes against the backdrop of the stock having nearly doubled in value since the summer months, reflecting strong investor confidence in the company’s long-term prospects.
As the holiday shopping season approaches, Affirm’s dominant market position, expanding product offerings, and strong merchant relationships suggest the company is well-equipped to capitalize on the growing consumer demand for flexible payment solutions. With its technological infrastructure, robust underwriting capabilities, and increasing market share, Affirm appears poised to maintain its leadership position in the evolving BNPL landscape.
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