In a strong indication as to how the credit market is changing, Affirm has announced that it is planning to launch a debit based payment card allowing users to pay for some purchases in instalments, as the buy now, pay later (BNPL) sector booms.
Affirm has become one of the most well-known buy now, pay later firms in the US, giving consumers the option to easily spread payments for online purchases.
Companies in the sector, including Sweden’s Klarna and Australia’s Afterpay, have seen business blossom over the past year as consumers shopped online more during the pandemic.
Affirm’s card, which it expects to be available later this year, will allow shoppers to split the cost of some in-store purchases over a period of time, but they can still choose to pay up front as with a normal debit card.
The card will offer interest-free and simple interest-bearing loans, said CEO Max Levchin, adding that more than a third of US consumers have used a BNPL service with debit transactions accounting for 30% of all payments.
“Yet, there is no card that currently allows consumers to make the choice between paying upfront or over time. We thought it would be very powerful to combine the two,” he said.
Oliver Wyman estimate BNPL firms facilitated between $20-25 billion in transactions in the US last year, and there are prediction that BNPL will be worth 10% of the UK e-commerce market, but some regulators are concerned that spreading payment encourages customers to spend more than they can afford.
The UK’s Financial Conduct Authority has said that “buy now, pay later” credit deals offered by online retailers pose a “significant potential for consumer harm” and require regulation “as a matter of urgency”.
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