The global Buy Now, Pay Later market is expected to grow at 22% CAGR to $20.4 billion by 2028 driven by the improvements in platforms, such as convenient and interest-free payments especially when shopping online. Affirm (Nasdaq: AFRM) is a leading player in the market that went public early this year.

Affirm’s Offerings

San Francisco-based Affirm was founded in 2012 by Jeffrey Kaditz, Nathan Gettings, and PayPal co-founder Max Levchin. Affirm was set up to improve the banking industry by being more accountable and accessible to consumers.

Over the last decade, Affirm has built a platform for digital and mobile-first commerce that simplifies the process for consumers to spend responsibly, for merchants to convert sales and grow, and for e-commerce to thrive. Affirm believed that legacy payment systems and traditional risk and credit underwriting models are restrictive to both consumers and merchants and are not suited for digital and mobile-first commerce. To address the issue, Affirm designed three key solutions: a point-of-sale payment solution for consumers, merchant commerce solutions, and a consumer-focused app.

Its point-of-sale solution allows consumers to pay for purchases in fixed amounts without deferred interest, hidden fees, or penalties. By allowing consumers to pay over time instead of paying upfront, helps increase consumers’ purchasing power and gives them more control and flexibility. It offers both true 0% APR payment options and interest-bearing loans where it charges simple interest on loans.

For merchants, Affirm offers effective commerce solutions that enhance demand generation and customer acquisition. Merchants are able to promote and sell their products, optimize their customer acquisition strategies, and drive incremental sales. Its flexible payment solutions allow merchants to solve affordability for their customers, drive revenue while avoiding discounting and expensive marketing channels. It also provides analytics to guide them about their marketing strategies.

Finally, its consumer-focused app is a one-stop-shop that allows consumers to manage payments, open a high-yield savings account, and access a personalized marketplace. Its marketplace acts as a discovery platform to enable consumers to find products and make purchases from partner merchants. Merchants also benefit from this app by providing customized products and financing solutions to consumers.

Affirm’s Financials

Affirm recently announced its fourth-quarter results. Revenues grew 71% to $261.8 million, ahead of the Street’s forecast by 16.7%. Loss per share of $0.48 was significantly behind the market’s estimated loss of $0.27 per share.

Among key metrics, Gross merchandise volume (GMV) through its platform grew 106% to $2.5 billion. Active merchants grew 412% to nearly 29,000 for the fourth quarter and active consumers soared 97% to 7.1 million. Transactions per active consumer increased 8% to 2.3 as of June this year.

Affirm ended the year with revenues growing 71% to $870.5 billion. Net loss was $2.88 per share compared with a loss of $2.63 per share a year ago.

For the current fiscal, Affirm expects GMV of $12.45-$12.75 billion, revenues of $1.16-$1.19 billion, and an adjusted operating loss of $145-$135 million.

Affirm’s Partnerships and Returnly Acquisition

Affirm has been expanding its presence in the market through partnerships. Recently, it entered into one with TicketNetwork that will allow consumers to purchase live event tickets while paying for them over time. The integration allows consumers to pay at their convenience while also choosing their preferred seats for events. Earlier last month, it also entered into a partnership with Amazon to provide its shoppers with flexible payment options.

Earlier this summer, Affirm completed the acquisition of Returnly for an estimated $300 million. Affirm was already an investor in Returnly. Prior to the acquisition, Returnly was privately held and had raised $30.2 million in funding from investor including Max Levchin, TheVentureCity, SV Angel, Craft Ventures, and Bonsai Partners.

San Francisco-based Returnly was set up in 2014 by Edurardo Vilar. It is a leader of online return experiences and post-purchase payments with a portfolio of over 1,800 merchants. It has helped process more than $1 billion in returns for more than eight million shoppers. Returnly’s solutions take care of the product return risk and offers merchants a turn-key solution around its financial technology that includes return management tools, hosted and fully branded end-customer touchpoints like package tracking, online returns and exchanges, and Green Returns. Its technology helps merchants remove friction from returns, drive loyalty, and retain more customers.

Affirm is not the only financing solution available to people. Consumers have access to crowd funding, peer-to-peer services, financial institutions and companies like FlexShopper which offer similar services. FlexShopper, for instance, allows consumers to buy products they like through weekly payment payments.

Affirm’s stock is trading at $148.47 with a market capitalization of $38.4 billion. It had reached a 52-week high of $153.49 earlier this month, and has recovered from the 52-week low of $46.50 in May. Affirm went public in January 2021 at a list price of $49 and a valuation of $11.9 billion. It raised $1.2 billion in the IPO.

Prior to going public, Affirm had raised $1.5 billion in funding from investors include Founders Fund, GIC, Lightspeed Venture Partners, Spark Capital, Caffeinated Capital, Ribbit Capital, Khosla Ventures, Morgan Stanley, Andreessen Horowitz, Founders Fund, and HVF Labs. Its last funding round was held in December 2020 when it raised $200 million at a valuation of $1.8 billion, more than double its. valuation of $800 million in 2016.