The news that Apple has introduced a buy-now-pay-later service, Apple Pay Later, caused shares of Affirm Holdings Inc. to drop 8% in Tuesday trading. Apple declared that it would start inviting select users to access a pre-release version of Apple Pay Later, with plans to offer it to all eligible users in the coming months. The announcement came as no surprise, considering that rumours about the tech giant planning to roll out a buy-now-pay-later service have been circulating for years.
Mizuho analyst Dan Dolev suggested that Affirm’s selloff on Tuesday was unwarranted, as the first news about this product had been around for almost two years and should already be reflected in AFRM’s stock price. The question that arises is whether Apple’s entry into the buy-now-pay-later market will disrupt existing players like Affirm.
There has been growing interest in the buy-now-pay-later space, with more and more consumers opting for this option for making purchases. These services allow users to break up payments into smaller instalments, which makes it easier to purchase more expensive items without draining their wallets. It’s a win-win situation for both consumers and retailers, as it leads to higher sales and repeat customers.
The buy-now-pay-later industry has been expanding rapidly in recent years, and the pandemic has only accelerated this trend. According to a report by ResearchAndMarkets.com, the global buy-now-pay-later market is expected to grow from $7.3 billion in 2019 to $33.6 billion by 2027, at a compound annual growth rate (CAGR) of 21.2%. This represents a huge opportunity for companies operating in this space.
Affirm, founded by PayPal co-founder Max Levchin in 2012, is one of the leading players in the buy-now-pay-later market. The company allows users to split payments into multiple instalments with no hidden fees or penalties, making it a transparent and affordable alternative to traditional credit cards. Affirm’s revenue has been growing rapidly, and in its most recent quarter, the company reported a revenue of $261.8 million, up 71% from the same quarter last year.
Despite the recent drop in its stock price, Affirm’s future looks bright. The company has established partnerships with several big-name retailers, including Walmart, Shopify, and Peloton. These collaborations have helped Affirm gain a foothold in the buy-now-pay-later market and reach a wider audience.
However, Apple’s entry into the buy-now-pay-later space could pose a threat to Affirm and other existing companies. Apple has a massive user base, and its integration of Apple Pay Later into its existing Apple Pay platform could make it easier for users to access this service. Moreover, Apple has a reputation for creating seamless and user-friendly products, which could make its buy-now-pay-later service more appealing to users.
That said, Affirm and other buy-now-pay-later providers still have an edge over Apple in some areas. Affirm allows users to create a personalised payment plan based on their budget and payback period, which Apple’s service may not offer. Affirm also has a strong focus on financial education and works with users to help them understand the cost of their purchases and avoid debt traps.
In conclusion, while Apple’s entry into the buy-now-pay-later market is a cause for concern, it is not necessarily a death sentence for existing providers like Affirm. The buy-now-pay-later market is growing rapidly, and there is room for multiple players to coexist. It will ultimately come down to which company can offer the most value to users and create a loyal customer base. Affirm’s focus on transparency, affordability, and financial education gives it an edge in this market, and the company’s partnerships with major retailers should help it maintain its position. However, it remains to be seen how Apple Pay Later will shape up and how it will impact the broader buy-now-pay-later landscape.