Affirm CEO Says Interest Rate Cut Could Drive BNPL Usage

As consumers navigate a challenging economic environment, they are increasingly adopting buy now, pay later (BNPL) options to manage their spending.

Affirm, a leading BNPL provider, reported Wednesday (Aug. 28) in its fourth quarter fiscal 2024 financial results that it saw 31% year-over-year growth in gross merchandise volume (GMV), reaching $7.2 billion, and a 48% surge in revenue, reaching $659 million. These increases underscore the growing appetite for flexible payment options as consumers deal with financial pressures.

Looking ahead, the company’s CEO Max Levchin told analysts on a call discussing these results, the potential interest rate declines could drive up usage.

“The most exciting thing about reductions at that fund rate is we’ll just have more active users, … we’ll have more repeat users, because we’ll be able to approve more people,” Levchin said.

The PYMNTS Intelligence report “Redefining Retail: Consumer Finance Trends Driving the Evolution of Pay Later Plans,” which drew from a survey of more than 2,600 United States consumers, revealed that one in three consumers had used BNPL in the last year. That share rises to 39% for those who live paycheck to paycheck without issues paying bills and 43% for those who do so with issues paying bills.

Plus, the report revealed, 59% of consumers use pay later plans to help them better manage their spending around big-ticket purchases such as home furnishings and appliances. Further PYMNTS Intelligence research revealed that 63% of BNPL users cited cash flow management as an important reason they chose the payment method.

Additionally, BNPL users are stepping up their frequency. Forty percent of all Affirm transactions in fiscal year 2024 came from consumers transacting quarterly or more often, a stark increase from just 10% in fiscal year 2021, according to the company’s letter to shareholders. The average transactions per active consumer reached 4.9 in Q4 2024.

This growth comes as consumers find themselves highly satisfied with their BNPL experiences. The PYMNTS Intelligence report “Divided, Not Conquered: Acquirer and Merchant Confusion Clouds Split-Payments Landscape” revealed that 79% of BNPL users are very or extremely satisfied with the plans they have utilized.

Now, the company aims to more than double Affirm cardholders’ spending and drive card adoption.

“Right now we’re on the order of $3,000 of annual spend. The right number, from my point of view, is $7,500 at least, and on the order of 20 million active cards. That’s the target,” Levchin said. “When [we’ll] get there, I don’t know, but that is what I think is both possible and required for us to succeed.”

As economic challenges persist, the adoption of BNPL services continues to rise, reflecting consumers’ desire for greater financial flexibility and control. The substantial growth reported by Affirm and the insights from PYMNTS Intelligence highlight the increasing reliance on BNPL as a tool for managing cash flow and making larger purchases more manageable.

With a significant portion of users expressing high satisfaction with their experiences, BNPL options have become a vital component of contemporary consumer finance, offering a convenient solution to meet the evolving needs of today’s shoppers.