Affirm: Great Idea, Not-So-Great Company
Affirm (NASDAQ: AFRM) entered the market with high hopes of out-innovating and overtaking the many other fintech competitors in the "buy now, pay later" market. In 2021, the company experienced large losses and now has an unclear path to profitability. Despite record payment volume, those losses increased in its most recent quarter, leaving investors even more uncertain. The stock price has reflected these concerns, falling 62% from its recent highs in November. And while those shares might recover, the company behind them still isn't looking great.
Affirm and its "buy now, pay later" rivals allow consumers to pay for items in scheduled instalments, instead of using a traditional credit card. Credit card companies like Mastercard and Visa make money by charging their customers compounding interest and late fees. Affirm offers 0% interest in some cases, and simple interest plans with no late fees in others.
For 0% financing, Affirm makes money by charging merchants fees to use its services; those shops pay up in hopes that Affirm's flexible payment options will encourage customers to buy from them. Affirm prides itself on transparency, and on not profiting from customers' mistakes like traditional credit card companies.
Source Fool.com
