Affirm launches in the UK as ‘buy now, pay later’ market faces regulatory overhaul

Purchase now, pay later (BNPL) big Affirm is launching within the U.Ok., its first market exterior North America.

Affirm’s long-anticipated arrival comes as U.Ok. lawmakers mull new guidelines to carry BNPL corporations into line with different conventional shopper credit score companies, although such legal guidelines aren’t anticipated to return into impact till at least 2026 — lengthy sufficient for Affirm to construct traction and curry favor with shoppers and regulators alike.

Based in 2012, Affirm emerged from a startup incubator known as HVF that was arrange by PayPal co-founder Max Levchin (pictured above), who finally took the reins at Affirm in 2014 to drive its business push.

The corporate expanded past the U.S. and into Canada in 2022, and it has struck profitable partnerships with main e-commerce firms by the years. Affirm has been Shopify’s main financing accomplice for close to a decade, it has a partnership with Walmart, and Amazon final yr tapped Affirm because the first BNPL partner for Amazon Pay within the U.S. Extra lately, Affirm also secured Apple as a buyer.

‘Normalizing debt’

The BNPL mannequin is straightforward: Clients are invited to buy items on credit score, and may repay the debt in a number of interest-free installments. The BNPL supplier monetizes by service provider charges, or if a buyer requires an extended compensation interval, the mortgage might embody curiosity, too.

The BNPL market has long been on the U.K. regulatory radar, with incumbents such as Klarna and Clearpay typically criticized for encouraging impulse shopping for and normalizing debt. The U.Ok.’s Monetary Conduct Authority (FCA) has hitherto had some power to keep BNPL providers in check, however there are key exemptions, resembling companies that contain interest-free credit score, the place fixed-sum agreements stipulate that money owed be repaid inside 12 months.

However new guidelines within the works may carry BNPL firms totally consistent with different shopper credit score firms. The Labour authorities final month announced a recent BNPL session, with plans to introduce regulation to “guarantee folks utilizing BNPL merchandise obtain clear info, keep away from unaffordable borrowing, and have robust rights when points come up.”

It’s clear that Affirm is already pushing to place itself favorably each with patrons and the powers that be. Certainly, the corporate famous for the U.Ok. launch that its interest-bearing cost choices received’t contain compound curiosity — as a substitute, curiosity might be mounted and calculated solely on the unique quantity borrowed.

It’s additionally value noting that Klarna started charging late fees within the U.Ok. final yr, and that is one space the place Affirm is getting down to differentiate — it says it received’t be charging late charges or every other “hidden expenses.”

Head-to-head

It has been a bumpy few years for the BNPL sector. Klarna was valued at more than $45 billion in 2021, a determine that swiftly plummeted by 85% to $6.5 billion following the good post-pandemic “correction” many firms endured. Nonetheless, information emerged final week that Klarna’s valuation has risen again to $14.6 billion. It has been a equally turbulent time for Affirm, whose ups and downs have followed a trajectory paying homage to its European rival.

Following its 2021 IPO, Affirm noticed its market cap hit the giddy heights of $47 billion, however its stock took a giant hit afterwards, and its market capitalization dropped beneath $3 billion final yr. Nonetheless, Affirm’s shares have surged to greater than $13 billion in 2024, partly as a result of firm reporting a 48% enhance in income within the fourth quarter in comparison with a yr earlier, whereas losses narrowed to $45 million from $206 million. Levchin additionally predicted the corporate would attain profitability in 2025.

We’ve recognized for a while that the U.Ok. was seemingly going to be Affirm’s subsequent port-of-call exterior the U.S. and Canada. The agency’s chief income officer, Wayne Pommen, went on record this March to say that it will be concentrating on markets the place a few of its largest current companions have already got a presence.

Affirm isn’t launching within the U.Ok. with any of the identical big-name partnerships it has again house, however the truth that it counts the likes of Amazon, Shopify, and Apple as prospects within the U.S. implies that it wouldn’t be an enormous stretch to broaden such business partnerships to the U.Ok., too.

For now Affirm goes to market with the likes of flight reserving website Various Airways and funds processor Fexco. Extra U.Ok. and worldwide manufacturers are anticipated to observe.

Within the build-up to immediately’s launch, Affirm advised TechCrunch it has already employed about 30 staff, together with Ruth Spratt, who’s main the native cost. It’s additionally trying so as to add to its headcount by the rest of the yr. And much like its remote-first ethos elsewhere, staff aren’t tethered to a selected bodily hub.

The corporate wouldn’t affirm its subsequent plans for progress in Europe or elsewhere, however stated that it will be “taking the identical disciplined strategy” that it has all the time finished to any future enlargement.