For those who follow the buy now, pay later corner of the fintech space, Affirm is a must-follow. It remains the only U.S.-based pure-play BNPL stock out there. There is also Australia’s ZipCo, which trades on the ASX.
There are also other big public companies with BNPL components, like PayPal and Block (and Apple). But for a quick sense of how BNPL is doing, the best single place to look is Affirm.
So we find it interesting that Affirm has been having a banner year. At least until this week.
From the beginning of the year until Wednesday (when we briefly discussed Affirm’s interesting ride this year while recording Localogy’s This Week in Local podcast), the stock was up by 51%. From Wednesday to Friday the stock took a 12% dive. Was it something I said? In fairness, the broader markets had a similar end to their weeks.
Affirm still remains up a healthy 40% for the year. And the podcast episode doesn’t post until Monday.
PayPal-KKR Oddity?
On the same recording, we also noted another recent oddity in the BNPL space. Or at least we thought it was odd.
Digital payments giant PayPal, also a leading player in buy now, pay later, sold off more than $40 billion in European BNPL loans in a multi-year deal with private equity giant KKR. Much of the news coverage surrounding this announcement focused on KKR’s decision to use this pile of debt to enter the consumer finance arena. So why would PayPal unload this debt? The debt was not tagged as high risk. At least not in any public discussion of the deal.
To fund a stock repurchase appears to be the most immediate answer.
While we don’t make predictions here, there is at least one reason to believe that tougher times could be coming for BNPLs like Affirm and perhaps other fintech stocks.
Even before the recent U.S. Supreme Court ruling striking down The Biden Administration’s student loan debt forgiveness program, there was a looming resumption of loan payments set to begin in October.
And that prospect led some Wall Street analysts to raise alarms over whether the resumption of loan payments would potentially crowd out repayment of other debts, including credit cards and BNPL loans.
Earlier this week I interviewed Accrue Savings Founder Michael Hershfield for another upcoming episode of This Week in Local. Hershfield, who runs a savings-based fintech company that competes with buy now pay later platforms and credit card issuers, raised the student loan issue as a significant headwind for both BNPL lenders and credit card issuers during the interview.
“Obviously in the next few months, as the student loan crisis comes back, and rising delinquencies are on credit cards, we’re going to see what pain the American consumer might be feeling because of that significant credit usage over the last over the last couple of years,” Hershfield said during the podcast interview, which will air on July 17.
