The buy now pay later platform Affirm is looking for revenue diversification. And it is looking for this via a subscription model, which appears to be a new twist for fintech companies like Affirm.
Revenue diversification is something we often talk about, especially with tech companies that reach a certain amount of scale and have perhaps become a bit too reliant on a single revenue stream. Think Apple and iPhones.
With Affirm, the revenue stream it seems to have become over-reliant on is interest on the loans it issues to consumers to buy designer shoes, Warby Parker glasses, and plane tickets to Bali.
Unlike many other BNPLs that are purportedly interest-free but clean up on late fees, Affirm charges interest on its loans at rates ranging up to 36%.
Introducing Affirm Plus
According to Bloomberg (which we read about in PYMNTS), Affirm will soon roll out a new subscription program called Affirm Plus that costs $7.99 a month and guarantees zero interest (on loans up to $2500). It also unlocks a higher interest rate on Affirm Savings. The latter, as the name suggests, allows Afrirm customers to set up savings accounts through the platform, which has thus far been more associated with helping consumers spend money they don’t have than with helping them build savings.
Still, Affirm getting into the savings business makes a certain amount of sense. After all, we have seen savings-based alternatives to BNP{L (under the Save Now, Buy Later banner) like Accrue Savings emerge. However, we have yet to see evidence that offering an easy way to save for a purchase is peeling any customers away from BNPL.
Back to subscriptions. Despite Bloomberg revealing the existence of the program, Affirm hasn’t offered any explanation for the new service, beyond an anodyne comment offered to PYMNTS via email.
We expect they will comment soon, however. Next week, the company’s CFO Michael Linford will participate in a shareholder fireside chat that Affirm plans to livestream. We can’t imagine the new subscription service won’t come up in a question from a shareholder.
If I were an Affirm shareholder, I would certainly want to know who Affirm sees as the target market for this solution. Who is going to pay $7.99 per month for access to interest-free loans on consumer goods? And just how much revenue diversification does the company really expect to achieve from this idea?
Perhaps we will tune in to the fireside chat to find out for ourselves.
