Nandini Roy Choudhury, writer
Brief news
- Affirm has expanded internationally by launching buy now, pay later services in the UK, marking its first entry outside the US and Canada.
- The company offers flexible payment options, including interest-free and interest-bearing plans, and has secured authorization from the Financial Conduct Authority.
- Affirm faces strong competition from established players like Klarna and PayPal, but differentiates itself with longer payment plans and a commitment to consumer-friendly practices.
Detailed news
Affirm, a startup that offers buy now, pay later services, made its first international expansion on Monday by introducing installment loans in the United Kingdom.
Affirm is a financial technology company based in the United States that was established in 2012 and provides a variety of flexible payment choices that are spread out over a period of time. Despite the fact that it does not impose any late fees, the firm claims that it underwrites each and every unique transaction before reaching a judgment on lending.
An service that will be made available in the United Kingdom by Affirm, which is authorized by the Financial Conduct Authority, will feature both interest-free and interest-bearing monthly payment modes. Its plans will have a fixed interest rate that is set based on the initial principal amount. This means that the interest rate will not climb or compound over time.
It is the first time that the company is entering a market outside of the United States and Canada with its expansion to the United Kingdom. On a global scale, Affirm has over 50 million users and more than 300,000 active merchants, including Amazon, Shopify, and Walmart.
Alternative Airlines, a flight booking website, and Fexco, a payments processing firm, were among the first merchants in the U.K. to offer Affirm as a payment method. Affirm anticipates that it will integrate additional brands in the months ahead.
Affirm’s CEO, Max Levchin, disclosed to CNBC that the organization had been conducting preparations for its entry into the United Kingdom for more than a year. According to Levchin, Affirm selected Britain as its initial overseas expansion objective due to the substantial demand from merchants in the country.
In an interview conducted last week prior to Affirm’s U.K. launch, Levchin described the market as “huge” and “English-speaking,” which renders it an ideal match for the business. “Affirm will eventually expand into markets that are not English-speaking, but this will necessitate additional effort,” he stated.
“There are numerous competitors in this area who are effectively catering to the market.” However, we initiated merchant outreach to determine whether the market was saturated in the local area. Is everyone satisfied with the level of service they receive? Levchin stated. “We experienced an immense amount of market pull.” It effectively sealed the deal for us.
Intense rivalry
The financial technology sector in the United Kingdom is characterized by intense competition. Klarna, Block’s Clearpay, Zilch, and PayPal, which entered the BNPL market in 2020, are the largest players in the buy now, pay later segment that Affirm concentrates on. The company will encounter no scarcity of competition in this sector.
According to Levchin, Affirm’s financing products differ from those of some of its competitors in that they enable consumers to amortize their expenditures over significantly longer periods. For instance, Affirm provides payment plans that can extend for up to 36 months.
Affirm’s entry into the United Kingdom coincides with the government’s consultation on strategies to regulate the buy-now, pay-later sector.
BNPL providers are required to provide consumers with precise information, ensure that they are not paying more than they can afford, and grant customers rights in the event of issues. These are among the key measures that the government is contemplating.
“In general, we support regulation that is thoughtful, that encourages the market to do the right thing while also ensuring that it is not overly burdensome for the end-user,” Levchin stated.
“It is wonderful that you are telling us to perform a lot of work in the background before you grant us money. Our ability to automate is really strong. In terms of creating software, we are quite skilled. He went on to say, “We’ll go do the work.” Putting the responsibility on the shoulders of the customer is risky.
Levchin stated that Affirm secured authorization from the Financial Conduct Authority, the country’s financial services overseer, after months of discussions with the regulator. He also cited the firm’s “pristine reputation” as a factor.
“There has never been a single dime levied for late fees. We don’t provide deferred interest programs. “We don’t engage in any of the anti-consumer activities that people struggle with,” Levchin said in an interview with CNBC. “So, we have this good, untarnished reputation of being just very thoughtfully pro-consumer,” she said. Merchants are particularly fond of this.
Source : CNBC News
