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

Buy now, pay later (BNPL) giant Affirm is launching in the UK, its first market outside of North America.

Its long-awaited arrival comes as UK lawmakers put together new rules to bring BNPL firms in line with other mainstream consumer credit services, although the rules are not expected to come into force until at least 2026 – long enough for Affirm to build participate, and curry favor with consumers and regulators alike.

Founded in 2012, Affirm grew out of an early incubator called HVF, founded by PayPal co-founder Max Levchin (pictured above) who eventually took over from Affirm in 2014 to further its business. The company expanded beyond the US and entered Canada in 2022, and has established strong relationships with major ecommerce companies over the years – Affirm has been Shopify’s major financial partner for nearly a decade, not to mention Walmart, and Amazon, which touched Affirm. as BNPL’s first Amazon Pay partner in the US last year. Recently, Affirm also secured the powerful Apple as a customer.

‘General credit’

BNPL’s model is simple: customers are invited to buy goods on credit, pay off the loan in several interest-free installments, and the BNPL provider makes money from the seller’s payments. Or, where the customer may need a longer repayment period, the loan may include interest, too.

The BNPL market has long been on the UK regulatory radar, with incumbents such as Klarna and Clearpay often criticized for encouraging unplanned purchases and normalizing credit. The UK’s Financial Conduct Authority (FCA) has so far had some powers to keep BNPL suppliers on hold, but there are important exemptions, such as services involving interest-free debt, where fixed-sum agreements mean the debt must be paid within 12 months.

But the new rules in the works can bring BNPL companies fully and other consumer credit companies. The Labor government last month announced a new BNPL consultation, with plans to introduce a regulation “to ensure that people using BNPL products get clear information, avoid cheap loans, and have strong rights when problems arise.”

It is clear that Affirm is already striving to position itself well with sponsors and incumbents. Indeed, the company notes once established in the UK that its interest payment options will not include compound interest – instead, the interest will be fixed, and calculated entirely on the original loan amount.

It’s also worth noting that Klarna started charging late fees in the UK last year, and this is one area where Affirm is willing to differentiate itself – it says it won’t charge late fees or any other “hidden fees.”

Head to head

It has been a tough few years for the BNPL sector. Klarna was valued at more than $45 billion in 2021, a figure that quickly dropped by 85 percent to $6.5 billion following the massive post-pandemic “correction” that many companies endured – however, news emerged last week that Klarna’s value has rebounded it rose to $14.6 billion. . It’s been a similarly tumultuous period for Affirm, whose ups and downs have followed a trajectory reminiscent of its European rival.

After its 2021 IPO, Affirm saw its market cap reach $47 billion, but its stock took a big hit, when its market capitalization fell below $3 billion last year. However, with Affirm shares rising to more than $13 billion by 2024, the NASDAQ-listed company recently reported a 48% year-over-year jump in Q4 revenue, with losses falling from $206 million to $45 million. Levchin also predicted a profit in 2025.

We’ve known for some time that the UK is likely to be Affirm’s next port of call outside of the US and Canada, with the company’s chief revenue officer Wayne Pommen making history saying it will focus on markets where some of its biggest partners already have a presence.

With its launch in the UK, it doesn’t have the same kind of big names it has at home, but the fact that it counts the likes of Amazon, Shopify, and Apple as US customers means it won’t be big. extending such commercial partnerships to the UK For now, however, Affirm will market through flight booking site Alternative Airlines and processor Fexco, “with UK and international brands expected to follow.”

In the build-up to today’s launch, Affirm told TechCrunch that it has already hired in the region of 30 employees, including Ruth Spratt who heads local litigation, while also looking to increase its headcount over the course of the rest of the year. And in keeping with its far-from-first ethos elsewhere, employees aren’t tied to a particular physical hub.

The company would not confirm its next expansion plans in Europe or elsewhere, although it said it would be “taking the same disciplined approach” it has always done to any future expansion.