Buy now, pay later (BNPL) giant Affirm has entered the UK, its first market outside of North America.
The long-awaited introduction comes as UK lawmakers seek new rules to bring BNPL companies in line with other traditional consumer credit services. But those laws aren’t expected to go into effect until 2026, long enough for Affirm to build traction. We need to do both consumers and regulators a favor.
Founded in 2012, Affirm grew out of a startup incubator called HVF, founded by PayPal co-founder Max Levchin (pictured above). Max Levchin took over the helm of Affirm in 2014 to lead its commercial push. The company expanded beyond the U.S. into Canada in 2022 and has signed lucrative partnerships with major e-commerce companies over the years. Affirm has been a key financing partner for Shopify for nearly a decade, as well as Walmart and Amazon, which tapped Affirm. Last year, we became Amazon Pay’s first BNPL partner in the United States. Recently, Affirm also secured the mighty Apple as a customer.
‘Debt normalization’
The BNPL model is simple. Customers purchase goods on credit and repay debt in interest-free installments, and BNPL providers generate revenue through merchant fees. Alternatively, interest may be included in the loan if the customer requires a longer repayment period.
The BNPL market has long been on the UK regulatory radar, with incumbents such as Klarna and Clearpay often criticized for encouraging impulse buying and normalizing debt. The UK’s Financial Conduct Authority (FCA) has so far had some powers to keep BNPL providers in check, but there are key exemptions such as interest-free credit-related services and a requirement to repay debts within 12 months under fixed-value contracts. It is done.
However, new regulations currently in the works could bring BNPL companies fully in line with other consumer credit companies. Last month, the Labor government announced a new BNPL consultation, with plans to introduce regulations to “ensure people who use BNPL products receive clear information, avoid loans they cannot afford and have strong rights if problems arise”. .
It’s clear that Affirm is already working to position itself well for both its customers and those in power. In fact, the company said for the UK launch that the interest payment option will not include compound interest. Instead, the interest rate is fixed and calculated based on the amount originally borrowed.
It’s also worth noting that Klarna started charging late fees in the UK last year. Affirm is working to differentiate itself. It said it would not charge late fees or other “hidden costs.”
one to one
The BNPL sector has had a tough few years. Klarna was valued at more than $45 billion in 2021, a figure that plunged 85% to $6.5 billion after many companies underwent major “corrections” following the pandemic. However, last week news emerged that Klarna’s value had risen again to $14.6 billion. . It’s been a similarly turbulent time for Affirm, which has followed a trajectory of ups and downs reminiscent of its European rivals.
After its 2021 IPO, Affirm’s market cap hit a whopping high of $47 billion, but its stock took a hit last year, with its market cap falling below $3 billion. But Affirm’s stock price has soared to more than $13 billion in 2024, and the Nasdaq-listed company recently reported a 48% year-over-year increase in revenue in the fourth quarter and a decline in losses from $206 million to $45 million. Levchin also predicted profitability in 2025.
We’ve known for some time that the UK was likely to be Affirm’s next port of call outside the US and Canada, and the company’s Chief Revenue Officer Wayne Pommen has said on record that the UK will be the next market it targets. Our largest existing partners are already in place.
The UK launch won’t have the same big name brands here, but the fact that in the US it counts the likes of Amazon, Shopify and Apple as customers means it won’t be as big. But now Affirm is set to enter the market with the likes of flight booking site Alternative Airlines and payments processor Fexco, and “additional UK and international brands are expected to follow.”
In preparation for today’s launch, Affirm told TechCrunch it has already hired 30 employees, including regional director Ruth Spratt, and plans to increase headcount over the remainder of the year. Similar to the remote-first ethos elsewhere, workers are not tied to a specific physical hub.
The company has not confirmed its next plans for growth in Europe or elsewhere, but said it will “take the same disciplined approach” it has always taken to future expansion.
