Affirm (AFRM) Shares Gain on Its Partnership With Target
Shares of Affirm Holdings, Inc. AFRM rose following its tie-up with retailer Target Corporation (TGT). The partnership will allow customers shopping at the Target stores to avail the company’s BNPL services.
The news cheered investors and added credence to this buy now pay later company’s business model. The partnership with the retailer will firm up Affirm’s position in the burgeoning and highly competitive BNPL space. Shares of the company rallied 22% after the news of partnership with Target surfaced.
Recently, Affirm tied up with the e-commerce leader Amazon.com, Inc. (AMZN) whereby the former will provide its instalment payments services to the latter on purchases valued at $50 or more.
The BNPL is an exploding space and even though the installment payments facility has been in existence since a long time, it was earlier presented in a traditional manner, carrying an interest, late payment and other additional charges. The BNPL trend got an impetus amid trust issues in legacy financial institutions.
The new-age customers, mainly Gen Z and the millennials, look for payment options that are easy, transparent, interest-free and dispersed via a digital medium and mobile phones. And the BNPL fits the bill perfectly here.
The BNPL market is expanding rapidly. According to Worldpay’s 2020 Global Payments report, “buy now pay later” is the fastest growing e-commerce payment method, globally. In North America, the BNPL market share is expected to triple to 3% of the e-commerce payments market by 2023.
In other regions, such as EMEA, “buy now pay later” already accounts for almost 6% of the e-commerce payment market and is expected to grow to almost 10% by 2023.
This vast market opportunity is enticing players and stiffening competition. The same is underscored by the recent deal wins. The payments company PayPal Holdings, Inc. PYPL is also exploring the sector. Another company Square, Inc. SQ recently announced a $29-billion acquisition of the Australian firm Afterpay, a rival of Affirm. The other major company in the BNPL space is the Swedish startup named Klarna.
The deal with Amazon is aptly timed as Affirm wanted a strong foothold amid its rivals, which are expanding their market shares, as well as a few other companies that are also participating in the installment payment program. For instance, last year, American Express Co. AXP introduced a BNPL option for its card holders with the name Pay It Plan It.
Affirm currently carries a Zacks Rank #3 (Hold) and is an emerging company, which has the potential to generate strong returns for its investors over the long haul.
Ever since it started trading in January this year, the stock has gained 42.3% compared with its industry's growth of 115.8%.
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