More Transactions, Less Interest: Can Affirm Still Win BNPL?

Affirm Holdings, Inc. AFRM has developed a robust system to handle a higher number of transactions by leveraging its proprietary technology infrastructure, deep data capabilities and efficient risk models. Furthermore, Affirm integrates easily with merchant APIs, which helps maintain seamless transaction flows across a growing network of roughly 358,000 active merchants as of March 31, 2025. The company’s revenues are closely tied to the number of transactions processed on its platform, as each transaction generates potential revenues through either merchant fees or consumer interest income. Transaction count increased 46% year over year in the third quarter of fiscal 2025. Affirm offers flexible financing solutions including Pay-in-four biweekly plans, 0% APR monthly installments and interest-bearing loans. Despite a surge in transactions, concerns arise as the share of Affirm’s 0% APR in total GMV is growing. 0% APR monthly instalment GMV jumped 44% YoY in the fiscal third quarter 2025. AFRM generally makes less money from these loans compared with high-interest-bearing ones and it can affect its interest margin. Nevertheless, the company is intentionally pushing 0% APR plans to attract higher-quality borrowers and boost conversion metrics, which can lower risk and improve lifetime value. Also, it earns larger merchant fees from these transactions. If Affirm can continue scaling transaction volume while balancing its loan mix, the strategy could support sustainable growth even with thinner marginsHow are Competitors Faring?Some of Affirm’s key competitors in the buy now, pay later (BNPL) space include PayPal Holdings, Inc. PYPL and Visa Inc. V, both of which enjoy a strong presence in the BNPL market.PayPal offers BNPL services under the PayPal Pay Later brand across the US, UK, France, Germany, and Japan (via its Paidy brand). It processed 6 billion transactions in the first quarter of 2025. PYPL’s net revenues rose 1% year over year to $7.8 billion. Visa offers BNPL solutions via issuers and fintechs. Its processed transactions increased 9% year over year in the second quarter of fiscal 2025. V’s total revenues advanced 9% year over year, supported by year-over-year increases of 8% and 13% in payments volume and cross-border volume.Affirm’s Price Performance, Valuation & EstimatesShares of Affirm have surged 104.9% in the past year compared with the industry’s 42.3% growth. Image Source: Zacks Investment ResearchFrom a valuation standpoint, AFRM trades at a forward price-to-sales ratio of 5.38, below the industry average of 5.7.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for Affirm’s fiscal 2025 earnings implies 101.8% improvement from the year-ago period. The consensus mark for revenues indicates 37% year-over-year growth. Image Source: Zacks Investment ResearchAFRM currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent. Thousands have taken advantage of this opportunity.Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators, and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Visa Inc. (V): Free Stock Analysis Report PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report Affirm Holdings, Inc. (AFRM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks