Buy Now and Pay Later (Online POS loans) Industry and the most leading company [Affirm Inc]

"How can I buy expensive products such as Nintendo DS(for me it is regarded as very luxury good) or expensive cars like Lexus or Tesla at the moment on the payment site?" This is the question that comes out when I do not have enough rooms for capital. Back in my school days, my property all relied only on the allowance from my part time job or my parents'. I wish I could have credit card to buy now pay later. Unfortunately, all those goods that I was thriving for were only owned in my craving dream but not in my hands.

The times goes by, my dreams to own luxury goods faded away; did not really think about acquiring my own credit card.

One day, as I was checking which companies are about to be in IPO debut line-ups this year, I happened to find the company called Affirm Inc. I could check the company throughout Wall Street Journal down below.

The person in the picture looked very familiar to me and checked out.
He is Max Levchin, the founder of Paypal and Slide.com.
Paypal(1998) is very well known not only to the investors or traders but also to consumers in Western countries. Paypal is used for peer-to-peer payment mostly in B2B business. Their service include mobile payment software called Venmo, which is another popular payment tool for teenagers.
Slide.com(2004) is photo sharing software for social networking services. Later Google agreed to buy Slide.com in about $180m.

Affirm was founded in 2012; Max Levchin is now concentrating on installment payment service company.
I first wondered what Online POS loan meant. The industry was very new to me.

This is example of POS loans. Suppose a person needs Nintendo DS. He wants to buy the product in 360 USD, however, the capital is not enough for him. Affirm pays to the merchants for the consumers and later get the installment payment starting from 3 months to the most term 39 months. Well, that is good concept.
Then another question came out in mind, "what is the difference between credit card system?" and found out.
POS loans requires less credit, therefore less capital limits. Some installment loans do not charge late penalty fees. It is decoupling phenomenon from credit card ecosystem.

Partners
Affirm has more than 4,000 partners (my estimated calculation). Walmart, Expedia, and Shopify are one of the biggest partners. Affirm has also many partners of brand companies such as Peloton, Swatch, and so on.

Competitors
Then who are the competitors of Affirm? Maybe credit card companies like Visa, Mastercard are one of them, payment companies including Paypal or Square are another. But there are some companies which do almost exactly similar service with Affirm. Lets find out.

There are many companies like Sezzle, Splitit, Zip co, Klarna which offers installment loan service; among those, Afterpay is the biggest competitor. It is Australian company founded 2 years after Affirm and was listed in 2019 in ASX(Australian Security Exchange) market. Australia is the leading country which pioneered online POS loan industry.

This is the recent stock price of Afterpay and other competitors indicating the industry is growing up really fast. Maybe it COVID19 can be one of the reason to be benefited.

Well, Affirm is not listed publicly, however, by looking at the competitor's stock movement, investors can assume the industry is expanding and more users are looking forward for installment loans. I found the chart indicating Affirm.Inc has the most users among them.

This chart is limited in the U.S. market, since Afterpay takes over Oceania regions and Klarna (Swedish bank) is dominant in Europe. Nevertheless, U.S. has big consumers market. Investors will definitely crave for IPO of Affirm.Inc.



Source 1: It’s Layaway, But for a Post-Recession Economy
https://www.nytimes.com/2019/05/03/fashion/afterpay-quadpay-klarna-affirm.html

Source 2: Affirm Prepares IPO That Could Value Fintech Firm at Up to $10 Billion [WSJ]
https://www.wsj.com/articles/affirm-prepares-ipo-that-could-value-fintech-firm-at-up-to-10-billion-11596143292?mod=searchresults&page=1&pos=11

Source 3: ‘Buy Now Pay Later’ Is Having a Moment as Pandemic Changes Shopping Habits [WSJ]
https://www.wsj.com/articles/buy-now-pay-later-is-having-a-moment-as-pandemic-changes-shopping-habits-11594459800

Source 4: Eyeing That Sweater? It’s Yours in Four Easy Payments [WSJ]
https://www.wsj.com/articles/eyeing-that-sweater-its-yours-in-four-easy-payments-11569672000