Payment platform Stripe is teaming up with buy-now-pay-later (BNPL) company Affirm Holdings Inc
This partnership could be a big deal for Stripe merchants: according to Affirm, compared to businesses that only offer traditional BNPL services through the payment network, businesses that adopt the company's Adaptive Checkout service see better sales and cart conversions thanks to Affirm's added payment flexibility.
"Businesses who offer Affirm at checkout have reported as much as 85% higher average order values compared to other payment methods, and our new partnership delivers a powerful growth engine to the millions of businesses and platforms that use Stripe," Chief Revenue Officer at Affirm Geoff Kott said. "Stripe's infrastructure, combined with Affirm's customizable payment options and unrivaled flexibility and transparency, provides immense value for businesses looking to reach new customers, increase sales, and drive growth."
The deal is also important for Affirm due to Stripe's market power: Stripe reports that it handles hundreds of billions of dollars worth of transactions each year and that its merchants include "every size of business - from startups to Fortune 500s", according to Stripe.
"Stripe is just one of many fresh partnerships that we have signed, although probably one of the more exciting ones just because of how great the product is and just how large their reach really is," Affirm co-founder and CEO Max Levchin said in an interview.
After the customer has received approval, Affirm's Adaptive Checkout works by using a smart decision-making system to individually underwrite customer transactions in real-time, offering optimized monthly and bi-weekly payment plans on Affirm loans. While Affirm doesn't charge customers late fees, it does charge interest rates, though the exact amount the customer will pay in interest is shown upfront. Affirm has repeatedly spoken about the value it places on customer transparency.
"We'll communicate it to them obviously, as an interest rate as we're legally required to, but also in dollars and cents," Affirm's president of technology said in an interview. "A lot of times people get surprised when I tell them that a $1,000 purchase at 15% for a year actually translates to $83 because of the amortization schedules. A calculator on our website lets you play with all of those numbers."
Last year, Affirm was valued at $95 billion, but since then it and nearly every other tech company have seen massive decreases in share price. Since the announcement of the Stripe partnership, Affirm's stock price has dropped below $30, meaning the company is now valued at $8.5 billion at most. Shares reached a low of $23.91 on June 2.
Still, the company's earnings reports have been positive. In May, Affirm said that it had beat its estimates for its third-quarter revenue thanks to a 54% spike. While the company says that it had just 12,000 active merchants last year, it has since grown to 207,000 sellers, and Affirm customers have reached 12.7 million.