Interest Rate Cuts Could Increase BNPL Usage, CEO Says

Last month, one of the leading buy now, pay later (BNPL) providers, Affirm, reported in its fourth quarter fiscal 2024 results that it saw 31 percent year-over-year growth in gross merchandise volume (GMV), reaching $7.2 billion. These increases reflect consumers’ experiences navigating a challenging economic environment and increasingly using BNPL products to manage their spending.

Max Levchin, Affirm’s CEO, told analysts that the potential interest rate declines could drive up BNPL usage. “The most exciting thing about reductions at that fund rate is we’ll just have more active users … we’ll have more repeat users, because we’ll be able to approve more people,” he said, according to PYMNTS.

The PYMNTS Intelligence report entitled “Redefining Retail: Consumer Finance Trends Driving the Evolution of Pay Later Plans” found that one in three consumers had used BNPL products within the last year. That share increases to 39 percent for consumers living paycheck to paycheck, and 43 percent for those who do so with problems paying bills.

59 percent of consumers use BNPL to assist in managing their spending when it comes to big-ticket purchases like appliances or furniture. 63 percent of BNPL users noted that cash flow management was an important reason they utilize BNPL products.

Additionally, 40 percent of Affirm transactions in fiscal year 2024 came from consumers using the payment method at least quarterly, a significant increase from 10 percent in fiscal year 2021. Since consumers are highly satisfied with their BNPL experiences, Affirm aims to more than double their cardholders’ spending and increase card adoption.

“Right now we’re on the order of $3,000 of annual spend. The right number, from my point of view, is $7,500 at least, and on the order of 20 million active cards. That’s the target,” Levchin said. “When [we’ll] get there, I don’t know, but that is what I think is both possible and required for us to succeed.”