Buy now, pay later (BNPL) giant Affirm is launching in the U.K., its first market outside North America.
Its long-anticipated arrival comes as U.K. lawmakers mull new rules to bring BNPL firms into line with other traditional consumer credit services, though such laws aren't expected to come into effect until at least 2026 -- long enough for Affirm to build traction, and curry favor with consumers and regulators alike.
Founded in 2012, Affirm emerged from a startup incubator called HVF, setup by PayPal co-founder Max Levchin (pictured above) who eventually took the reins at Affirm in 2014 to drive its commercial push. The company expanded beyond the U.S. and into Canada in 2022, and it has struck lucrative partnerships with major ecommerce companies through the years -- Affirm has been Shopify's major financing partner for close to a decade, not to mention Walmart, and Amazon, which tapped Affirm as Amazon Pay's first BNPL partner in the U.S. last year. More recently, Affirm also secured the mighty Apple as a customer.
The BNPL model is simple: customers are invited to purchase goods on credit, repaying the debt in several interest-free instalments, with the BNPL provider monetizing through merchant fees. Or, where the customer may require a longer repayment period, the loan may include interest, too.
The BNPL market has long been on the U.K. regulatory radar, with incumbents such as Klarna and Clearpay often criticized for encouraging impulse buying and normalizing debt. The U.K.'s Financial Conduct Authority (FCA) has hitherto had some power to keep BNPL providers in check, but there are key exemptions, such as services that involve interest-free credit, where fixed-sum agreements stipulate that debts be repaid within 12 months.
But new rules in the works could bring BNPL companies fully in line with other consumer credit companies. The Labour government last month announced a fresh BNPL consultation, with plans to introduce regulation to "ensure people using BNPL products receive clear information, avoid unaffordable borrowing, and have strong rights when issues arise."
It's clear that Affirm is already pushing to position itself favorably both with patrons and the the powers-that be. Indeed, the company notes for the U.K. launch that its interest-bearing payment options won't involve compound interest -- instead, interest will be fixed, and calculated entirely on the original amount borrowed.
It's also worth noting that Klarna started charging late fees in the U.K. last year, and this is one area where Affirm is setting out to differentiate -- it says it won't be charging late fees or any other "hidden charges."