Yahoo! Finance had an article titled, Will Affirm replace the debit card? It’s going to try. It highlights the launch of a debit card that Affirm (AFRM) has embedded with their very successful Buy Now Pay Later (BNPL) functionality. The article was about the investment opportunity of Affirm, so it doesn’t provide much detail about the functionality, but it sounds like a decoupled debit card (think Target Debit Card) where transactions are funded from a buyer’s checking account:
“It’s a card that works with your existing checking account. You don’t have to switch your banking relationship. You get the new card from us, swipe it and use it the way you normally would. You get a notification if the transaction is splitable,” explained Affirm founder and CEO Max Levchin on Yahoo Finance Live.
What isn’t known is how the funding will move from the checking account to the Affirm account. It might be through ACH which does create some funding risk.
So why is Affirm offering a debit card? Likely they want to be more involved in providing services around their customers’ everyday spend. They will also have more data that they can mine. Beyond this, Affirm is likely interested in the interchange income. Given that they operate at a loss (see their earnings presentation here) they could use a steady revenue source.
Here’s more from the article:
Suffice it to say, the Street is jazzed up by what the new debit card will mean to Affirm’s top and bottom lines.
“We see Debit+ as an avenue for Affirm to penetrate everyday, in-store spend,” said Bank of America analyst Jason Kupferberg in a note to clients.
For Affirm, it’s just the latest in a series of wins — which include the teasing of a new crypto trading service this week — that have powered the stock higher by about 80% in the past three months.
Shares of Affirm exploded more than 48% on Aug. 30 after unveiling a new partnership with Amazon. Under the deal, Affirm will help Amazon consumers finance large purchases.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
