More Transactions, Less Interest: Can Affirm Still Win BNPL?

Affirm Holdings, Inc. AFRM has developed a robust system to handle a higher number of transactions by leveraging its proprietary technology infrastructure, deep data capabilities and efficient risk models. Furthermore, Affirm integrates easily with merchant APIs, which helps maintain seamless transaction flows across a growing network of roughly 358,000 active merchants as of March 31, 2025. 

The company’s revenues are closely tied to the number of transactions processed on its platform, as each transaction generates potential revenues through either merchant fees or consumer interest income. Transaction count increased 46% year over year in the third quarter of fiscal 2025. Affirm offers flexible financing solutions including Pay-in-four biweekly plans, 0% APR monthly installments and interest-bearing loans. 

Despite a surge in transactions, concerns arise as the share of Affirm’s 0% APR in total GMV is growing. 0% APR monthly instalment GMV jumped 44% YoY in the fiscal third quarter 2025. AFRM generally makes less money from these loans compared with high-interest-bearing ones and it can affect its interest margin. Nevertheless, the company is intentionally pushing 0% APR plans to attract higher-quality borrowers and boost conversion metrics, which can lower risk and improve lifetime value. Also, it earns larger merchant fees from these transactions. 

If Affirm can continue scaling transaction volume while balancing its loan mix, the strategy could support sustainable growth even with thinner margins

How are Competitors Faring?

Some of Affirm’s key competitors in the buy now, pay later (BNPL) space include PayPal Holdings, Inc. PYPL and Visa Inc. V, both of which enjoy a strong presence in the BNPL market.

PayPal offers BNPL services under the PayPal Pay Later brand across the US, UK, France, Germany, and Japan (via its Paidy brand). It processed 6 billion transactions in the first quarter of 2025. PYPL’s net revenues rose 1% year over year to $7.8 billion. 

Visa offers BNPL solutions via issuers and fintechs. Its processed transactions increased 9% year over year in the second quarter of fiscal 2025. V’s total revenues advanced 9% year over year, supported by year-over-year increases of 8% and 13% in payments volume and cross-border volume.

Affirm’s Price Performance, Valuation & Estimates

Shares of Affirm have surged 104.9% in the past year compared with the industry’s 42.3% growth. 

From a valuation standpoint, AFRM trades at a forward price-to-sales ratio of 5.38, below the industry average of 5.7.

The Zacks Consensus Estimate for Affirm’s fiscal 2025 earnings implies 101.8% improvement from the year-ago period. The consensus mark for revenues indicates 37% year-over-year growth. 

AFRM currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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