Affirm CEO reveals AI potential as BNPL growth continues, costs set to fall

According to a report by Wells Fargo, buy now, pay later (BNPL) is one of the fastest-growing categories in consumer finance. This trend is being closely watched by industry players, including Affirm, which is working to refine features of its popular Affirm Card. During a recent conference call discussing earnings for the first quarter of 2024, Affirm CEO Max Levchin revealed that recent tests the company carried out with generative AI suggest that young adults prefer resolving customer-service issues via intelligent chatbots over speaking with human agents. Levchin explained that the aim is to use AI to “prework” many routine customer queries, allowing human agents with expertise to handle more complicated issues. While acknowledging that it’s still early days to accurately predict the full potential of AI, Levchin expressed confidence that it will provide significant cost savings for the business over the course of the next one to three years. In terms of Affirm Card usage, Levchin noted that the product’s popularity is growing steadily, with around 10% of Affirm Card users currently making debit purchases using the tool, up from 6% during the previous quarter. Notably, customers are increasingly turning to Affirm for a broad range of purchases beyond traditional high-value items like Peloton bikes, with figures from the most recent quarter showing that general merchandise accounted for 32% of total Affirm purchases, while fashion/beauty and travel/ticketing each accounted for approximately 16% and sporting goods claimed 4%. The company’s gross merchandise volume increased by 36% during the third fiscal quarter, reaching $6.3bn, while total revenue jumped by 51% to reach $576m. Delinquencies relating to monthly instalment loans remained stable, while Affirm’s net loss decreased significantly, falling from $206m in the corresponding quarter of 2023 to $134m. However, despite these encouraging statistics, Affirm’s shares dipped following the announcement, with analysts at Morgan Stanley warning that the company might struggle to compete effectively within the most rapidly expanding segments of Generation Z due to its relatively slow rate of expansion. They suggested that Affirm’s core clientele is likely to comprise predominantly low-income earners with regular income streams spread across various age groups, implying that future income and expenditure growth may be constrained.