Core Insights - Buy Now, Pay Later (BNPL) services like Affirm and Klarna are increasingly popular among consumers, particularly younger demographics, allowing them to make purchases in smaller, often interest-free payments [3][10] - Analysts are divided on the investment potential of Affirm versus Klarna, with some viewing Affirm as a stronger buy due to its lower fees and established profitability [14][18] Industry Overview - The BNPL market is growing as consumers seek flexible payment options, with services allowing payments to be split into smaller amounts without interest, appealing to a wide range of consumers [6][9] - The Federal Reserve indicates that credit card debt in the U.S. has reached $1.28 trillion, highlighting a shift towards alternative payment methods like BNPL [5] Consumer Behavior - Approximately 19% of individuals aged 18 to 29 and 30 to 44 have utilized BNPL services, with late payment rates being notably higher among younger users [10][11] - The financial stability of consumers using BNPL is questioned, as a significant percentage of users report making late payments, indicating potential budgeting risks [11][13] Company Performance - Affirm's CEO reported that a majority of their users are financially stable, with 72% of stable users and 89% of fragile users making multiple BNPL purchases in a year [13] - Affirm is currently priced at $54.26, down 27% year-to-date, while Klarna is trading at $18.34, having experienced a 36% decline year-to-date [17][20] Investment Analysis - Analysts have mixed views on Affirm and Klarna, with some recommending Affirm as a buy due to its profitability and lower fees, while others express caution regarding Klarna's lack of profitability and potential risks [14][19] - Merc Research has a contrarian view on Affirm, suggesting a strong sell position due to anticipated challenges in the UK market and competition in the checkout space [16] Market Dynamics - Both Affirm and Klarna have established relationships with retailers, with Klarna offering cash back for certain merchants, while Affirm has discontinued its cash back rewards program [21]