Core Insights - A significant increase in the acceptance of Buy Now, Pay Later (BNPL) loans is observed, particularly as the holiday shopping season approaches, with 60% of surveyed participants feeling more financial stress [1][2] - Approximately 80% of shoppers who have used or considered BNPL are open to utilizing it for holiday shopping this year, indicating its mainstream adoption [2] Summary by Sections BNPL Overview - BNPL loans allow consumers to pay for purchases in installments, typically with little to no interest, no hard credit checks, and quick approval [3] - Various services such as Affirm, Klarna, Afterpay, and PayPal provide BNPL options during online checkouts, with flexibility in payment terms [4] Consumer Behavior - Younger generations, particularly Gen Z and Millennials, are the primary users of BNPL, with about 10% of each generation utilizing these loans [7] - The convenience of BNPL is appealing to consumers, especially those experiencing financial stress [8] Credit Reporting - Starting in fall 2025, FICO will include BNPL loans in credit scores, although not all providers are required to report this activity [5]

Core Viewpoint - Despite recent growth in the Buy Now, Pay Later (BNPL) industry, concerns about future performance are rising among investors, particularly due to increasing default rates and a weakening economy [2][10][14]. Company Performance - Affirm Holdings' stock has decreased by 17% in 2025 following a prediction of lower-than-expected growth for the current quarter [2]. - In the last three years, Affirm's stock has increased by 126%, reaching $52 per share, while the industry has expanded at an annual rate exceeding 50% [3]. - The company's fiscal third quarter results showed revenue of $783 million, a 36% increase year-over-year, and earnings per share of $0.01, surpassing expectations [5]. - The fourth quarter revenue guidance is set at $830 million, which is $11 million below consensus estimates, while the gross merchandise value (GMV) guidance is $9.55 billion, exceeding expectations by $350 million [5]. Industry Trends - The BNPL market has grown significantly, with an average annual growth rate of 55% since 2021, expanding from $97 billion to an estimated $560 billion in 2025 [10]. - The rise in BNPL loans has led to increased investment in the industry, but also to rising default rates among major players [10][12]. - Nearly two-thirds of BNPL loans are issued to borrowers with risky credit scores, indicating potential credit quality issues [12]. Consumer Behavior - Affirm's business is closely linked to consumer spending in sectors like electronics, apparel, and travel, with a 10% growth in active customers reaching 22 million in the third quarter [6]. - The company has introduced 0% interest loans, which have increased by 44%, as a strategy to drive sales and enhance customer lifetime value [8][9]. Market Sentiment - Wall Street analysts view Affirm's stock as undervalued, trading 29% below the average price target of $67.18 set by 21 analysts [4]. - Despite concerns, some analysts remain bullish on Affirm, citing its leadership in the BNPL space and recent partnerships, such as with Costco [17].