What: Affirm launches interest-free and interest-bearing BNPL loans in the UK market, positioning itself as a responsible lender amid growing regulatory scrutiny of the sector.

Why it is important: The entry of a major US BNPL provider with a focus on responsible lending could reshape the UK market at a crucial time when regulators are implementing stricter oversight of the sector and consumers are seeking more transparent financial solutions.

Affirm, the US-based buy now, pay later provider, has launched its services in the UK market, introducing both interest-free and interest-bearing loans with monthly payment plans. The company, which has over 18 million active customers in the US and partnerships with major retailers like Amazon and Walmart, is positioning itself as a responsible alternative to existing BNPL providers. Affirm's approach includes real-time credit decisions for each transaction and notably excludes late payment fees, a feature that sets it apart in a market where nearly a quarter of BNPL customers faced such charges in 2023. The company's founder and CEO, Max Levchin, emphasises their commitment to responsible lending through comprehensive underwriting processes. This launch coincides with the UK government's consultation to bring BNPL providers under Financial Conduct Authority regulation, with Affirm expressing its willingness to work closely with regulators to ensure intelligent oversight of the sector. The company's revenue model focuses on fixed interest rates without compounding, reflecting its strategy to maintain transparency in consumer lending.

IADS Notes: Affirm's UK launch comes at a pivotal time in the BNPL landscape. In September 2024, Klarna expanded into physical retail stores , while Sainsbury's integrated BNPL options across its brands in June 2024 , demonstrating the sector's evolution beyond pure e-commerce. The market has shown strong growth, with Black Friday 2023 setting records for BNPL usage , even as consumer demographics broaden beyond young shoppers. However, this expansion occurs amid increasing regulatory scrutiny, with the UK government actively working to bring BNPL under stricter oversight. Affirm's emphasis on responsible lending and no-fee approach appears strategically timed, as concerns about problem borrowing have doubled the industry's growth rate. This positions the company to potentially benefit from both the sector's growth and the upcoming regulatory changes, while competing with established players like Klarna, which has already secured major retail partnerships and expanded its services.

US ‘buy now, pay later’ group Affirm launches in UK