How Does Affirm Makes Money: Affirm Business Model and Revenue Model Explained!

Want to make a big purchase, but paying the full amount at once – that makes us think twice, right? 

What about “Pay at your own pace!” – sounds intriguing, doesn’t it? Well, that’s exactly what Affirm, one of the major BNPL (Buy Now, Pay Later) services, is all about. 

It’s not your typical credit card alternative; instead, it offers much more than that. Affirm empowers customers to split their payments into manageable amounts – without any hidden fees, compounding interest, or penalty. With a few taps, you can checkout with confidence, choose how and when you want to pay, and stay transparent about your costs. And for businesses? It means higher conversion, bigger orders, and happier customers.

In today’s guide, we’ll thoroughly explore Affirm’s business model and revenue model, SWOT analysis, and much more—time to see what makes it tick.

What is Affirm?

You must’ve seen the “Pay in 4 with Affirm” button when checking out on Amazon or Walmart and wondered what it means? That’s your perfect alternative: buy now, pay later (BNPL), which allows you to split your purchase into smaller, more manageable payments.

Let’s break down how Affirm works: 

How Does Affirm Work: Affirm Business Model Canvas

Affirm is a FinTech company that offers Point-of-Sale (POS) loans directly via its partner merchants, both online and in-store. 

At checkout, when you choose the Affirm option, it offers to pay over time – either in 4 biweekly interest-free payments or through monthly instalments ranging from 3 to 36 months. 

Affirm assesses the customer’s eligibility and the terms before finalizing the loan. Affirm evaluates the customer’s application, checking relevant information such as the FICO score. Once approved, you’ll see your details upfront, including any applicable interest rates, total cost, and exact monthly payments (without any hidden fees or charges). 

Affirm then pays the retailer or merchant on your behalf, and you pay Affirm back directly through their website or app. Additionally, there are typically no late fees or penalties for early repayment, and you have the option to set up autopay or make manual payments.

However, it’s crucial to remember your due dates because Affirm might notify the credit bureaus if you do miss a payment. This makes Affirm a transparent, flexible BNPL alternative to traditional credit cards – a win-win situation for all parties involved. 

Affirm: Facts & Statistics

Check the following facts and statistics regarding Affirm. Let’s check:

• • Founded: 2012
  • Founder: Max Levchin (also co-founder of PayPal)
  • Headquarters: San Francisco, California
  • Type: Public company (NASDAQ: AFRM)
  • No. of Employees: 2000+

Business Impact

• As of March 2021, Affirm had:
  
  • Over 11,500 merchant partners
  • Served industries include fashion, travel, electronics, dental care, and auto
• Retailers offering Affirm reported:
  
  • 85% increase in annual order volume
  • 20% rise in repeat purchases

Notable Merchant Partners of Affirm

• Walmart
• Amazon
• Adidas
• Peloton
• StockX
• Eventbrite

Affirm Business Model Canvas

Let’s understand the business model canvas of Affirm and how it has completely transformed the BNPL market with effective fintech solutions: 

1. Customer Segments

• Consumers looking for flexible payment options at checkout
• Millennials & Gen Z who avoid traditional credit cards
• Retail partners & eCommerce merchants who want to increase conversions and average order value
• Enterprise clients in verticals like fashion, electronics, travel, healthcare, and automotive

2. Value Propositions

• For Consumers:

  • Transparent, flexible installment loans (no hidden fees, no late charges)
  • Buy now, pay later with simple interest (0–30% APR)
  • Soft credit checks with no impact on credit score
  • Easy-to-use app to manage payments
    

• For Merchants:
  

  • Increased conversion rates and average order values
  • 85% annual increase in orders (reported by Affirm)
    20% increase in repeat customer purchases
  • Full upfront payment while Affirm assumes the risk

3. Channels

• Partner retailers’ online and in-store checkouts
• Affirm mobile app and website
• Direct API integration with eCommerce platforms (like Shopify, BigCommerce)
• Digital advertising and referral partnerships

4. Customer Relationships

• Automated self-service (loan management via app or web)
• Customer support via chat and email
• Personalized loan offers based on spending behavior
• Transparent communication on loan terms and repayment schedules

5. Revenue Streams

• Interest income from consumer loans
• Merchant fees (retailers pay a percentage per transaction)
• Partnerships and API integration fees with platforms
• Virtual Affirm cards for offline purchases (generating more transaction volume)

6. Key Activities

• Underwriting and issuing POS loans
• Credit risk management analysis and fraud prevention
• Developing & maintaining a platform and mobile app
• Merchant acquisition and onboarding
• Compliance with financial regulations

7. Key Resources

• Proprietary risk assessment algorithms
• Affirm app and tech infrastructure
• Merchant integration tools & APIs
• Partnerships with banks (like Cross River Bank) for underwriting loans
• Strong brand trust and user base

8. Cost Structure

• Credit underwriting and servicing costs
• Payment processing infrastructure
• R&D and technology development
• Customer support and marketing
• Regulatory compliance and legal expenses

9. Key Partnerships

• Retailers & eCommerce platforms (Amazon, Walmart, Peloton, etc.)
  Banking partners (e.g., Cross River Bank, Celtic Bank)
• Technology partners (eCommerce platforms, payment gateways)
• Credit bureaus (for reporting and risk assessment)

How Does Affirm Make Money? – Affirm’s Revenue Model

Let’s take a look at how Affirm makes money with its BNPL service solutions: 

1. Interest Income from Consumers

Affirm generates revenue by charging interest on the loans it offers. Certain loans provide zero-interest financing, while others have an annual percentage rate (APR) of up to 30%, depending on the credit history of the borrower. The average loan size is $750, but it may reach $17,500, and about 43% of loans are interest-free.

Although they don’t charge late or hidden fees, interest accounts for a sizable amount of their revenue. 

2. Merchant Fees (Affirm’s Core Revenue Stream)

A processing fee, often ranging from 2 to 6% of each transaction, is assessed to merchants by Affirm. Why do merchants agree? Affirm benefits both parties by increasing average order value, reducing cart abandonment, and boosting revenues.

Note: Affirm either underwrites directly through Affirm Loan Services or collaborates with banks like Celtic Bank and Cross River Bank to fund some loans. This enables them to grow rapidly without taking on significant capital risk. 

3. Virtual Card Transactions

Like credit card issuers, Affirm makes money by serving as the issuer and collecting fees from transactions made by users using its virtual cards to shop at non-partner merchants. 

4. Late Payment Reporting (Not Fee-Based)

Although Affirm doesn’t impose late fees like traditional lenders do, it does notify credit bureaus of late payments, which serves more as a means of encouraging credit behavior than a revenue stream.

5. Strategic Partnerships & Platform Integrations

Affirm earns from partnerships with eCommerce platforms (like Shopify and Amazon). It becomes the preferred BNPL option on these eCommerce platforms —leading to more transactions and broader market reach.

SWOT Analysis of Affirm Business and Revenue Model

Following, we’ve discussed the SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of the Affirm business strategy model. Let’s learn:

1. Strength

Let’s take a look at the strength aspect of Affirm’s business & Affirm’s revenue model: 

• Strong Brand Recognition & Consumer Trust: Affirm is widely trusted for its transparent & no-surprise lending approach in the BNPL space.
• Financing Model: Affirm offers clear, upfront loan terms with no hidden fees or late charges.
• Strong Merchant Network: Affirm partners with 11,500+ top brands, increasing reach and usage opportunities.
• Appealing to Younger Consumers: Flexible and mobile-first model attracts Millennials and Gen Z. 
• Technological Infrastructure: Integration of technological advancement and data-driven underwriting enables fast & scalable loan decisions. 
• Dual Revenue Model: Affirm’s income sources include both consumer interest and merchant transaction fees, ensuring consistent revenue. 

2. Weakness

Let’s take a look at the weakness aspect of the Affirm business & revenue model: 

• Relying on Merchant Partnerships: Affirm relies heavily on managing and expanding retailer partnerships. 
• Exposure to Credit Risk: Affirm underwrites loans directly, making it vulnerable to consumer defaults.
• Limited Global Presence: Affirm operations are mainly U.S.-focussed, limiting its global presence and opportunities. 
• Reliance on Consumer Creditworthiness: Loan approvals and repayment success depend heavily on users’ credit profiles.
• Potential Regulatory Scurtiny & Compliance Cost: Growing regulatory attention on BNPL may lead to increased compliance burdens and restrictions.

3. Opportunities

Let’s take a look at the opportunities aspect of the Affirm business & Affirm revenue model: 

• Increased Adoption in High-Ticket Sectors: Sectors like healthcare, travel, and education offer strong potential for BNPL financing of expensive purchases.
• Financial Product Diversification: Affirm’s financial model can expand into new offerings like savings accounts, credit-building tools, or debit cards.
• Partnership Growth with Online Platforms: Integration with platforms like Shopify or Amazon can enhance Affirm’s transaction volume and brand visibility.
• Expansion into New Markets: Entering international markets can unlock new user bases and revenue streams.
• Growing Market for BNPL Services: The global shift toward flexible, interest-free payments creates a broader market for Affirm’s model.

4. Threats

Let’s take a look at the threat aspect of the Affirm buy now and pay later model:

• High Competition in the BNPL Market: Affirm’s market share and margins are under pressure from competitors like Klarna, Afterpay, PayPal, and others.
• Strict Regulations: Increasing oversight of BNPL services could lead to more stringent regulations and higher compliance costs.
• Economic Uncertainty: Higher default rates and lower consumer spending might result from inflation or recessions.
• Merchant Fee Compression: Affirm’s profitability may be impacted if it is forced to reduce its merchant fees due to competitive pressure.

How Does the Affirm Payment Plan Work?

Let’s take a look at how Affirm payment plans work:

Final Thoughts

Affirm is transforming the way people pay – it’s reshaping the psychology of purchasing. It’s paving its way to eliminate friction that often stops consumers mid-checkout. 

In today’s Buy Now and Pay Later revolution, Affirm is standing firm in this ecosystem. By offering flexible, transparent, and interest-free (in some cases) financing options, Affirm is becoming a top priority for consumers. Here’s the most impressive catch: Affirm monetization strategy without traditional fees, making it a win-win solution for both customers and merchants. If you’re eyeing a similar BNPL business model like Affirm in this competitive FinTech industry, get in touch with our experts. 

Build a BNPL App Like Affirm with Apptunix – Your Trusted FinTech Development Partner

If you’re ready to enter the booming Buy Now, Pay Later (BNPL) market and build a BNPL app like Affirm, choosing the right development partner is critical to your success.

Apptunix, a leading name in FinTech app development, is here to help you turn your BNPL vision into a powerful, scalable reality.

In a competitive financial landscape, you can’t afford to settle for a basic product. So, you need a solution that’s not only technically sound but also user-centric, compliant, and future-ready.

Why Choose Apptunix?

At Apptunix, we blend cutting-edge technologies with FinTech expertise to build apps that can outperform and scale seamlessly. When you work with us, you get:

• Custom BNPL Platform Development – Tailored to your business model, whether you’re targeting eCommerce, healthcare, or retail.
• Advanced Risk & Credit Assessment Systems – Using AI/ML to ensure responsible lending and fraud prevention.
• Seamless API Integrations – For payment gateways, merchant dashboards, and consumer apps.
• Engaging UX/UI Design – Built to convert users, increase trust, and maximize app engagement.
• Regulatory Compliance & Data Security – Ensuring your app complies with PCI-DSS, GDPR, and regional financial regulations.
• Post-Launch Support & Growth Strategy – We don’t just build apps; we help you scale them.

Whether you want to create a flexible payment model, a virtual card system, or integrate with eCommerce giants like Shopify or Amazon, we’ll build the infrastructure you need to thrive in the BNPL space.