Buy now, get rewards later

Affirm is testing a bonus rewards program for its "buy now, pay later" product, Fast Company confirmed, addressing a major gap between the short-term payment plans and conventional credit cards. CEO Max Levchin first teased the idea in the company's fourth-quarter earnings call in August.

“One of the key preferences driving features of modern consumer payments is rewards,” Levchin said, according to a Seeking Alpha transcript. “It is one of the most common theoretical objections to BNPL versus credit cards. We can stop the debate.”

Though "buy now, pay later" companies are hesitant to liken themselves directly to credit cards, they are ostensibly the sector’s most significant emerging competitor. Companies in the space began launching card products in an attempt to be customers’ first choice at checkout, whether that’s online or in person. Affirm’s card, Debit+, launched in 2021 and allows customers to split purchases over $100 into installment payments. Affirm also allows customers to use it similarly to a debit card and pay for products with one lump sum deducted from a checking account.

Now the company is justifying the “+” in “Debit+” by adding more bonus features. The company’s beta rewards structure will give customers one point for every dollar paid, though the company told Fast Company that may change as they continue to test the feature. Customers will be able to cash in on points the next time they take out one of Affirm’s loans and receive a discount.

"Buy now, pay later" companies’ success in 2021 was built largely on their traction with younger consumers, who are less likely to have a credit card than older cohorts. Surveys have shown Gen Z and younger Millennials to be distinctly wary of accumulating credit card debt, in some cases leading to sparser credit histories than generations prior. This means they're not only behaviorally averse to credit, but also often struggle to qualify for credit products when they apply.

Yet surveys have also shown that this generation of users still want the perks that come with credit. Because of this, Fitch Ratings analysts suggested that a segment of the demographic actually use the cards to pay off their "buy now, pay later" loans. Rolling out bonus features is a play at solidifying their loyalty and warding off competition with other credit products.

While Affirm’s bonus structure is unique among major pay-later companies, Afterpay has a program that rewards users for on-time payments. Klarna also has a similar program that also rewards users for spending with BNPL, but applies to any purchase tracked through the app rather than only purchases made with the company’s card. Several smaller BNPL companies like Perpay also have rewards programs that provide incentives for spending with their products.

Correction: This story was updated on Oct. 7, 2022, to clarify the launch date for Debit+.