The pandemic derailed Affirm's big push into the next hot space in "buy now, pay later": travel.
"We spent 2019 really figuring out what it would take to bring Affirm to travel," Affirm CEO Max Levchin told Protocol in June. "2020 was supposed to be the year of travel. Of course, 2020 was not the year of travel for anyone. Travel basically fell off a cliff."
But travel has bounced back. Affirm has accelerated its "fly now, pay later" offensive, which took a big step forward Wednesday with a new partnership with American Airlines.
The move underlines how travel — which Levchin said was already "a standout" in Affirm's business — has grown in importance to the company. But some analysts say the company, which is a top player in the $100 billion "buy now, pay later" credit market, faces stiff competition in an arena where consumers now enjoy a broader range of payment options.
Affirm has formed partnerships with travel companies, including Expedia, Priceline and Delta Vacations. The American Airlines deal is the company's first pay-later partnership with a major airline, said Geoffrey Kott, Affirm's chief revenue officer.
Eligible travelers will be able to book airfares of $50 or more on American and have payment options from three to 12 months with fixed interest ranging from 10% to 30%, with no late payment penalties. "Consumers never owe a penny more than what they agree to at checkout, even if they're late missing payments," Kott told Protocol.
Geoffrey Kott said the American Airlines deal is the company's first pay-later partnership with a major airline.Photo: Affirm
Alex Johnson, fintech research director at Cornerstone Advisors, called the American Airlines deal a "good win for Affirm."
Affirm hasn't "done much in air travel before this," Johnson told Protocol. "I'd expect Affirm to try and expand its presence in the space now that it has this win."
He said "the airline industry has been a bit under-penetrated by the big BNPL providers so far."
Uplift, a smaller BNPL company, specializes in travel, with 17 airlines listed as partners on its website. Wall Street giants like American Express and Goldman Sachs, through its Marcus digital bank, have made big moves into pay-later travel.
Melody Brue, principal fintech analyst at Moor Insights & Strategy, said that while the American Airlines deal gives Affirm an edge over rivals like Klarna and Afterpay, it is also entering a space where major credit card companies are already "offering their version of BNPL" and where " consumers have so many choices with payment methods they may already be using," she told Protocol.
Johnson said BNPL financing in travel can also be complicated in one key area: cancellations and refunds. BNPL providers are typically able to work with merchants to facilitate returns and exchanges, he said, but those are typically for hard goods. Airlines have different policies around whether tickets can be refunded.
"Airlines present some unique challenges in this area," Johnson said. "You have standard cancelations, which are somewhat analogous to returns, but you also have flight changes, switching fees, rebookings, etc. How do BNPL providers handle all of these?"