Both Affirm and Afterpay offer alternative financing options to consumers who wish to make a purchase in installments. At the time of purchase, shoppers choose them as installment options, and then apply for financing. Affirm is recognized as an industry leader with an innovative approach to making credit approval decisions using both a soft check of the borrower’s credit score and factors such as machine learning and the borrower’s social media activity to return an approval within seconds. For that reason, it is able to offer a higher approval rate than industry averages, i.e, 67% versus ~50%. Affirm only affects the borrower’s credit if payments are late, in which case it charges late fees of 1.5% and reports the delinquency to credit bureaus. It charges interest rates between 10% and 30% depending on its agreement with merchants.
Afterpay concentrates on the millennial shopper segment and is typically used for lower order values than other installment providers. While Affirm is available within the U.S only, Afterpay can also be used in Australia, Belgium, Netherlands, New Zealand, and the U.K. After the shopper applies and is approved for credit, a purchase is broken into four equal installments payable every two weeks. Instead of interest, Afterpay charges an $8.00 initial fee and an $8.00 fee for each payment.
Affirm and Afterpay deliver comparable improvements to sales conversion, in the 20% range. As an offering that targets lower order values to begin with, Afterpay provides a lower boost to Average Order Value (20% – 30% compared to 87%). In addition, Affirm offers greater flexibility to merchants in customizing rates, number of installments, and other options. Because both ask the shopper to apply for additional credit, they do not allow shoppers to accumulate credit card points or other premiums; they both potentially increase the risk that shoppers will overextend their credit.