A buyer leaves a Target store in New York on August 15, 2021.
Scott Mlyn | CNBC
Affirm shares rose 20% on Wednesday after retail chain Target began offering its online lender’s installment loan service to its customers for purchases over $ 100.
Goal said in a blog entry that it is partnering with Affirm and smaller competitor Sezzle as consumers prepare for the Christmas shopping season.
“We know our guests want simple, affordable payment options that work within their family budget,” said Gemma Kubat, President of Financial and Retail Services, Target, in the post.
Buy Now, Pay Later, or BNPL services, which are installment loans that are often interest-free, have gained popularity as retailers respond to consumer demand for easy debt-free payment options. BNPL providers usually add a checkout button to a retailer’s website and then take a share from the retailer on every transaction.
RBC Capital Markets estimates that a BNPL option increases retail conversion rates by 20 to 30% and increases the average ticket size between 30 and 50%.
Affirm went public for $ 49 per share in January, and its share price has since surged over 150% to $ 133.70 on Wednesday. The company’s market capitalization has surged to over $ 35 billion.
An Affirm spokesperson confirmed the Target deal and said in an email to CNBC that a recent survey by the company showed that more than half of Americans “are on a pay-over-time solution this holiday season are interested”.
Affirm’s main announcement came in late August when the company said Amazon was offering its service for purchases of $ 50 or more on the website. Affirm stocks rose 47% as the company became Amazon’s first third-party consumer credit provider.
In early August, Affirm partnered with Apple to Offer financing for iPhones, iPads and Macs.
The BNPL market is picking up speed well beyond Affirm. Square agreed to buy Australia’s Afterpay for $ 29 billion in August, the biggest tech deal of the year. And in June, after partnering with Macy’s, Swedish fintech company Klarna raised funds valued at $ 46 billion in late 2020.
Target said in his post that customers can apply with Affirm to get started. After filling a shopping cart on the Target website, a buyer can then pay with Affirm and opt for a monthly repayment.
“You will never pay more than you agreed at the checkout because Affirm does not charge any late fees or hidden fees,” said Target.
SEE: Affirm CEO Says Fintech has a long way to go