How Affirm benefits from Apple's Exit from Pay Later Service?

Overview

$Apple(AAPL)$ 's decision to shut down its Apple Pay Later service could significantly benefit $Affirm Holdings, Inc.(AFRM)$ a company specializing in "buy now, pay later" (BNPL) services.

Apple announced that it would discontinue the service just a year after its launch, shifting focus to integrating third-party providers like Affirm into its ecosystem.

Key Highlights

1. Apple's Strategic Shift: Apple is stepping back from its in-house BNPL service, Apple Pay Later, which allowed customers to split purchases into four installments without interest. The service, which was part of Apple's broader financial services push, is being phased out as the company looks to partner with existing BNPL providers

2. Impact on Affirm:

   • Growth Opportunity: Affirm is well-positioned to capitalize on this change. Apple's integration of third-party BNPL services into its upcoming iOS 18 is likely to drive more users to Affirm's platform. This partnership opens a substantial customer base for Affirm, enhancing its growth prospects

   • Market Reaction: Following the announcement, Affirm's stock has seen positive movements, indicating investor confidence in the potential upside from Apple's strategic pivot

3. Affirm's Competitive Edge: Affirm's CEO, Max Levchin, has expressed confidence that the BNPL market remains underpenetrated, suggesting significant room for growth. The company distinguishes itself by focusing on transparent, interest-free payment plans and avoiding hidden fees, which appeals to a broad consumer base​

4. Broader Market Implications: The BNPL sector has been growing rapidly, especially post-pandemic, as consumers increasingly seek flexible payment options. Affirm's collaboration with Apple is expected to enhance its visibility and adoption among a tech-savvy audience, potentially driving higher transaction volumes and revenue growth

Conclusion

Apple's exit from the Pay Later service is a strategic win for Affirm, presenting a significant growth opportunity. By partnering with Apple, Affirm can leverage a vast customer network, enhancing its market position and accelerating its expansion in the BNPL space.