Affirm, the buy now, pay later (BNPL) leader, is stepping beyond North America and into the U.K., marking a significant move as the industry faces a critical regulatory transformation. This launch follows months of anticipation as U.K. regulators weigh new rules aimed at leveling the playing field between BNPL firms and traditional consumer credit services. Though regulatory changes may not kick in until 2026, Affirm has ample time to establish a strong foothold and appeal to both U.K. consumers and regulators alike.
Affirm’s Journey to Global Expansion
Founded in 2012 within the HVF startup incubator by PayPal co-founder Max Levchin, Affirm has quickly grown to be a force in the BNPL sector. Levchin, who took on the CEO role in 2014, led Affirm’s expansion into Canada in 2022. The company’s strategic partnerships with major e-commerce players have driven its growth, including nearly a decade-long partnership with Shopify, a deal with Walmart, and a groundbreaking collaboration with Amazon, where Affirm became the first BNPL partner for Amazon Pay in the U.S. Most recently, Affirm also secured Apple as a key partner, solidifying its place in the digital retail space.
How BNPL Works—and Why Affirm Stands Out
The BNPL concept is straightforward: customers can make purchases on credit and repay the amount in several interest-free installments. BNPL providers like Affirm make money primarily through fees charged to merchants. If a customer opts for a longer repayment period, Affirm can also generate revenue from interest, which is set at a fixed rate on the original borrowed amount rather than compounding over time—a key difference that appeals to many consumers.
As Affirm enters the U.K. market, it highlights its consumer-friendly approach, pledging that interest-bearing options will be free from compounding interest. Furthermore, unlike some competitors, Affirm has committed to a policy of no late fees or hidden charges, a position that distinguishes it from major players like Klarna, which introduced late fees in the U.K. last year.
Navigating a Shifting Regulatory Landscape
The BNPL model has sparked debate, with critics warning that it can encourage impulse purchases and normalize debt, often targeting young, budget-conscious consumers. While the U.K. Financial Conduct Authority (FCA) has limited regulatory power over BNPL firms, interest-free short-term credit agreements are currently exempt from full FCA oversight. However, the tide is turning: recent months have seen the Labour government launch a new consultation focused on regulating BNPL products, aiming to enhance transparency, ensure affordability, and protect consumer rights. The proposed changes could potentially reshape the industry landscape, and Affirm’s thoughtful approach may help it align favorably with incoming rules.
Affirm vs. Klarna: A Competitive Field
The BNPL industry has experienced a rollercoaster of valuations over recent years. Klarna, once valued at over $45 billion in 2021, saw its valuation plunge by 85% to $6.5 billion during the post-pandemic correction. Last week, however, Klarna’s value bounced back to $14.6 billion, reflecting renewed investor confidence. Affirm’s journey has followed a similar trajectory, skyrocketing to a $47 billion market cap after its 2021 IPO, only to see a drastic drop below $3 billion last year. Yet in 2024, Affirm shares have rebounded, with a market cap exceeding $13 billion, bolstered by strong financials—a 48% year-over-year increase in revenue in Q4 and narrowed losses to $45 million from $206 million. Levchin has since predicted that Affirm will reach profitability in 2025.
Building on Strategic Partnerships
Affirm’s U.K. launch isn’t backed by its high-profile partners like Amazon, Shopify, and Apple just yet. Still, given these partnerships in North America, there’s potential for future collaborations as Affirm establishes itself in the U.K. Currently, Affirm’s U.K. offerings include partnerships with flight booking platform Alternative Airlines and payments processor Fexco. Plans to onboard additional British and international brands are already in the works, suggesting a strong growth trajectory in the region.
Setting Up a Local Presence
To support its U.K. launch, Affirm has hired approximately 30 employees, including Ruth Spratt, who is leading the team’s regional efforts. Like in other markets, Affirm’s U.K. workforce will operate under its remote-first model, enabling flexibility and scalability. Looking forward, the company anticipates growing its headcount further over the coming year. While Affirm hasn’t disclosed specific plans for future European expansion, it emphasizes that its approach remains disciplined, prioritizing stability and strategic growth.
Affirm’s U.K. Debut: Key Takeaways
Affirm’s arrival in the U.K. signals a new chapter for both the company and the BNPL sector as a whole. With forthcoming regulations likely to transform how BNPL operates, Affirm’s commitment to transparency, fair interest rates, and fee-free options puts it in a strong position to win over British consumers. As Affirm begins this new journey, it has set its sights on not only expanding its market share but also on pioneering a responsible, consumer-centric BNPL model that aligns with the evolving landscape of financial regulation.
