A customer leaves a Target store in New York City, August 15, 2021.
Scott Mlyn | CNBC
Affirm shares jumped 20% on Wednesday after retail chain Target began offering customers the online lender’s installment loan service for purchases over $ 100.
Target stated in a blog post that he is teaming up with Affirm and his little rival Sezdle as consumers gear up for the holiday shopping season.
“We know our customers want easy, affordable payment options that stay within their family’s budget,” Gemma Kubat, President of Retail and Financial Services at Target, said in the post.
Buy Now, Pay Later or BNPL, which are often interest-free installment loans, have grown in popularity as retailers respond to consumer demands for easy ways to pay without going into debt. BNPL providers typically add a payment button to a retailer’s website and then take a merchant’s share with each transaction.
RBC Capital Markets estimates that a BNPL option increases retail conversion rates by 20-30% and increases average note size by 30-50%.
Affirm went public in January at $ 49 a share, and its price has since jumped more than 150% to $ 133.70 on Wednesday. The company’s market capitalization has exceeded $ 35 billion.
A spokesperson for Affirm confirmed Target’s deal and said in an email to CNBC that a recent survey conducted by the company showed that more than half of Americans “are interested in using ‘a pay-as-you-go solution during the holiday season “.
Affirmer’s most significant announcement came in late August, when the company said Amazon was offering its service for purchases of $ 50 or more on the site. Affirm shares soared 47% as the company became Amazon’s top third-party installment loan provider.
Earlier in August, Affirm partnered with Apple to financing offer for iPhone, iPad and Mac.
The BNPL market is taking off far beyond Affirm. Square agreed in August to buy Afterpay in Australia for $ 29 billion, the biggest tech deal of the year. And in June, Swedish fintech company Klarna raised funds at a valuation of $ 46 billion, following a partnership with Macy’s in late 2020.
Target said in their post that clients can apply with Affirm to get started. Then, after filling out a cart on Target’s website, a buyer can choose to pay with Affirm and decide on a monthly refund.
âYou’ll never pay more than what you agreed to at checkout because Affirm doesn’t charge any late or hidden fees,â Target said.
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