Affirm shares jump to deal with Target ahead of holiday shopping

A shopper leaves a Target store in New York on August 15, 2021.

Scott Mlyn | CNBC

Affirm shares rose and closed 20% on Wednesday after retail chain Target began offering its customers the online lender’s installment loan service for purchases over $ 100.

Target said in a blog post which is partnering with Affirm and its smaller rival, Sezzle, as consumers gear up for the holiday shopping season.

“We know our guests want easy and affordable payment options that work within their family’s budget,” says Gemma Kubat, Target’s president of retail and financial services, in the post.

The Buy Now, Pay Later or BNPL services, which are installment loans that often come without interest, have gained popularity as retailers respond to consumer demands for easy ways to pay without incurring debt. BNPL providers generally add a payment button to a retailer’s website and then take a share from the merchant on each transaction.

RBC Capital Markets estimates that a BNPL option increases retail conversion rates by 20-30% and raises average note size by 30-50%.

Affirm went public in January at $ 49 a share, and its share price has since risen more than 150% to $ 133.70 on Wednesday. The company’s market capitalization has exceeded $ 35 billion.

An Affirm spokesperson confirmed the deal with Target, saying in an email to CNBC that a recent survey by the company showed that more than half of Americans “are interested in using a pay-by-time solution this season. Christmas “.

Affirm’s most significant announcement came in late August, when the company said that Amazon was offering its service for purchases of $ 50 or more on the site. Affirm shares soared 47% as the company became Amazon’s first third-party installment loan provider.

In early August, Affirm partnered with Apple to offer financing for iPhone, iPad and Mac.

The BNPL market is taking off well beyond Affirm. Square agreed in August to buy Australia’s Afterpay for $ 29 billion, the biggest tech deal of the year. And in June, Swedish fintech company Klarna raised money at a valuation of $ 46 billion, following a partnership with Macy’s in late 2020.

Target said in its post that customers can apply with Affirm to get started. Then, after filling a cart on the Target website, a shopper can choose to pay with Affirm and decide on a monthly payment.

“You will never pay more than what you agreed to at checkout, as Affirm does not charge late or hidden fees,” said Target.

LOOK: Affirm CEO says fintechs have a long way to go

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