How does Affirm make money?

Affirm APR interest rates range from 0% to 30%. Although Affirm claims its average loan rate is 18%.Affirm does not charge any hidden fees or late fees, making them different from other buy now pay later options, like credit cards. In the year 2021, Affirm made 38% of its revenue from loan interest accounting for $138.3 million in profits.

• Merchant fees

Affirm makes money off of merchant fees. These are fees paid by merchants to Affirm. Affirm collects fees from merchants each time a transaction is accomplished on the platform and a fee for every item sold on the platform. Affirm mostly earns these fees from e-commerce merchants and many have integrated their pay-over-time solutions on their platforms.

• Interchange fees

Affirm has a branded virtual credit card. Whenever a cardholder uses their Affirm credit card it accrues an interchange fee. Interchange fees are charged on each transaction regarding Affirm virtual credit cards. These virtual credit cards can be utilized on established credit card processing networks.

• Sales of loans

The company also sometimes chooses to sell off the loans it provides to users to third-party investors. However, this is a financial risk, Affirm can either make or lose money when it sells its loans to third-party investors based on the specifics of the sale of the loan and the particular loan itself.

• Servicing fees

Affirm also generates revenue from servicing fees it gets from third-party investors. When the company sells one of its loans to a third-party investor, it is only selling the ownership of the specific loan, not the servicing rights to a specific loan. Third-party investors then pay to Affirm a fee for servicing the loan.