Dive Brief:

• Buy now, pay later player Affirm Holdings is trying to attract more consumers who are affluent, with higher credit scores, compared to traditional BNPL users, an executive said this week.
• The company plans to reach these consumers through 0% interest promotions, Affirm President Libor Michalek said Tuesday in a question-and-answer session at the Morgan Stanley Technology, Media, and Telecom conference in San Francisco.
• “Something like 0% interest is targeted at users where it has the most impact,” Michalek said. “We see an increase in user retention and an increase in subsequent transactions” with those customers.

Dive Insight:

During the discussion of Affirm promotions for no-interest installment loans, Morgan Stanley Managing Director James Faucette noted such promotions tend to attract shoppers with more purchasing power and higher credit scores. 

"That is one of the primary reasons to do them," Michalek said in reply.

Affirm CEO Max Levchin has also noted in the past that interest free loans tend to attract consumers with better credit scores.

“Approximately 80% of monthly 0% volume in FQ3’25 came from prime and super prime borrowers compared to roughly 50% we typically see in interest-bearing products,” he wrote in the company’s third quarter shareholder letter.

Interest-free options drive both consumer engagement and retention, Michalek said Tuesday.

When San Francisco-based Affirm attracts someone by offering a zero interest loan, the probability of that person using the company's payment products is close to 80%, he said. 

Michalek didn't say how often these promotions happen, why they attract different demographics or what the company considers a high FICO score. An Affirm spokesperson declined to provide more information.

“Consumers choose Affirm because we offer clarity and control,” the spokesperson said in an email. “With Affirm, a 0% APR offer is exactly what it sounds like, nothing, since we don’t have any late fees or hidden charges like other products.”

Affirm makes money on interchange fees paid by merchants on debit cards it offers, in addition to interest on loans.

In October, the company had a three-day interest holiday in which it pledged to offer more interest-free loans than it usually does.

Research has shown that consumers who use buy now, pay later services tend to have lower incomes and lower credit scores than the general population.

A short- term loan repaid in four installments over several weeks, often referred to as pay-in-four, is the BNPL industry's signature product, but buy now, pay later players are increasingly offering longer-term loans, some of which accrue interest.

Interest free installment loans make up about 16% of Affirm's transactions, according to the company’s third quarter earnings supplement.