Affirm’s new debit card brings it one step closer to becoming a neobank

• Affirm could expand into additional product categories through its incremental approach to banking.
• This puts the buy now, pay later fintech in direct competition with other big-name challengers.
• Insider Intelligence publishes hundreds of research reports, charts, and forecasts on the Banking industry. Learn more about becoming a client.

The US fintech best known for its buy now, pay later (BNPL) solution announced plans to offer a debit card that will give users access to its pay-over-time functionality.

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For eligible transactions, users will be able to choose between several purchase options: paying upfront; paying from their bank account; or splitting it into four post-purchase, interest-free installments. The card is the first of its kind, allowing users to directly decide between paying upfront or over time.

Affirm is taking a gradual approach to becoming a full-fledged digital bank—putting it directly into competition with other neobanks. The high-yield savings account it launched last summer was the first hint at its banking ambitions, and its new debit card marks another milestone on this path.

Affirm follows the lead of other fintechs in incrementally broadening its banking platform. BNPL giant Klarna recently launched bank accounts in Germany, and its massive funding round last fall could position it to invest even further in banking products and services.

And Goldman Sachs’ Marcus debuted in 2016 as an online personal loan platform, expanded into savings and investment products, and now has a digital checking account on the horizon. If Affirm follows Marcus’ roadmap, a checking account could be one of the last banking products it introduces—inverting the typical neobank model of debuting with checking products.

Affirm can leverage its expanding user base to offer a comprehensive banking solution that caters to the needs of its younger customers. Here are two areas Insider Intelligence thinks it should expand:

• Personal financial management (PFM): By integrating PFM tools into its offerings, Affirm could become a hub, providing users with a full picture of their financial health alongside their spending and savings products. A service like this would cater directly to its user base, over half of whom are millennials and Gen Zers. Increased access to a customer’s financial situation could also enable Affirm to more accurately suggest which payment option they should use upon checkout.
• Credit building solutions: A recent Credit Karma survey found that 72% of US consumers saw their credit scores drop after missing a BNPL payment. Affirm could respond to this issue by providing new opportunities for customers to strengthen their credit score. Other neobanks already offer innovative solutions like secured accounts that reserve money alongside every purchase that is eventually used to pay an outstanding balance on time and in full. Affirm could follow a similar approach and tap into its vast merchant network to create partnerships that put its users’ financial health first. For example, a user who is furnishing their new apartment or buying a laptop for school could use funds set aside in a secured account to make the four installment payments that underpin Affirm’s main BNPL product.

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