Market Data 
By Hannah Lang
(Reuters) – Fintech lender Affirm has started quietly offering “buy now, pay later” (BNPL) loans for elective medical procedures, in a major push beyond its core e-commerce market, the company told Reuters.
Over the past year, Affirm has more than doubled the number of elective medical merchants on its network, reaching around 130 at of the end of 2023. The San Francisco-based company is hoping to tap growing consumer demand for financing for cosmetic treatments, dental services, medical devices and veterinary procedures.
“A lot of these price points are about $2,000 and above, so that suits our installment product… really well,” Pat Suh, Affirm’s senior vice president of revenue, said in an interview.
While Affirm has been adding elective medical providers since the middle of last year, it has not previously discussed or publicized its push into the sector, the first by a major BNPL provider in the U.S. market, the company said.
Affirm’s installment product charges between 0% and 36%, depending on the purchase price and a borrower’s credit profile.
“It’s a smart growth strategy,” said Ted Rossman, senior industry analyst at Bankrate, a consumer finance publisher. “They’re already doing a lot with e-commerce, and that’ll continue to grow, but it’s always about the next big thing.”
In 2022, the global market for cosmetic procedures and dental services combined was worth more than half a trillion dollars, market research firm Grand View Research estimated.
Global veterinary services were worth $124.37 billion in 2023, according to Precedence Research.
Buy now, pay later exploded in popularity as the COVID-19 pandemic forced more shoppers online.
The move into medical highlights how lenders in the space are trying to expand beyond what Affirm Chief Executive Max Levchin described to analysts in November as the “e-commerce cage.”
It could also fuel concerns among regulators and advocacy groups that BNPL lending, which has grown rapidly, is leading consumers to borrow more than they can afford.
As part of the expansion, Affirm has partnered with Weave, a customer relationship management platform for small and medium-sized healthcare businesses, as a distribution partner.
BNPL providers partner with retailers like Amazon.com (NASDAQ:) and Walmart (NYSE:) to finance customer purchases, earning a commission on the sale and interest on the loan, which shoppers repay in a handful of installments. BNPL loans drove $75 billion in online spending in 2023, up 14.3% from 2022, according to Adobe (NASDAQ:) Analytics.
Despite that growth, some fintech lenders have been pressured by high interest rates and inflation, which have driven up their borrowing costs and customer delinquencies, though Affirm’s 30-day delinquencies are currently steady compared to the year prior.
The company’s shares are down more than 30% from its initial public offering price in January 2021.
While most BNPL purchases are for discretionary consumer goods like clothes and beauty, spending on services, travel, healthcare and even education has been growing since 2019, according to a 2022 U.S. Consumer Financial Protection Bureau (CFPB) report.
Affirm is marketing elective medical procedure loans as an alternative to medical credit cards, like Synchrony Financial (NYSE:)’s CareCredit, and installment loans. Those products typically waive interest payments for a promotional period after which annual interest is on average 27%, according to the CFPB.
“Being able to shift consumers away from paying these types of high interest and deferred rates into a product like ours, we think there’s a lot of value to that,” Suh said.
Affirm declined to disclose the average interest rate it charges customers for elective medical purchases, but said that nearly half of its transactions in the category are at 0% APR – a higher proportion compared to other categories.
The company has been tightening credit standards and said in a Feb. 8 earnings report that 30-day delinquencies on monthly loans were flat from a year earlier at 2.4%.
‘FINANCIAL DISTRESS’
Still, some consumer advocates worry the growth of BNPL may contribute to a consumer debt crisis.
BNPL borrowers are more likely to have lower credit scores and lower savings on average, according to the CFPB. U.S. borrowers on lower incomes are increasingly struggling to keep up with their loan payments, Reuters reported on Monday.
Because many BNPL lenders do not provide comprehensive data to credit reporting agencies, consumer advocates have warned that the firms have little insight into borrowers’ indebtedness.
“One of our long standing concerns is a cumulative impact of multiple buy now, pay later loans on top of other expenses and debt obligations, which could really push the consumer over into over-indebtedness and financial distress,” said Delicia Hand, a senior director at Consumer Reports.
Affirm mostly lends to near-prime and prime — credit scores between about 620 and 719 — borrowers. The company says it only lends what customers are able to repay, total charges are disclosed upfront, and there are no late or hidden fees.
Affirm looks at every customer’s financial position, Suh said, “in order to offer them an appropriate amount of credit.”
