Spec Fin Weekly

Research evidence excerpt

Spec Fin Weekly

duct itself may be better at Affirm versusREPORT Bread, we think Bread offers the better loyalty and affinity programs through its experiential offerings (the strength Bread

has with sports teams, are a strong example). We think this emotional loyalty that Bread is able to engender with consumers

is a significant value-add to merchants, and this concept of emotional loyalty is not in the DNA of Affirm's offering (though

Affirm is trying, with its upcoming rewards program).

■ American Express (AXP, Sell, $285 PT) and Capital One Financial (COF, Buy, $224 PT): Affirm certainly appears to be making

a push towards the prime and superprime consumer. However, while Affirm poked fun at the Amex lounges on its Investor

Forum, we still see significant value in premium credit cards that offers certainty of use and has rewards. It appears that

Affirm will be offering promotional financing as a way to incentivize superprime usage, but we think the cashflow solutions

that Affirm provides via Buy Now Pay Later is less useful for superprime consumers unless the purchase is significantly large.

Nevertheless, we have seen significant growth in Amex's consumer lending book, and it would from this loan portfolio that

Affirm could capture share.

■ Pay-In-4 / Short-duration BNPL: This is where we think Affirm has a significant edge, against other competitors who only offer

short-duration financing. Affirm already has an underwriting engine capable of appropriately pricing for risk for multi-year

loans, while competitors in the Buy Now Pay Later space essentially appear to not be pricing for risk. Some competitors rely

on other underwriting engines for longer duration loans, but we think this lack of credit control is risky (and we've seen it in

earnings).