Buy Now, Pay Later Lender Affirm Expands Into Financing Elective Medical Procedures

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. 

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.     

"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."

BNPL providers partner with retailers like Amazon.com and Walmart 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 percent from 2022, according to Adobe 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. 

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's CareCredit, and installment loans. Those products typically waive interest payments for a promotional period after which annual interest is on average 27 percent, according to the CFPB. 

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. 

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.  

"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.