The news: Affirm wants to embed its buy now, pay later (BNPL) products within banking apps with Affirm Edge, per its Investor Day deck.

Placement within shoppers’ primary bank app could make Affirm easier to access, igniting a flywheel effect through exclusive in-app promotions from Affirm’s merchant network. 

The company is targeting a $140 billion addressable volume opportunity from this integration, due to the strength in debit-first US customers and strong mobile banking loyalty. 

How we got here: Affirm’s partnership with Fiserv this January laid the groundwork for deeper banking integrations.

Working with banks so that users don’t have to set up Affirm Card accounts and wait for physical cards to arrive before they can use BNPL in stores could give the company broader reach into in-store retail purchases, where the bigger payment volume prize lives.

Why this matters: Affirm Edge could help smaller financial institutions, which have been reluctant to offer BNPL products, reclaim volume from customers who have gone elsewhere to fill their lending needs. 

Our data shows that 65% of US consumers get their installments through a secondary financial provider, suggesting that smaller FIs and credit unions are losing a valuable growth channel to competitors that could be captured, if they have in-house BNPL tools, per our US Consumer Habits Survey. These consumers may be less inclined to use alternative providers if they have an option within their mobile banking app.

Implications for financial institutions: Not offering BNPL products is giving up payment volume to competitors. 

Integrations with providers like Fiserv and Affirm can remedy those gaps and attract accounts from millennials and Gen Zers, who use installment solutions the most out of all cohorts, per our Ecommerce Survey. 

However, Affirm’s push in banks will meet strong competition from bigger players: Chase already offers installment loans tied to its debit card Chase Pay in 4. The banks that control the most debit volume are also least likely to give Affirm real estate in their mobile apps leaving Affirm and other BNPL providers trying to make debit inroads less room to compete.