By the numbers: Affirm’s gross merchandise volume (GMV) increased 18% year over year (YoY) to reach $4.639 billion in its fiscal Q3 (ended March 31, 2023), per its earnings release. While this is still impressive growth, it’s a major slowdown from the 73% YoY surge during the same period last year.

• Active consumers grew 26% YoY to hit 16.0 million users, another marked slowdown from a year ago (137%).
• The company’s revenues inched up 7% YoY growth to reach $381 million, versus 54% YoY last year.

Digging deeper: Service and experience-related categories were a boon to volume, while “tepid consumer demand” dragged on other discretionary categories, per Affirm management.

• Travel and ticketing, which makes up 16% of its gross merchandise volume, shot up 62% YoY in Q3.
• But consumer electronics declined 8% YoY, and the home and lifestyle category slumped 10% YoY.
• Affirm’s biggest drop came in the sporting goods and outdoor category, which plummeted 48% YoY. This is largely due to Peloton’s interminable volume slide. The firm was once Affirm’s largest partner but “will now be less than 1% of GMV going forward,” CFO Michael Linford said on the earnings call.

Overall, Affirm had trouble keeping up with fiscal 2022’s rapid growth. But Linford noted that those base effects will fade by Q3 of next fiscal year.

What’s next? Affirm is restructuring its business.

• After a disappointing Q2 (ended December 2022), Affirm started Q3 by laying off 19% of its staff, and shutting down its cryptocurrency business.
• The restructure—which could cost $39 million—aims to create a “nimbler team,” per CEO Max Levchin. It’s targeting profitability by the end of fiscal 2023.

Other BNPL providers, like Splitit, are also restructuring. As they regroup, they’ll have to contend with a multitude of challenges, like regulatory scrutiny and the entrance of Apple Pay Later. But Affirm’s more cautious approach should put the company in a better position to withstand those challenges and grow. We expect 88.2 million US consumers will use BNPL in 2023, up 33.9% YoY, per our forecast.

This article originally appeared in Insider Intelligence's Payments Innovation Briefing—a daily recap of top stories reshaping the payments industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

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