Affirm (AFRM) Q3 2025: 0% APR Volume Jumps, Fuels Prime User Acquisition and Card Flywheel
Affirm’s Q3 saw a surge in 0% APR promotional loans, driving high-quality customer acquisition and accelerating card adoption, while maintaining strong credit metrics and merchant fee stability. The company’s merchant-driven promotional finance mix is proving a strategic engine for both near-term growth and long-term platform stickiness, as evidenced by robust GMV expansion and broad-based partner engagement. Affirm’s guidance signals confidence in its ability to balance growth and profitability, with operational discipline and capital markets execution remaining key watchpoints for the coming quarters.
Summary
- Zero-APR Surge Drives Prime Acquisition: Merchant-led 0% APR promos are fueling new, high-credit-quality users and future card adoption.
- Merchant Partnerships Deepen: Direct-to-consumer, enterprise, and platform partners like Costco and Shopify are expanding Affirm’s reach and stickiness.
- Profitability Discipline Sustained: Affirm signals ongoing cost control and prudent credit posture as it edges closer to GAAP profitability.
Performance Analysis
Affirm’s Q3 delivered broad-based GMV (Gross Merchandise Volume) growth, with all but one category expanding and direct-to-consumer services—anchored by the Affirm Card—outpacing the overall business. The company’s March GMV growth hit 40% YoY, a clear acceleration from earlier in the quarter, and April maintained this elevated pace. This reflects not just seasonal strength, but also the impact of merchant-driven 0% APR promotions and expanding enterprise relationships.
Despite the higher mix of lower-yield 0% loans, credit metrics remained robust, with management highlighting “excellent credit quality” and a slight uptick in prepayments, seen as a positive signal. Merchant fee rates held steady, demonstrating Affirm’s ability to maintain pricing power even amid a competitive backdrop and shifting product mix. Funding execution continues to be strong, with a recent non-consolidated ABS deal supporting off-balance sheet funding flexibility. The sales and marketing expense line declined, largely due to the end of a major warrant amortization, providing further margin support as the company approaches GAAP profitability.
- 0% APR Mix Impact: Promotional financing volume rose sharply, delivering high credit quality and future card users, but at lower immediate RLTC (Revenue Less Transaction Costs) than interest-bearing loans.
- Direct-to-Consumer Outperformance: Affirm Card and wallet partnerships led segment growth, reinforcing the card as a central pillar of the ecosystem.
- Funding and Cost Control: ABS execution and lower warrant amortization supported margin discipline, while credit reserves rose modestly in line with healthy prepayment trends.
Affirm’s ability to balance merchant demand for promotional offers with prudent credit and profitability signals a maturing, resilient business model, even as competitive intensity and macro uncertainty remain elevated.
Executive Commentary
"This quarter is a good example of us leaning into growth opportunities with excellent credit quality and LTV characteristics while hitting our targets. As we continue our journey as a soon-to-be GAAP profitable business, we'll continue to be judicious in how we spend our hard-earned dollars. And as opportunities to take market share arise, we'll keep balancing growth and profitability."
Max Levchin, Founder & Chief Executive Officer
"The strength in GMV that we saw in the quarter, it really was incredibly broad-based. I think we had one category that declined, but otherwise we really saw strong growth across the board, and that was both growing with our largest merchants and partners, but also growing across the merchant base. Obviously, we called out in the letter the strong growth in our direct-to-consumer services. Those grew faster than the rest of the business at large and was led by CARD, of course."
Rob O'Hare, Chief Financial Officer
Strategic Positioning
1. Promotional Finance as a Prime Acquisition Engine
Affirm’s 0% APR promotional loans are now a central lever for acquiring prime and super-prime users, as merchants increasingly opt for these offers to drive conversion and direct sales. While these loans carry lower immediate RLTC, they deliver superior credit quality and serve as a powerful funnel for the Affirm Card, which management describes as the “lifetime value booster” for the platform. The company’s transparent, no-gotcha approach to 0% APR is building brand equity and merchant loyalty, differentiating Affirm from competitors whose offers often carry hidden penalties.
2. Merchant and Platform Ecosystem Expansion
Enterprise partnerships remain a critical growth vector, with the Costco online partnership announced this quarter and the Shopify renewal extended through 2028. These deals not only expand Affirm’s reach but also embed its products deeper into high-traffic commerce platforms, supporting both GMV growth and card adoption. The company’s ability to maintain merchant fee rates despite competitive pressure underscores Affirm’s value proposition and pricing discipline.
3. Direct-to-Consumer Card Momentum
The Affirm Card continues to outpace the broader business, both as a product and as a strategic flywheel. The company is focused on improving attach rates, expanding features (such as foreign transaction support), and using 0% promos to drive high-quality cardholder growth. The app remains a critical channel for both repayment and promotional discovery, with ongoing UI enhancements carefully managed to avoid any negative impact on repayment rates.
4. Credit, Underwriting, and Capital Markets Execution
Affirm’s short loan book duration enables rapid credit posture adjustments, allowing the company to respond quickly to macro stress or cohort deterioration. Management emphasizes a conservative, empirically-driven approach to stress-testing and recession planning, with a focus on leading indicators from its own loan book rather than lagging macro data. Funding flexibility remains strong, with robust ABS and forward flow execution supporting liquidity and risk management.
5. Regulatory Leadership and Industry Standards
Affirm is at the forefront of credit bureau reporting in BNPL, having invested years in ensuring accurate, beneficial consumer data is reported. Management frames this as both a consumer benefit and a regulatory differentiator, calling on peers to follow suit to prevent loan stacking and enhance transparency. While the company monitors the regulatory environment, it does not see a bank charter as a near-term funding solution, instead prioritizing product-driven regulatory needs.
Key Considerations
Affirm’s Q3 demonstrates a business balancing rapid growth with operational discipline, as the company leans into merchant demand for promotional financing while maintaining credit quality and profitability guardrails. The evolving mix of 0% APR loans, deepening enterprise partnerships, and direct-to-consumer card traction are reshaping Affirm’s long-term economics and competitive positioning.
Key Considerations:
- Merchant-Led Promo Mix: The surge in 0% APR volume is merchant-driven, reflecting retailer appetite for growth and conversion, not defensive discounting.
- Card Flywheel Strengthens: Promotional offers are proving the most effective incentive for driving high-quality cardholder acquisition and future engagement.
- Credit and Funding Vigilance: Affirm’s short-duration book and robust capital markets access allow for rapid credit tightening if stress emerges, but continued vigilance is needed as macro risks persist.
- App as Platform Hub: The Affirm app is evolving from a repayment tool to a discovery and engagement engine, with dynamic offer optimization and future AI-driven enhancements on the roadmap.
Risks
Competitive pricing pressure remains a persistent risk, especially as rivals seek to win merchants with economic concessions. A sudden deterioration in consumer credit could force rapid tightening of underwriting, potentially impacting growth. Regulatory shifts—particularly around BNPL reporting requirements or bank charter models—could alter Affirm’s operating environment, though management appears proactive in both reporting and compliance. Macroeconomic volatility, including the potential impact of student loan enforcement, remains an external watchpoint.
Forward Outlook
For Q4 2025, Affirm guided to:
- GMV growth at the high end of 34% YoY, a moderation from the 36% growth seen this quarter.
- April GMV growth rates remained elevated, roughly in line with March’s 40% YoY pace, but management expects growth to moderate into the June quarter.
For full-year 2025, management raised guidance, citing:
- Broad-based merchant growth and continued strength in direct-to-consumer services.
- Operational discipline and ongoing focus on balancing growth with profitability targets.
Management highlighted that cost control, credit vigilance, and merchant partnership execution will remain central to sustaining profitable growth in the quarters ahead.
Takeaways
Affirm’s Q3 underscores the power of merchant-led promotional finance in driving prime user acquisition and card flywheel dynamics, while maintaining credit quality and merchant fee discipline. The evolving product mix, deepening enterprise partnerships, and direct-to-consumer traction set the stage for continued growth, but require careful management of credit, funding, and regulatory risks.
- Promotional Finance Mix as Growth Lever: Affirm’s ability to convert merchant promo demand into high-quality card users is a strategic advantage, but requires ongoing margin and credit vigilance.
- Enterprise and Platform Partnerships Deepen Moat: Deals with Costco and Shopify, alongside direct-to-consumer outperformance, are embedding Affirm deeper into commerce ecosystems.
- Macro and Competitive Risks Remain: Investors should monitor for shifts in consumer credit, competitive pricing moves, and regulatory developments that could impact Affirm’s funding, growth, or economics.
Conclusion
Affirm’s Q3 reveals a business scaling both breadth and depth, leveraging merchant demand for promotional finance to drive high-quality user acquisition and card adoption, while maintaining disciplined credit and cost management. The balance between growth and profitability is holding, but ongoing vigilance is warranted as the competitive and macro landscape evolves.
Industry Read-Through
Affirm’s performance and commentary highlight several broader BNPL and fintech sector signals. Merchant appetite for promotional finance is rising as a proactive growth lever, not just a defensive response to weak retail sales. The strategic use of 0% APR offers to acquire and retain prime users may pressure peers to follow suit, potentially compressing near-term margins but enhancing long-term ecosystem value. Affirm’s leadership in credit bureau reporting sets a new bar for transparency and regulatory readiness, likely prompting industry-wide adoption. Lastly, the emphasis on direct-to-consumer card products and app-driven engagement signals a shift toward platform models that blend credit, payments, and discovery, raising the competitive stakes for both fintechs and incumbent issuers.