Exclusive: Affirm is testing a points-based rewards program to take on credit cards

Affirm is testing a free rewards program in a bid to compete with credit card companies’ popular points systems.

Consumers in the Affirm Rewards beta will rack up points as they submit each repayment to the platform. Generally, shoppers will earn one point per $1 repaid, though that could change as Affirm continues to test the feature, the company tells Fast Company. (That’s a slightly different model than the typical credit card program, which incentivizes high spending on a card in order for users to get cash back or travel and product discounts.) The accrued points can then be applied toward a discount on any future Affirm buy-now-pay-later loan made at a participating retailer.

“Launching rewards allows us to tell consumers, ‘Look, [Affirm] was a better financial decision even before rewards; but at this point, this is clearly just as rewarding and a smarter financial decision,’” says cofounder and CEO Max Levchin, who also cofounded PayPal. The feature is being tested by a small number of users, though the company declined to comment on the exact size of the test group or when it expects to roll out the product more broadly.

Affirm is one of several buy now, pay later (BNPL) companies that shot up in popularity during the pandemic (competitors include Klarna and Afterpay). But some consumers point to credit cards’ rewards systems as a reason to remain with the legacy approach, despite complaints about fees and complicated rewards-redemption processes. Levchin believes Affirm’s rewards program should help sway more customers to his financing system. “It’s a fairly powerful incentive for people to want to make smart financial decisions for themselves and reward them in a similar way as credit cards do, but without the pressure of, you know, ‘go spend more money because then you’ll get a free flight,’” he says.

That’s not to say BNPLs haven’t taken their lumps, too. Indeed, some have landed in hot water over concerns that they encourage spending among young consumers who may not be able to pay loans back. Last month, the Consumer Financial Protection Bureau (CFPB) said it plans to start regulating BNPL companies to avoid any potential harms to consumers.

In response to broad industry concerns, Levchin stressed that “not all buy now, pay later companies are created equal.” Affirm underwrites all of its transactions from the point of sale and tells consumers exactly what they owe and over what time period, without charging late fees. “We made a decision very early on, very deliberately, to not charge late fees, as much as because it’s a great consumer benefit as it is to actually put the onus of being good underwriters on ourselves,” he says.

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