Uday's avatar
$80.9m follower assets
BNPL takes a hit
A lot of tweets today about $AAPL putting startups out of business by offering their entire business as one of the features in their ever-expanding ecosystem of products and services. Takes me back to this excellent piece by @jemimajoanna on BNPL

The author very rightly questioned whether this was a sustainable model as a standalone business. The emergence of the likes of Klarna and Affirm have pushed other fintech players to add this as a feature to their existing product portfolio. $AAPL entering the game is bad news for a lot of these guys. As the space gets crowded with much larger tech and payment players, the path to long-term profitability for the standalone models might have to be pushed further down the road.

From the article:

While BNPL is an accelerated method of customer acquisition, all roads in payment somehow point in one direction: bundled/super-app models.

Valuations have already taken a hit this year. $SQ, $PYPL and $AFRM are down massively. The standalone Affirm dropped 5% just yesterday post Apple's WWDC announcement.

Standalones have probably entered the buyout target territory with shares down 50-70% from the highs. Existing players from the payments and tech landscape might already be looking, is my guess.

For whom does something like $AFRM add the most value?
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In 'The Innovation Stack' Jim McKelvey has this great passage about copying.

In the case where an incumbent attacks a start-up, often the best thing for the start-up to do is nothing. They can't compete with their innovation stack. He likens Amazon's difficulties to compete with Square's early card reader as an example. Or larger airlines who tried to compete with SouthWest by copying 1 of 20 of their innovation stack blocks.

But in cases where the market is already large and established, copying is typically the best route. That's why we oft see Google copy Apple. Facebook copy other socials, etc. These are not radical innovations, rather features, that help divy up the already congested marketplace of consumers.

BNPL, to me, is one of those features.
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Apple Just Entered the BNPL Space!
Do existing providers like $AFRM, $SQ, and $PYPL have what it takes to beat out $AAPL?

Each of these BNPL providers has seen operating income drop in recent quarters. Will they be able to turn this around?
Is Apple entering the BNPL a good thing?
64%YES (gives BNPL legitimacy)
35%NO (too much competition)
17 VotesPoll ended on: 06/07/22
Kinda like when they unveiled their credit card. Not going to own the market, but it does well to solidify their ecosystem further.
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Huge!!! $AFRM and Stripe partnership!!!
A strategic partnership that makes Affirm’s Adaptive Checkout™ available to Stripe users in the U.S. today.

Adaptive Checkout uses Affirm’s smart decision engine to make a real-time underwriting decision and offer consumers optimized bi-weekly and monthly pay over time options side-by-side.

Businesses using Stripe can add this technology to their checkout experience in minutes.

Eligible customers will then have the option to use Affirm to split the cost of purchases ranging from $50 to $30,000, with a maximum credit limit of $17,500.

True to Affirm’s long-standing commitment to never charge late or hidden fees, customers will never owe more than they agree to upfront.

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Tell me you are a monopoly without telling me you are a monopoly.
Long $AFRM, endure the pain, reap the rewards.

“Monopoly is the condition of every successful business.” - Peter Thiel
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Samuel Meciar's avatar
$14.5m follower assets
Portfolio changes - update 10
Hello friends, I got an update for you, now with a rounded number

I decided to sell $AFRM + $PAYC, and here's my thinking:

  • I get a pretty decent exposure to $AFRM anyways through $SHOP, not only are they a sole processor for Shop Pay installments but are also invested in $AFRM, own about 7% of the shares (Class A+B combined)
  • I recognize the power of $SQ's Afterpay in combination with CApp and Square after I watched Block's Investor Day, it's just one well put ecosystem. Afterpay is also a bit larger in terms of GMV and has superior margins.

My overall plan is to just add to $SQ and $SHOP and chill.

When it comes to $PAYC I recognize the power of Square Payroll and HR solutions in combination with the whole ecosystem especially as they move more into Mid market, that's going to be interesting. Therefore it just makes sense for me to consolidate here.

I'm also selling $ZI $DOCN, no specific reason really, just want to move my capital into my highest conviction names.

Instead I went on a buying spree and got some $QCOM $RBLX $TWLO $SQ $SHOP $COUR $FVRR $HIMS $ADBE and $COIN.

Wrapping up, all $AFRM $DOCN $PAYC $ZI are great companies in my view, but like I said, it makes sense for me to consolidate, especially as I favor optionality over specialization at this point in time, while still maintaining an exposure to those players/spaces without further fragmentation.
StockOpine's avatar
$30.8m follower assets
Buy now, pay later. Is this a bubble?
We came across the article on the link below and we wonder what could be the impact on firms like $AFRM $SQ $PYPL $AFTPY, if any.
Few notable extracts from the article:
“4 in 5 U.S. consumers use BNPL on everything from clothing to cleaning supplies, according to Experian, and most shoppers said buy now, pay later could replace their traditional payment method”
“When people start buying household goods on credit, that signals a problem.” Marshall Lux
“BNPL’s rapid growth is driven primarily by younger consumers, with two-thirds of BNPL borrowers considered subprime” Lux noted
“42% of consumers who’ve taken out a buy now, pay later loan have made a late payment on one of those loans, LendingTree found.”
“The financial watchdog said it is particularly concerned about how these programs impact consumer debt accumulation, as well as what consumer protection laws apply and how the payment providers harvest data”
Credit card companies and BNPL companies are already beating inflation
What's the average interest rate for a credit card or a "buy now, pay later" loan?

For credit cards, it's 18%. For "buy now, pay later" loans, it's 23%.

Inflation is currently above 8%. Many companies' profit margins are below 8%. But for $V $MA $AXP $DFS $AFRM $SQ $PYPL etc., they're already making a lot more on each loan. Many banks envy these fintech companies.

Mortgage rates are surging, but at the same time, their rates haven't been as high as what the credit card companies and BNPL loan providers charge.

As for the % of people that pay their credit card and BNPL balances in full every month, it varies. For credit cards, it looks like 1/3 of users pay their balances in full each month. For BNPL, that number looks to be a lot lower because the credit quality of those that use BNPL is lower too. In general, the majority of their customers accrue interest in those companies. It explains why those companies are highly successful today.
$AFRM Earnings Review
$AFRM is up 20% AH and 40% today as they plan on being "profitable" in nine months.

$AFRM real margins continue to deteriorate. If the network effects were real, margins would be expanding. I might have to re-open my puts, but this is a crowded trade which scares me.

Also, how do you adjust your operating margins from -64% to +1% for the quarter?
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