Walmart’s Buy Now, Pay Later

Not everyone pays cash when they go to a store. A large number of people use credit cards. It is a sort of “buy now, pay later,” along with often usurious interest rates that can be as high as 20%. Walmart Inc. (NYSE: WMT | WMT Price Prediction) has a new buy now, pay later system. It has entered into a deal with Affirm Holdings Inc. (NASDAQ: AFRM), a giant in the “buy now” space. (See six reasons to avoid Walmart stock today.)

The new deal with Walmart will allow people who shop at 4,500 stores to use the self-checkout system when they access the Affirm service. According to Affirm management, the service is popular. “Recent Affirm research revealed that more than half of Americans (54%) are looking for retailers to offer a buy now, pay later option at checkout. Moreover, we’ve found that 76% of consumers would either delay or not make a purchase without Affirm,” according to Pat Suh, Affirm’s SVP of Revenue. If that is true, it should boost Walmart’s revenue substantially.

Affirm’s service will be available at several points of sale, including Walmart.com and the Walmart app. Amazon also offers the service.

Many retailers use Affirm. Customers agree on what they will pay at the time of their purchase and how much they will defer until later. Affirm promotes itself as an alternative to high-interest-rate credit cards. “We started Affirm because credit cards aren’t working,” the company says in its sales pitch.

Wall Street has warmed to the Affirm business model. This year, shares are up 371%, compared to 22% for the S&P 500. In the period ending September 30, revenue was up from $361 million a year ago to $486 million. The bottom line, however, was not so attractive. Affirm lost $171 million, compared to $251 million last year. Affirm’s product may be better than its financial numbers.