Affirm – a buy now, pay later (BNPL) payment network – has borrowed a page from the credit card industry and is launching a cash-back rewards program for its users.
Until now, users of the Affirm app have mostly employed the system to spread purchase payments out over a period of weeks. But when users pay for their purchases in full, Affirm will now reward that.
“With the average consumer planning to spend nearly $650 on gifts this holiday season, we’re excited to offer a way for shoppers to earn while they spend,” said Greg Fisher, chief marketing officer at Affirm. “Now whether consumers want to pay in full and earn cash back or pay later by choosing a schedule that’s best for them, Affirm can offer that choice and flexibility.”
“Natural next step”
The rewards program allows users of the Affirm app to automatically earn a percentage of every eligible purchase in rewards, which can later be redeemed for cash and deposited directly into their Affirm account. To encourage early adopters, Affirm is providing an extra reward on transactions through December 15, giving users an extra $20 reward on their first eligible cash-back purchase.
“A rewards program is a natural next step for buy now, pay later companies like Affirm that are looking to attract more loyal customers,” Nerdwallet’s Annie Millerbernd wrote in an email to ConsumerAffairs.
“While cash back is a benefit for consumers who use the same BNPL company again and again, it is still a feature that comes with many credit cards. A key feature that BNPL companies lack is credit for making on-time payments, which most credit cards do have.”
More consumers are using BNPL services
BNPL services have recently grown in popularity with consumers who are concerned about running up huge credit card balances. With BNPL transactions, there is a schedule of payments that ends with the purchase being paid for in full, often with no interest charges. Even though BNPL services are often better for consumers than carrying a high-interest credit card balance, Millerbernd says users should be aware of the risks.
“The risk with BNPL is that you could buy more than you originally planned and overextend your finances, or make too many purchases and struggle to keep track of your payments,” she said. “Though cash back is an exciting addition for consumers, it doesn’t erase the risk of overspending.”
According to a CNBC/Momentive Small Business Survey, 7% of shoppers said they will use a BNPL service as a payment method for holiday purchases during the holiday season.