Affirm’s latest earnings show 68% of its 0% APR loans go to super-prime borrowers, while stress tests predict a 10% GMV impact in recessions. Regulatory risks loom as the CFPB advances new BNPL oversight rules, and traditional credit card issuers fight back with hybrid products.
Affirm’s strategic shift toward super-prime borrowers is paying off with 55% contribution margins, but new CFPB oversight rules and competitive pressure from Visa and Mastercard could disrupt its growth. Meanwhile, JPMorgan’s Jamie Dimon calls BNPL a ‘structural threat’ to traditional card revenues.
Super-Prime Borrowers Drive Affirm’s Growth
Affirm’s Q3 2025 results reveal that 68% of its 0% APR loans are issued to super-prime borrowers (FICO 750+), marking a significant shift from BNPL’s early days as a subprime alternative. The company’s contribution margin reached 55%, up 3% year-over-year, demonstrating the profitability of this strategy. As CEO Max Levchin noted in the earnings call, ‘We’re seeing premium customers increasingly choose Affirm not out of necessity, but for its transparency and flexibility.’
Regulatory Storm Clouds Gather
The Consumer Financial Protection Bureau (CFPB) announced on June 18, 2024 plans to subject BNPL providers to credit card-style oversight, requiring standardized dispute resolution and fee transparency. This comes as Federal Reserve data shows BNPL delinquency rates rising to 3.1% in Q2 2024 – still below credit cards’ 5.8%, but signaling potential vulnerability. ‘The regulatory landscape is catching up to BNPL’s explosive growth,’ warned Federal Reserve Governor Michelle Bowman in a recent speech.
Traditional Issuers Fight Back
JPMorgan Chase CEO Jamie Dimon called BNPL a ‘structural threat’ during a June 19 investor call, confirming plans for Chase-branded installment loans. Visa and Mastercard have already launched hybrid credit-BNPL products, with Visa reporting 40% growth in its installment program volume last quarter. ‘The lines between cards and BNPL are blurring,’ noted Morgan Stanley analyst James Faucette.
Historical Context: From Subprime to Super-Prime
Affirm’s pivot to super-prime borrowers mirrors a broader trend in fintech. In the 2010s, peer-to-peer lenders like LendingClub initially targeted subprime borrowers before shifting upmarket as default rates rose. Similarly, credit card issuers learned during the 2008 financial crisis that premium customers provide more stable returns – a lesson BNPL providers now appear to be adopting.
The current regulatory scrutiny also follows a familiar pattern. When PayPal revolutionized online payments in the early 2000s, it faced years of regulatory challenges before achieving mainstream acceptance. Whether Affirm can navigate this transition while maintaining its growth trajectory remains the critical question for investors.
