Companies that offer buy now, pay later services to consumers are catching a major bid in the market at this time and might just be the next big thing in fintech. If you aren’t familiar with this new take on consumer lending, it’s a form of short-term financing the helps consumers make purchases with a small down payment and wait to pay for the rest of the balance at a later date. Buy now, pay later is becoming an increasingly popular way for people to shop, particularly online, since oftentimes these plans don’t charge interest and are much easier for consumers to get approved for than traditional loan methods.
When you consider some of the financial constraints that have been caused by the pandemic and how the price of consumer goods has been steadily increasing, it’s easy to understand where the demand for this type of service is coming from. It can really pay off to take notice of a new trend as it develops, and there’s a good chance that buy now, pay later plans could become the default way that many consumers handle their transactions in the years to come. All of this supports the notion of adding buy now, pay later stocks to your shopping list, which is why we’ve prepared a list of a few standout names below.
1. Affirm Holdings
Affirm (NASDAQ:AFRM) is perhaps the most prominent name in the buy now, pay later space at this time, and has the makings of a true market-leading company, which means it should absolutely be on investors’ shopping lists going forward. Affirm Holdings provides a platform for digital and mobile commerce and uses a technology-driven payments network and partnerships with originating banks to help customers take advantage of this burgeoning payment method. Consumers can simply choose Affirm when they are at the checkout point of shopping online, select the payment schedule that works best for them, and typically get approved in a matter of seconds for a short-term loan.
While Affirm stock has been on a wild ride since its IPO earlier this year, the stock is edging closer to taking out its all-time high and is benefitting from a few catalysts at this time. First, the company recently struck a deal with Amazon (NASDAQ:AMZN) that will allow the e-commerce behemoth’s customers to choose Affirm’s payment service at checkout for purchases of $50 or more. This is a big deal as it expands Affirm’s reach to the millions of Amazon shoppers that purchase everything from groceries to high-end electronics online. The company also recently announced Q4 earnings that saw its total revenue grow by 71% to $261.8 million and provided upbeat forward guidance, both of which could be driving the share price higher.
2. Paypal
It makes a lot of sense that PayPal (NASDAQ:PYPL), which is one of the largest and most successful fintech companies today, would be exploring buy now, pay later services. The company offers a payment solution called “Pay in 4” which allows shoppers to purchase goods at millions of online stores and split their payments into 4. The service is interest-free, backed by PayPal, and has no impact on shoppers’ credit scores, which makes it a very attractive option for people that are using PayPal’s network. When you think about how many online merchants already support PayPal, this update could mean big things for a company that has been benefitting from a shift to digital payments for years.
The buy now, pay later solution is certainly an attractive reason to consider adding shares of this growth stock, but there are plenty of other qualities that make this a great option for investors. PayPal’s total payment volumes increased by 40% in Q2 to $311 billion Q2, and the company’s Venmo application is picking up steam among consumers as well. There’s also a lot to like about how the company enables PayPal account holders to buy, hold, and sell cryptocurrencies with their accounts, and the recent dip in the share price could present a great buying opportunity for investors that have been waiting for a pullback.
3. Visa
Adding shares of a blue-chip stock that is a leader in its industry on dips to the 200-day moving average can be a potentially masterful investing move, which means that Visa (NYSE:V) looks fairly attractive at this time given how sharply the stock has been pulling back. The payments technology company connects consumers, merchants, financial institutions, businesses, strategic partners, and government entities to electronic payments and is rolling out a buy now, pay later service that could really take off given Visa’s trusted brand name.
The company has started to offer an installment payments option that allows its credit card-issuing clients to develop and pilot buy now, pay later experiences for their customers. It’s clear that Visa recognizes the potential of this payments model, and it will certainly be interesting to watch how the company can leverage this solution over time.