Upstart Vs Affirm – An Impact Analysis
An Analysis of the Impact of Upstart & Affirm
Upstart and Affirm both made headlines because of the immediate effect they had on the modus operandi of conventional finance. Upstart drew focus because it posed a challenge to credit reporting services by analyzing a wide variety of non-traditional variables, such as an individual’s learning, GPA, exam results, and employment history, to endorse loans for clients without sufficient credit histories.
Affirm attracted a lot of attention because it changed the ways followed by credit card issuers by offering effective pay-later solutions. These solutions allowed clients to divide big purchases into smaller installments. This strategy, which endorsed “micro-loans” for each and every buy, also focused on customers with poor or insufficient credit scores who could not get access to regular credit cards.
In recent times, the performance of both these companies has witnessed a decline. While Upstart has faced challenges because of the rising rates of interest, Affirm has been hindered by subprime concerns as well as inflation.
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Upstart had a loan-to-equity proportion of 1.7 towards the close of Q3 FY 2022, up from 1.2 the previous year. Also, it lost 53 million USD during the first three quarters of FY 2022. However, it garnered profits in the range of 76 million USD in the same period last year. It may not see a green bottom line before the end of 2024.
Things are better for Affirm because it is expanding rapidly. Income increased by 71% in FY 2021, and the number of active customers increased by 97 percent to reach 7.1 million. In FY 2022, revenue grew by 55% to 1.3 billion USD, and active clients increased by 96%, making a total of 14 million.However, analysts anticipate a loss of $1.01 billion in FY2023. To counter this, Affirm might plan to raise its interest rates or merchant fees, but that will narrow down its chances against bigger players in the field.
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