In a strategic move aimed at enhancing growth and profitability, buy-now-pay-later (BNPL) provider Affirm announced its decision to divest its Returnly returns payment platform. The platform, which was acquired for $300 million in June 2021, will "sunset" in early October, marking a significant shift in Affirm's business strategy.
Affirm's Chief Revenue Officer, Wayne Pommen, shared the news in a blog post, stating that the company will be partnering with Loop Returns, the preferred returns provider of Shopify, to facilitate a seamless transition for Returnly merchants. Loop Returns currently serves 2,200 retailers, while Returnly serves 1,500. The migration is expected to be completed before the slated shutdown date, ensuring uninterrupted service for merchants and their customers.
The decision to divest Returnly comes as Affirm focuses on optimizing its core business to drive robust growth and attain profitability, especially amidst a challenging economic landscape in the United States. BNPL providers, including Affirm, have been under increased scrutiny to improve financial performance and demonstrate their ability to deliver sustainable results.
Affirm's fiscal third quarter ending March 31, 2023, reflected the ongoing financial challenges in the BNPL sector, with the company reporting a loss of $205.7 million. To counter these losses and enhance their standing in the market, Affirm took measures to streamline its operations by terminating 500 jobs and discontinuing operations in Australia.
While the exact financial implications of the Returnly divestment were not disclosed, Affirm declined to confirm whether it would write off the platform. The company also refrained from providing details about the number of Returnly staff members who have been redeployed within the organization.
The new strategic partnership with Loop Returns appears to be a critical aspect of Affirm's future growth plans. By collaborating with a prominent returns partner such as Loop, Affirm seeks to strengthen its customer-centric approach by offering self-service online refunds for BNPL loan customers. This move is expected to enhance customer satisfaction and retention while further establishing Affirm as a leader in the BNPL industry.
With the shift in focus towards profitability and expansion, Affirm aims to achieve profitability on an adjusted operating income basis soon. By narrowing its attention to core business activities and collaborating with a successful return provider like Loop, Affirm is positioning itself for a brighter financial future.
As the company faces the ongoing challenges in the U.S. economy, this strategic shift promises a positive outlook for Affirm's future in the increasingly competitive BNPL industry.