Buy now/pay later provider Affirm has added a new banking-as-a-service provider to its ranks on the heels of surging uptake for its debit card while current partner Evolve struggles.
Enid, Oklahoma-based Stride Bank is the BNPL lender's newest card issuing bank partner for its Affirm Card debit card, the companies announced today. Stride joins Evolve Bank & Trust, which has been Affirm's issuing bank partner since the card was launched in 2021.
"Adding Stride Bank as a card issuing partner will help enable us to continue scaling Affirm Card while further strengthening and diversifying our platform so that we can improve millions more lives," said Vishal Kapoor, senior vice president of product at Affirm.
The addition of a new BaaS partner comes as Affirm looks to diversify and add redundancies to its business model on the coattails of surging Affirm Card adoption. Affirm, in addition to its two card issuing BaaS providers, has originating bank partnerships with Cross River Bank, Celtic Bank and Lead Bank.
The new partnership also comes at a time when
For now, Affirm and Evolve's relationship remains intact. "Evolve Bank & Trust and Affirm continue to enjoy a long and successful business relationship. Evolve continues to be a card issuing partner with Affirm. We are proud to work with fintechs, like Affirm, which make more financial solutions accessible," an Evolve spokesperson told American Banker in an email.
For the $4.6-billion-asset Stride, Affirm is the latest addition to its growing BaaS portfolio, which provides card issuing services to
"We've taken the approach – which is a little bit different than the peers in the space – where we truly view this as community banking, but at a national scale," President of Stride's payments group Jimmy Stallings told American Banker in an interview.
"When we have a partner that comes to us, we want to help build products with them, as opposed to white label a product," he said. "As a result, we end up with a fairly small portfolio of some really good companies, and that really fit with where Affirm was and where they were going."
Distributing Affirm's card product across multiple sponsor banks helps to ensure that Affirm is able to get the most out of debit interchange, which is capped for financial institutions with assets over $10 billion, Tony DeSanctis, senior director at Cornerstone Advisors, told American Banker.
"In order to get non-regulated interchange, you need to ensure that your total deposits as the bank are under $10 billion, otherwise you hit what's called the
For example, in 2023 the interchange fee as percent of average transaction value for exempt transactions was 1.21%, compared with 0.47% for covered transactions, according to the Federal Reserve.
An Affirm spokesperson declined to comment on how card issuance will be split between its two card-issuing BaaS providers. Affirm will need to send Stride new customers, though, due to programmatic minimums baked into its contract with Stride.
"With our partners, especially when we're the second bank, we really leave it up to them [to decide,]" Stallings said. "They give us a pro forma, and we have to basically build our program economics around that. There's going to be programmatic minimums… it's their incentive to ramp the program on us."
