Affirm Holdings, Inc. AFRM is launching a new transformer-based machine learning model for real-time credit underwriting at U.S. checkouts. The system analyzes the order and timing of events across a consumer’s credit history, helping identify patterns that standard credit measures may miss. The model draws on 14 years of its transaction and repayment data, giving it a proprietary dataset to refine credit decisions. Affirm built the model to deliver fast and explainable decisions.
The announcement matters because Affirm is expanding approvals without simply lowering credit standards. In initial testing, the model approved applications that the previous system would have declined, including consumers with limited credit histories and no FICO scores. Those incremental approvals produced 3.4% more completed purchases than the control group. The loans also showed better performance than a comparable expansion under the previous model.
Financially, the model could support higher transaction volumes by enabling Affirm to approve more creditworthy consumers. More completed purchases can translate into greater loan originations, merchant activity and revenues, although the release does not provide a dollar estimate. The stronger early loan performance also suggests potential for better credit selection, but the financial benefit will depend on how these results scale.
The launch strengthens Affirm’s technology-driven underwriting strategy as it expands across digital commerce. Its ability to use transaction and repayment data to refine credit decisions could help broaden customer access while managing risk. While the early results show potential, the model’s long-term value will hinge on sustained credit performance and its ability to scale successfully across Affirm’s platform.
How Are Competitors Faring?
Some of AFRM’s competitors in the digital lending and payments space are Upstart Holdings, Inc. UPST and PayPal Holdings, Inc. PYPL.
Upstart Holdings uses proprietary AI models to automate credit decisions across personal loans, auto loans and other products. UPST’s platform connects consumers with more than 100 banks and credit unions, with more than 90% of loans fully automated.
PayPal offers Pay Later products at checkout, including Pay Monthly for eligible purchases of $49 to $10,000. PYPL provides financing across millions of merchants, with terms and rates based on consumer creditworthiness.
AFRM’s Price Performance, Valuation & Estimates
Shares of AFRM have risen 58.2% over the past six months compared with the industry’s 20.2% growth.
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From a valuation standpoint, AFRM trades at a forward price-to-sales ratio of 4.1X compared to the industry average of 4.2X. AFRM currently carries a Value Score of D.
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The Zacks Consensus Estimate for AFRM’s 2026 earnings is pegged at $1.87 per share, followed by 53.3% growth next year.
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AFRMcurrently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).