Hi all, Julie here.

First of all, quick reminder that you can now go to our website and look back/search through all of our previous premium content! New subscribers in particular: you’re welcome ;)

Don’t worry, I have more than just the website to talk about today. A few weeks ago, Buy Now Pay Later startup Affirm acquired Returnly for $300M. Why? Well, returning things isn’t just a pain in the ass for you, it’s a pain for retailers as well as the companies that are processing payments for them.

So not only does this acquisition make sense from that perspective, but Max Levchin, the CEO and Co-Founder of Affirm, is also a Returnly investor. So if his company was gonna buy someone in the space, it was definitely going to be them.

Levchin investing aside, Returnly seems to be running quite the business. It currently serves more than 1,800 businesses and has processed more than $1B in returns, with more than 8M customers having used the platform. And while that’s big, there’s still a ton of room for growth. With the pandemic, ecommerce accounted for 14% of total US retail sales in 2020, or $565B. At the same time, approximately $102B of merchandise purchased online was returned. I’d expect those numbers to go down a bit as the world opens back up, but you get the point: people buy and return a lot online.

You might also have noticed that your payment options at the checkout have been changing. Now it’s more than just a credit card or PayPal option. More often than not, I’m seeing a BNPL option too. So today you have to choose from dozens of credit cards, debit cards, PayPal, Venmo, CashApp, BNPL, and maybe even crypto as a payment option. That’s a lot. Though chances are, you aren’t seeing all of these on every checkout page. Retailers are picking and choosing who they have in the shopping cart based on a variety of things such as cost, checkout conversion, and more.

So with that checkout option getting increasingly competitive, why not try to make this whole process easier so the merchants and customers value working with you as a payment provider over one of the other options that they see on their screen? Seems like a no brainer for someone like Affirm, especially if you don’t want to have to compete your way to 0 on costs.

Affirm: Hey, I can offer you great rates, great customer conversion, and can issue merchandise credits or replacements instantly when customers make a return.

Merchant: Where do I sign up?

You get the point. I’m not an expert on how all of this works, but based on my experience helping with payments for Fintech Today’s newsletter subscription, I think all of this is a lot harder than people realize. If a payment provider said they could handle all of this for me, I’d be very keen on going with them vs someone else. In emerging markets where online shopping isn’t as trustworthy as it is in developed nations, this could have an even larger impact.

Whether in developed markets or emerging, whether you’re selling a mattress or a sweatshirt, adding services like this to your lineup as a payment provider seems like a really smart move. Any way you can change the long term value and customer acquisition costs for a retailer is gonna be huge in winning checkout space.