Affirm and PayPal Face BNPL Credit Stress

Affirm is the clearest example. The stock has been volatile, falling to $73.66 in the latest trading data after a sharp run-up and then retracement, while technical gauges show momentum cooling: the shares sit below the 50-day moving average, with RSI in the low 40s. That does not tell the whole story, but it does underscore investor caution after a period when optimism about growth and partnerships got ahead of the underlying economics.

The company’s own filings point to why the market keeps circling back to risk. Affirm said loan modification activity increased to 0.25% of receivables in fiscal 2026 from 0.17% a year earlier, a small number that still matters because it signals more borrowers needing help to keep payments current. The firm also warned that weaker economic conditions, inflation and tariffs could reduce consumer disposable income. In plain English, the more households rely on installments to book a vacation now and pay later, the more fragile the model becomes if budgets tighten.

PayPal, meanwhile, is still living with the hangover of becoming a broader consumer-credit player. Its shares have been under pressure too, dropping to $54.13 from a recent high above $61, and the stock is now below its recent 50-day average. RSI readings in the high 20s suggest the move has already become stretched, but investors care less about the technicals than the underlying trend: PayPal’s consumer loans and interest receivable fell to $5.5 billion at midyear, down 6% from a year earlier, while net charge-offs rose. That is not a collapse, but it does show how sensitive installment lending can be when borrowers are balancing discretionary spending against higher living costs.

The bigger narrative is that BNPL works best when households feel flush and rates are low. In a world where inflation is still elevated relative to the past decade and consumer confidence can wobble quickly, vacation financing is an attractive product for shoppers but a thinner-margin, higher-risk proposition for lenders. The companies can grow by expanding payment options and capturing more transaction volume, but every new installment plan also adds another point of contact with credit quality.

For long-term investors, that means choosing carefully. Affirm still has a compelling niche in point-of-sale lending, and PayPal has a much broader ecosystem to lean on, but neither deserves to be treated like a simple payments stock anymore. The winners will be the firms that combine underwriting discipline, funding flexibility and enough scale to absorb credit cycles. For everyone else, installment financing may look like convenience to the customer and leverage to the balance sheet. Worth watching, but patience matters.