Should You Buy Affirm, or Are Square and PayPal Better Investments?

The buy now, pay later trend has picked up steam in the past year or so, and Affirm (AFRM 0.91%) has been one of the biggest beneficiaries. In this Fool Live video clip, recorded on May 3, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss whether Affirm is worth a look, or if one of the fintech giants like PayPal (PYPL -1.83%) or Square (SQ -1.97%) might be a better way to invest.

Matt Frankel: Jen says, "If you had to pick one, Square or PayPal and why? Also couldn't either or both of these companies do what Affirm is doing?" We'll take them one at a time. Yes, they can absolutely do what Affirm is doing. In fact, PayPal is doing what Affirm is doing. PayPal has its own buy now, pay later service right now, that's really the biggest bear case against Affirm right now, is that all these big fintech's could do the same thing they're doing, in some cases, use their tens of millions of loyal customers to build a following with it. If I had to pick one right now, I would have to go with Square just because I see them as the biggest opportunity from here. I think that they have a lot of room to grow their business still, whereas PayPal is not necessarily maxed out, but they're definitely more of the mature company of the two. Payment volume through PayPal was roughly 10 times what it is through Square's network. Square has a lot more adjacent opportunities, especially on the consumer side of it. Especially now they're a bank, remember Square just got a banking charter. I just see them as a higher potential of the two right now, I don't think you'll go wrong with either one. I do like that PayPal got into Affirm space with the buy now pay later service. I think there's quite a bit of potential there as well. But out of the two, I will pick Square if I was, well, I already owned Square, but if I was adding today.

Jason Moser: This goes into the next question from Dev who asks, "Affirm versus Afterpay? Affirm is a Fool recommendation, please give us your opinion. I mean, the thing that's always concerned me about these businesses. I'm not saying that they are bad investments, don't get me wrong. The question that I have though that keeps me on the sidelines is it reminds me a lot of the whole Clubhouse with Twitter spaces thing, in like Clubhouse is a feature versus like a platform. Remember when live streaming video came out and like the big deal was Meerkat and it was at South by Southwest, I guess. I think were talking about how Meerkat is this big deal and whatever. Then Twitter (TWTR) goes and buys Periscope and just basically just puts Meerkat out of business, they had to completely redo everything. It was like this feature, had a really difficult time then competing with platforms that could just introduced that feature. You've got a lot of platforms out there that are able to introduce that buy now pay later feature no problem. I mean, we're watching them do it. Then I don't know, does that make something like an Affirm weren't after pay a good investment? Is that something that investors should be concerned about? For me personally, I look at those companies and think, well, they better come up with something else because what they're doing is being incorporated into other platforms. I don't know, it's not like they have some irreplicable product or service that they're offering because other platforms, other bigger networks are already replicating it.

Frankel: Right now, Affirm's big advantage is that they have some big accounts, specifically Peloton (PTON -0.97%).

Moser: Yeah, Peloton. It's right

Frankel: If they were to lose Peloton, that's a pretty big risk having a lot of your revenue come from one source. If they were to lose Peloton, I would know what the bull case would be for Affirm right now. That's just me.