Technology
Thursday, November 2nd, 2023 1:55 pm EDT
Key Points
- Amazon’s Expansion into Buy Now, Pay Later: Amazon is launching its first buy now, pay later checkout option, which is set to be available for millions of small business owners using its online store. The partnership with Affirm is expanding to include Amazon Business, catering to companies, and Affirm’s shares surged more than 14% after this announcement.
- Service Details: The buy now, pay later service will offer loans ranging from $100 to $20,000 and will be accessible to eligible customers by Black Friday, which falls on November 24. This service is specifically aimed at sole proprietors and small businesses owned by single individuals, a common form of business ownership in the United States.
- Sign of Fintech Adoption: This move reflects the growing adoption of fintech features like buy now, pay later, which gained popularity during the pandemic. The option is considered more transparent than credit cards, making it appealing to households and businesses seeking to manage cash flow as excess cash from pandemic stimulus programs diminishes. Amazon Business, which launched in 2015, has grown to reach $35 billion in sales this year, with over 6 million customers globally. Affirm’s decision to target sole proprietors first aligns with its strategy to underwrite successfully and explore potential expansion to a wider range of businesses in the future.
Amazon is introducing a buy now, pay later checkout option in partnership with Affirm for small business owners using its online store, specifically targeting sole proprietors and small businesses in the U.S. This service will offer loans ranging from $100 to $20,000 and will be available to eligible customers by Black Friday, which falls on November 24. Affirm’s shares surged more than 14% following the announcement.
The move reflects the growing adoption of fintech features, such as buy now, pay later, which gained popularity during the pandemic. Despite concerns about rising interest rates and borrower defaults affecting the industry’s growth and profitability, users find this payment option more transparent than credit cards because they know the interest costs upfront. This transparency is particularly appealing to households and businesses as excess cash from pandemic stimulus programs diminishes.
Amazon Business, the e-commerce platform catering to companies, is expanding its financial offerings to include this buy now, pay later option. Users who are approved can make purchases on Amazon in equal installments over three to 48 months, with an annualized interest rate between 10% and 36% based on transaction risk. Importantly, there are no late or hidden fees associated with this payment option.
Affirm sees this as an opportunity to provide credit to small businesses, especially sole proprietors who may struggle to secure loans through traditional financial institutions until they reach a certain scale. The partnership with Amazon Business is a significant step for Affirm, which has been seeking revenue growth after a decline in demand for expensive Peloton bikes. Affirm had previously offered installment loans to Amazon’s retail customers, and the extension to small businesses reflects the importance of this market segment.
Affirm’s initial focus on sole proprietors, who constitute a significant portion of small businesses in the U.S., allows for a controlled launch, with potential expansion to a broader range of businesses in the future based on performance. The move aligns with Amazon’s goal to provide flexible payment solutions for its business customers, offering them another option to manage their cash flow.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/11/02/amazon-affirm-buy-now-pay-later-small-business.html
