Amazon announced Thursday its partnership with Affirm is being expanded to include Amazon Business, the e-commerce platform for companies. This is the first time Amazon is rolling out a "buy now, pay later" checkout option for the millions of small business owners who use its online store. The move is beneficial for Affirm, which has had to seek other sources of income after demand for expensive Peloton bikes diminished.
Amazon has revealed its first "buy now, pay later" checkout option for the millions of small business owners who use its Amazon Business e-commerce platform. Following the news, shares of its partner Affirm jumped more than 15%. Come Black Friday, Nov. 24, eligible customers will have access to a range of loans from $100 to $20,000 specifically for sole proprietors, the most widespread type of business ownership in the US.
This is in keeping with the increased adoption of this fintech feature during the pandemic, as well as the rapidly growing valuations of leading players Affirm and Klarna. Despite the doubts expressed by skeptics with regard to rising interest rates and borrower defaults impeding growth and profitability, the option continues to be well-received due to its greater transparency compared to credit cards which requires customers to know exactly how much interest they will owe upfront.
"We continually hear from small businesses that need payment solutions to manage their cash flow," comments Todd Heimes, Director of Amazon Business Worldwide. "With the availability of credit cards, invoice payments, and now the ability to pay over time, small business customers have more options than ever before."
The Amazon Business division was first established in 2015 when it was realized that businesses had begun to use its retail website for office supplies and larger-scale purchases. This year it achieved $35 billion in sales, and boasts more than 6 million customers internationally.
If approved, users can split Amazon purchases into equal payments over three to 48 months, incurring an annualized interest rate of between 10% and 36%, based on the risk of the transaction, according to Affirm Chief Revenue Officer Wayne Pommen. The companies have stated that there are no late or hidden fees. Pommen commented that "the financial industry is not great at providing credit to really small businesses; they can't just walk into a bank branch and get a loan until they reach a certain scale. Therefore, allowing us to provide this for purchases" can help businesses grow and manage their cash flows.The development is a major advantage for Affirm, which had to seek sources of revenue growth after demand for costly Peloton bikes decreased. Affirm first provided installment loans to Amazon's retail shoppers in 2021, followed by a launch on Amazon in Canada in 2022, and its addition to Amazon Pay this year.Affirm, which evaluates each transaction it facilitates with its own models, has opted to target sole proprietors initially since they make up the majority of small businesses in the U.S., with 28 million registered. Pommen stated, "We'll investigate how the product works out and if it's sensible to extend it to a wider array of businesses. Our analysis is that we can assess this accurately and have the strong performance we need."
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