- Amazon is rolling out its first buy-now, pay-later option at checkout for the millions of small business owners who use its online store, CNBC has learned exclusively.
- The tech giant plans to announce Thursday that its partnership with Affirm is expanding to include Amazon Business, its e-commerce platform for companies.
- The move is a boost in a crucial relationship for Affirm, which has had to look for revenue growth after demand for expensive Peloton bikes collapsed.
Alain Jokar | AFP | Getty Images
Amazon is unveiling its first buy-now, pay-later option at checkout for the millions of small business owners who use its online store, CNBC has learned exclusively.
The tech giant plans to announce Thursday that its partnership with Affirm is expanding to include Amazon Business, the e-commerce platform that serves companies, according to executives from both firms.
Shares of Affirm jumped more than 10% in premarket trading after the news.
The service, with loans ranging from $100 to $20,000, will be available to all eligible customers until Black Friday or November 24. It’s specifically for sole proprietors, or small businesses owned by one person, the most common form of business ownership in the US
It’s the latest sign of widespread adoption of a fintech feature that exploded in popularity at the start of the pandemic, along with ratings from leading players Affirm and Klarna. As the boom turned to bust in 2021 and industry valuations plummeted, skeptics pointed to rising interest rates and borrower defaults as obstacles to growth and profitability.
But for consumers, the option is touted as more transparent than credit cards because customers know how much interest they’ll owe in advance. That made its appeal durable for households and businesses under increasing strain as excess cash from pandemic stimulus programs dwindled.
“We hear all the time from small businesses who say they need payment solutions to manage their cash flow,” Todd Hames, director of Amazon Business Worldwide, said in an interview. “We offer the ability to use credit cards and pay by invoice; it’s another option available to small business customers to pay over time.”
Amazon Business was launched in 2015 after the company realized that businesses were using its popular retail website for office supplies and bulk purchases. The division reached $35 billion in sales this year and has more than 6 million customers worldwide.
Amazon customer with access to buy now, pay later option when paying by Affirm.
Courtesy: Amazon Inc.
If approved, consumers can pay for Amazon purchases in equal installments over a period of three to 48 months. They receive an annual interest rate of between 10% and 36%, based on the perceived risk of the transaction, according to Affirm’s chief revenue officer Wayne Pomen. There are no late or hidden fees, the companies said.
“The financial industry is not good at providing credit to really small businesses,” Pomen said. “They can’t walk into a bank branch and get a loan until they reach a certain scale. So our ability to provide that for purchases” helps businesses grow and manage their cash flow, he said.
The move is a boost in an all-important relationship for Affirm, which has had to look for revenue growth after a collapse in demand for expensive Peloton bikes. Affirm first began offering installment loans to Amazon retail customers in 2021, then was added to Amazon Pay earlier this year.
Affirm decided to target sole proprietors first because they make up the majority of small businesses in the country, with 28 million registered in the U.S., according to Pommen.
“We’ll see how the product performs and whether it makes sense to expand it to a wider universe of businesses,” he said. “Our assessment is that we can deliver this very successfully and have the strong performance that we need.”
