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Amazon Jumps Into Buy Now, Pay Later With Affirm

Amazon has officially thrown its hat in the crowded “buy now, pay later” space, partnering with installment payments provider Affirm to bring pay-over-time capabilities to its marketplace for the first time.

The e-commerce giant and Affirm are testing the partnership with select customers now, and in the coming months, Amazon plans to make Affirm more broadly available to its customers, the companies said in a statement on Friday. Upon the announcement of the partnership, Affirm’s stock price shot up as much as 48 percent to more than $100 per share in after-hours trading.

The major players in the BNPL arena have been turning heads across retail and tech, particularly as younger, risk-averse consumers prefer to pay for items in installments without fear of hidden or late fees. According to an April 2021 study from C+R Research, roughly half (56 percent) of 2,000 U.S. consumers surveyed said they always prefer the payments method over credit cards, while an additional 25 percent say they sometimes prefer BNPL over credit cards. According to the study, Affirm was the third-most popular installment payments platform behind PayPal Credit and Afterpay.

With the shift in payments preferences, the heavy hitters in the category are capitalizing. Swedish fintech Klarna raised a robust $639 million in June, valuing the company at $45.6 billion. What’s more—the recent funding came less than a year after Klarna nabbed $650 million. And earlier this month, the first major deal in the sector occurred when payments giant Square acquired Afterpay for $29 billion.

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As a result of Amazon and Affirm’s partnership, select Amazon customers now have the option to split the total cost of purchases of $50 or more into smaller, monthly payments.

Approved customers are shown the total cost of their purchase upfront and will never pay more than what they agree to at checkout, Affirm says. When using the “buy now, pay later” platform, consumers will not be charged any late or hidden fees.

Per Affirm’s policy, customers must agree to a soft credit check at checkout. The financial terms offered depend on both the person’s credit history and the item’s purchase price. Depending on the customer and their order value, they might be offered anywhere from a three- to 48-month payment plan, with interest ranging from 0 to 30 percent APR. Consumers that pay interest on loans will agree to the interest rate upfront, and the interest does not compound.

“By partnering with Amazon we’re bringing the transparency, predictability and affordability that Affirm provides today to the millions of people who shop on in the U.S.,” said Eric Morse, senior vice president of sales at Affirm. “Offering Affirm’s alternative to credit cards also delivers more of the payment choice and flexibility consumers on Amazon want.”

Affirm works with more than 12,000 merchants, including Peloton, Walmart and Shopify, and counts 5.4 million active consumers. The tech platform went public in January 2021, and three months later shelled out $300 million for Returnly, a platform focused on improving post-purchase and return experiences.

In its third quarter, Affirm boosted revenue 67 percent year over year to $230.7 million, and traded $2.3 billion in gross merchandise volume (GMV) over the platform—an increase of 83 percent. With Amazon now in tow, Affirm should except its GMV output to continue to skyrocket.