- Amazon is rolling out its first buy now, pay later option for the millions of small business owners who use its online store, CNBC has learned exclusively.
- The tech giant confirmed Thursday that its partnership with Affirm is expanding to include Amazon Business, an e-commerce platform for companies.
- The move is a boost in important relationships for Affirm, which has been forced to seek revenue growth after demand for its expensive Peloton bikes collapsed.
Alain Jocard | AFP | Getty Images
CNBC is exclusively introducing a shop-first, pay-later option for the millions of small business owners using Amazon’s online store.
The tech giant confirmed Thursday that its partnership with Affirm is expanding to include Amazon Business, an e-commerce platform that serves businesses.
Affirm shares rose more than 14% following the news.
With loans ranging from $100 to $20,000, the service will be available to all eligible customers until Black Friday or November 24. It is specifically for sole proprietors or small businesses owned by one person, the most common form of business ownership. in the United States
It’s the latest sign of an expansion of the fintech feature that gained popularity at the start of the pandemic, along with valuations by leading players Affirm and Klarna. When the boom turned bust in 2021 and valuations in the industry fell sharply, skeptics pointed to rising interest rates and borrower defaults as obstacles to growth and profitability.
But for users, this option is more transparent than credit cards, because customers know how much interest they will owe. This has made it attractive to households and businesses under increasing strain as excess cash from pandemic stimulus programs dwindles.
“We’re constantly hearing from small businesses that they need payment solutions to manage their cash flow,” Amazon Business Worldwide director Todd Heimes said in an interview. “We offer the ability to use credit cards and pay by invoice; this is another option for small business customers to pay over time.”
Amazon Business was launched in 2015 after the company realized that businesses were using its popular retail site for office supplies and bulk purchases. The division reached $35 billion in sales this year and has more than 6 million customers globally.
Amazon customer with buy now, pay later at checkout.
Courtesy: Amazon Inc.
If approved, users can pay off their Amazon purchases in equal installments over three to 48 months. According to Affirm Chief Revenue Officer Wayne Pommen, they are charged an annual interest rate of 10% to 36% based on the perceived risk of the transaction. The companies said there were no delays or hidden fees.
“The financial industry is really not good at lending to small businesses,” Pommen said. “They can’t walk into a bank branch and get a loan until they’re at a certain scale. So we can provide that for purchases,” he said.
The move is a boost in important relationships for Affirm, which has been forced to seek revenue growth after demand for its expensive Peloton bikes collapsed. Affirm first began offering installment loans to Amazon’s retail customers in 2021, launched on Amazon in Canada in 2022, and then added to Amazon Pay earlier this year.
According to Pommen, Affirm decided to primarily target sole proprietors because they make up the majority of small businesses in the country, with 28 million registered in the United States.
“We will see how the product performs and whether it makes sense to expand it to the wider business world,” he said. “Our assessment is that we can pull it off very successfully and have the strong performance that we need.”