Source: Affirm
Following a rush of other retailers adding the payment option, Amazon is bringing a buy now, pay later (BNPL) checkout option to its U.S. platform for the first time.
Under the partnership with Affirm, Amazon customers at checkout will have the option to split the total cost of purchases of $50 or more into monthly payments in select markets. The option will become more broadly available in coming months. Purchases from Whole Foods, Amazon Fresh and certain digital purchases like movies and books will not be eligible.
Amazon already works with Zip, formerly Quadpay, in Australia.
Amazon’s push adds more credibility to BNPL installment services and comes after Square last month agreed to acquire BNPL-giant Afterpay for $29 billion. Apple has also partnered with Affirm on a BNPL option in Canada. Klarna and Paypal are other major BNPL players.
The short-term financing method has quickly become common with Walmart, Best Buy, Nike, Macy's and Sephora among the many chains rolling out the option.
For retailers, the primary appeal is to reach younger consumers encumbered by student loan debt. The 2010 Card Act also made it harder to get a credit card before age 21.
Typically, the loan is paid off in four installments over a six-week period. Unlike old-school layaway programs that Sears pioneered in the sixties, shoppers receive the purchases right away instead of waiting for all installment payments to be made. Simplified checkout and the lack of hidden fees also drive BNPL’s appeal.
A new study from Financial Technology Partners (FTP) predicts that BNPL will jump from 2.1 percent of all global payment methods to 4.2 percent in 2024, while all other payment methods except digital/mobile wallets decline.
BNPL companies make most of their revenue from merchant fees, which can run two to three times credit card processing fees. However, BNPL providers take on all credit risk (including fraud and chargebacks) and deliver payment in full to the merchant at the time of purchase.
Some stores risk losing revenues gained from the use of their store-branded credit cards. With many BNPL players conducting light credit checks on customers, retailers may also be called out should consumer debt escalate with increased BNPL use.
- Amazon Partners with Affirm to Deliver Pay-Over-Time Option at Checkout – Affirm
- Affirm Shares Soar on Amazon Partnership – Wall Street Journal
- Amazon strikes a deal with Affirm, the buy-now pay-later provider. – New York Times
- Buy Now, Pay Later - Boom or Bust? – Strawhecker Group
- Covid-19 Economy Boosts ‘Buy Now, Pay Later’ Installment Services – Wall Street Journal
- Gartner Survey Analysis: 9 Key Trends in Digital Commerce Adoption – Elasticpath
- Outlining the Potential Growth of BNPL Services, Apple Pay’s Newest Reported Venture – Morning Consult
- Buy Now Pay Later - Revolutionizing Traditional Credit With Convenience, Data & eCommerce – FT Partners
- Fueled by the Pandemic, Buy Now, Pay Later Is Reaching an Inflection Point – Adweek
- Urban Outfitters buys into installment payment plan – RetailWire