(CTN News) – In response to the millions of small business owners using Amazon’s online store, Amazon has introduced its first buy now, pay later checkout option.
Affirm executives plan to announce Thursday that Amazon’s partnership with Affirm will expand to include Amazon Business, the company’s e-commerce platform.
Following the news, Affirm shares jumped more than 10% in premarket trading.
Those eligible for the service will be able to borrow between $100 and $20,000 by Black Friday, which falls on November 24. Sole proprietorships, or small businesses owned by a single person, are the most common form of business ownership in the United States.
The graph illustrates the popularity of a fintech feature that exploded early in the pandemic, along with the valuations of leading players Affirm and Klarna. After the boom turned into a bust in 2021 and valuations fell steeply, skeptics blamed rising interest rates and borrower defaults for holding back growth.
Since customers know their interest payments in advance, this option is touted as being more transparent than credit cards. Households and businesses have become more receptive to pandemic stimulus programs as excess funds have dwindled.
According to Todd Heimes, director of Amazon Business Worldwide, small businesses frequently need payment solutions to manage their cash flow. Our customers can pay by credit card or by invoice; this is another option available to them to spread out their payments.”
In 2015, Amazon Business was launched after the company realized businesses were using its popular retail website for office supplies and bulk orders. Globally, the division has more than 6 million customers and sales of $35 billion this year.
Users can pay for Amazon purchases in equal installments over three to 48 months if they are approved. They are charged an annualized interest rate between 10% and 36%, according to Affirm Chief Revenue Officer Wayne Pommen. There are no late or hidden fees, the companies said.
According to Pommen, the financial industry does not provide adequate credit to small businesses. In order to obtain a loan, they must reach a certain scale before they can walk into a bank branch. Therefore, the ability for us to provide this service for purchases helps businesses grow and manage their cash flow, he said.
This move strengthens a crucial relationship for Affirm, which has been struggling to grow revenue since the demand for expensive Peloton bikes collapsed. In 2021, Affirm began offering installment loans to Amazon’s retail customers, and earlier this year, it became part of Amazon Pay.
According to Pommen, Affirm decided to focus on sole proprietors first because they represent the majority of small businesses in the country.
“We will observe how the product performs and whether extending it to a broader range of businesses makes sense,” he explained. As far as we are concerned, we are able to underwrite this very successfully and have the performance that is required.