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Buy now, pay later specialist Affirm Inc. late Friday announced it had clinched the e-commerce giant Amazon.com Inc. as a client, securing a source of enormous volume and sending its stock soaring Monday morning. The news follows the enablement in May of Affirm’s service for hundreds of thousands of U.S. merchants using Shopify Inc.’s Shop Pay app.
While the Amazon deal is clearly a coup for San Francisco-based Affirm in the hot market for point-of-sale installment credit, some of the contours of the arrangement remained somewhat vague Monday. For example, while the two firms are testing the service now, timing of the rollout remains unclear. A terse press release characterizes it as arriving “in the coming months.”
An Affirm spokesperson tells Digital Transactions News the service will be available both for products sold directly by Amazon as well as those listed by merchants using the e-commerce giant’s platform. He adds, however, that “Affirm is not eligible for certain purchases, such as Whole Foods Market, Amazon Fresh orders, digital purchases like movies or Kindle books or gift cards.”
The arrangement with Affirm will allow “select” Amazon users to split a purchase of at least $50 into monthly payments, with a promise of no late or “hidden” fees, according to the news release. “Offering Affirm’s alternative to credit cards … delivers more of the payment choice and flexibility consumers on Amazon want,” says Eric Morse, senior vice president of sales at Affirm, in a statement.
The Amazon deal is clearly a huge win for Affirm at a time when the BNPL trend is gaining momentum as Covid-impacted consumers search for alternative ways to finance purchases, both online and in stores. The arrangement will deliver approximately $7.7 billion in annual volume for Affirm, starting next year, according to an estimate from Deutsche Bank analyst Bryan Keane, as quoted by Yahoo Finance. That’s almost three-and-a -half times the total gross merchandise volume Affirm reported for its fiscal second quarter, which ended March 31.
Amazon late last month reported $113.1 billion in total net sales for the second quarter, up 27% year-over-year.
In response to the Amazon announcement, Affirm’s stock soared early Monday, reaching the mid-90s by midmorning. That’s up 42% from Friday and returns the shares to the range they briefly visited this spring. The company’s high for the year is $146.90. Affirm went public in January, nine years after its founding by a group including current chief executive Max Levchin, who in 1998 was among the founders of PayPal Holdings Inc.
The Amazon deal comes soon after Affirm’s agreement with Shopify, which lets buyers on the platform pay merchants in four installments at no interest and with no fees. The Shop Pay wallet is part of Ottawa-based Shopify’s overarching shopping assistant, called Shop, which has approximately 19 million monthly active users, according to information Shopify released in April. At the time, the company said Shop Pay had accounted for nearly $20 billion in total sales since its debut in 2017.
