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Amazon Launches Buy Now, Pay Later Checkout for Millions of Small Business Owners

Amazon is set to introduce its inaugural buy now, pay later checkout option for the vast community of small business owners utilising its online marketplace, according to an exclusive report by CNBC.

The e-commerce behemoth has officially announced an expansion of its partnership with Affirm, a move that will encompass Amazon Business, the platform designed for corporate clientele.

Affirm’s stock saw a remarkable surge of 19% in response to this development. This service, offering loans ranging from $100 to $20,000, is poised to become accessible to all eligible customers by Black Friday, scheduled for November 24. Targeted explicitly at sole proprietors and small businesses owned by a single individual, which constitute the most prevalent form of business ownership in the United States.

This latest move exemplifies the increasing adoption of fintech features, which experienced substantial popularity during the early stages of the pandemic. Companies such as Affirm and Klarna saw their valuations skyrocket. However, 2021 brought a shift, as valuations in the industry decreased significantly. Skeptics cited rising interest rates and borrower defaults as potential roadblocks to growth and profitability.

Nonetheless, from the user perspective, the buy now, pay later option is hailed for its transparency compared to traditional credit cards. It provides customers with a clear understanding of the interest they will owe upfront, making it a durable choice for households and businesses contending with diminishing excess cash from pandemic-related stimulus programmes.

Todd Heimes, Director of Amazon Business Worldwide, emphasised the importance of payment solutions for small businesses managing their cash flow. He noted that Amazon Business already offers the ability to use credit cards and pay by invoice, and this new option provides small business customers with a further avenue to pay over time.

Amazon Business was launched in 2015 after recognising that companies were using Amazon’s retail site for office supplies and bulk purchases. The division has amassed over 6 million customers globally and generated $35 billion in sales this year. Once approved, users can split their Amazon purchases into equal installments spanning three to 48 months. They will be subject to an annualised interest rate ranging from 10% to 36%, dependent on the perceived risk of the transaction. Importantly, there are no late fees or hidden charges.

Wayne Pommen, Chief Revenue Officer at Affirm, highlighted the limited availability of credit for very small businesses in the conventional financial industry. He explained that they often face challenges in securing loans until they reach a particular scale. Affirm’s offering aims to facilitate business growth and assist in managing cash flows.

For Affirm, this move strengthens a pivotal partnership as the company seeks to expand its revenue base following a decline in demand for Peloton bikes. Affirm initially introduced installment loans to Amazon’s retail customers in 2021, subsequently launching in Canada in 2022 and being integrated into Amazon Pay earlier this year.

The decision to commence with sole proprietors is driven by their prevalence as the majority of small businesses in the United States, with 28 million registered entities, according to Pommen. He suggested that they will monitor the performance of the product and assess the possibility of expanding it to a broader spectrum of businesses. Affirm is confident in its ability to underwrite this segment effectively, foreseeing strong performance ahead.

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