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Affirm already partners with Walmart, Shopify, Peloton, and other big e-commerce players.
Amazon.com Inc (NASDAQ: AMZN) on Friday announced it was jumping into the “Buy now, pay later” (BNPL) ecosystem. To achieve this seamlessly, Amazon teamed up with financial services company Affirm. This news has positively affected the price of Affirm Holdings Inc (NASDAQ: AFRM) stock. It is nearly 40% up now.
With the partnership, Amazon customers in certain parts of the United States will be able to split payment for purchases of $50 or more. Payments can be split into monthly installments as may be convenient for the user. Once approved, customers can expect that they won’t pay more they were shown at checkout.
Following the initial run, it will be made available to a wider audience in the coming months. Before this partnership, Affirm already has a relationship with Walmart Inc (NYSE: WMT), Shopify Inc (NYSE: SHOP), Peloton Interactive Inc (NASDAQ: PTON), and other big e-commerce players.
How Amazon’s Announcement Affected Affirm (AFRM) Stock
With news of the partnership, Affirm (AFRM) stock grew by nearly 40%. The company’s market capitalization also grew by a whopping $8 billion although the share price was unchanged. Recall that AFRM stock was made public in January, and peaked in February. However, the price skyrocketed by 20% earlier in August when Square brokered a $29 billion deal to acquire Australian fintech, AfterPay.
The rise in stock price even before pre-sale shows a positive interest of the investors. Bank of America analysts said that the news is an “unambiguous positive,” which affirms Affirm’s “technological leadership and strong reputation in the BNPL market.”
While installment loans are not new, most online payment providers and fintech services are just jumping on board the trend, and making online products available for users to buy and pay later.
Made popular since the pandemic, the online BNPL ecosystem has been growing in leaps and bounds with customers seeking alternative means of credit to augment their incomes. Amazon’s partnership with Affirm is the latest boost to the BNPL space.
Apart from Square brokering a deal earlier in the month, Apple is also looking to partner with Goldman Sachs for similar reasons.
Interestingly, Affirm, Afterpay, and Klarna do not charge interest payments on products bought through their system. Instead, they make their money from commissions received from the e-commerce stores that can boast of huger volumes of trade because of the BNPL option. However, according to Affirm, “Some Amazon customers will bear interest on purchases.”