Amazon customers in Britain may soon be able to split the cost of their purchases into smaller monthly payments.
The e-commerce giant has partnered with the buy now pay later provider, Affirm, with its flexible payments soon to become available to customers at checkout in the US.
The partnership is being tested via select customers to begin with, but in the coming months Amazon plans to make BNPL more broadly available to shoppers.
There are concerns that buy now pay later providers are operating in an unregulated market and may be exacerbating debt amongst the financially vulnerable.
Eric Morse, senior vice president of sales at Affirm said: ‘By partnering with Amazon, we’re bringing the transparency, predictability and affordability that Affirm provides to the millions of people who shop on Amazon in the US.
‘Offering Affirm’s alternative to credit cards also delivers more of the payment choice and flexibility consumers on Amazon want.’
An Amazon spokesperson added: ‘Amazon is always looking to add flexible payment options, and Affirm does just that by offering transparent pay-over-time solutions that customers can choose from based on their needs, with no late or hidden fees.’
For the time being, the BNPL partnership will mean that select Amazon customers will have the option to split the total cost of purchases of $50 or more into smaller monthly payments.
Affirm claims that it does not charge any fees such as those you might expect for late payments, or when opening or closing your account.
However, depending on the size of the purchase and where you’re shopping, payment plans may include interest.
Thousands of stores offer Affirm as a payment option at checkout.
How will it work?
Amazon customers will shop like normal, but at checkout they will have the choice to select Affirm as their preferred payment method rather than their debit or credit card.
They will then be able to select the number of months they wish to spread their payments over and also see if there is any interest payable.
Once you confirm the loan, customers can download the Affirm app or sign in via its website and it will send email and text reminders to stop shoppers from missing payments.
Affirm is one of the better-known buy now pay later providers and it currently works with over 12,000 companies including Walmart.
What does it mean for UK shoppers?
Pending a successful roll out in the US there is a likely chance that the UK will follow.
The UK’s BNPL market more than trebled in size last year, according to The Woolard Review, which was published by the Financial Conduct Authority earlier this year.
Big names now include Klarna, Clearpay and Laybuy, who partner with retailers to allow shoppers to splice payments, often into three chunks over three months.
Sarah Coles, personal finance analyst at Hargreaves Lansdown said: ‘The use of buy-now-pay-later is already growing at a blistering pace. In the UK more than five million people used it in the year after the onset of the pandemic.
‘If Amazon was to make it a feature in the UK, it could super-charge its growth.’
Amazon is starting a trial with Affirm but expects to roll it out across the U.S. in the coming months.
Although some payment plans will include interest, BNPL providers like Affirm will argue that they provide a more transparent and cheaper alternative to credit cards.
On its website Affirm says: ‘Unlike credit cards and other pay-over-time options, we show consumers exactly what they will pay up front, never increase that amount, and never charge any late or hidden fees.’
But the Woolard Review raised major concerns about the fact the BNPL market isn’t regulated and may be exacerbating debt amongst the financially vulnerable.
One bank told the review that of the 677,000 current account customers who made a payment to two of the large BNPL providers in November 2020, 10 per cent had also exceeded their overdraft limit in the same month.
‘The Woolard Review rang alarm bells over buy-now-pay-later,’ said Coles
‘Much of the risk lies in the fact that people don’t really think of it as borrowing, so they don’t give it the same kind of thought they would when taking on other types of debt.
‘The structure of the payments also encourages people to focus on the cost of each instalment, rather than the overall price, which can convince them to make purchases they can’t really afford.
‘The fact that you only need a very basic credit assessment to get a deal also means you can take on a large number of them at the same time, and run up significant debts, without ever considering whether they’re affordable.’