Affirm ventures into B2B BNPL with Amazon Business

Amazon and Affirm have joined forces to offer buy now, pay later (BNPL) solutions to sole proprietors or exclusive owners of small businesses who make purchases on Amazon Business, its B2B e-commerce platform. Earlier Amazon Pay tapped Affirm to offer BNPL options to consumers; this time, however, the extended partnership marks the debut of Affirm’s B2B pay-over-time solution, also making it the first US pay-later provider for Amazon Business.

Eligible Amazon Business customers can pay over time for a cart value of $100 or more for a variety of business purchases like furniture, office supplies, and electronics among other things. Purchases can be split into 3-48 monthly installments, with no late or hidden fees, according to the company. However, customers are charged an annualized interest rate between 10% and 36%. 

Following the underwriting process, Affirm sends out a payment schedule after the last item in a business owner’s order is shipped. Business customers can then make or schedule payments at affirm.com or in the Affirm app for iOS or Android. SMB customers can also use credit cards or pay by invoice option to pay over time. The new service will roll out to all eligible Amazon Business sole proprietor customers by Black Friday.

Financing has always been a significant and standing challenge for small and medium-sized companies, as a majority of them do not conform to the risk appetite of traditional lenders. Meanwhile, current economic circumstances continue to exert pressure on the financial stability of SMBs. While SMB leaders are generally projecting strong revenue growth midway through 2023, one-half don’t have full funding to expand their business horizons, and many seek new funding sources going forward, according to a new report by Visa. 

The new B2B BNPL checkout solution aims to equip SMBs with flexible financing options and increase their cash flow, according to Wayne Pommen, Chief Revenue Officer of Affirm.

“The financial industry is not great at providing credit to really small businesses,” said Pommen. “They can’t walk into a bank branch and get a loan until they reach a certain scale. So us being able to provide this for purchases” helps them to scale business in parallel to manage their cash flow, he said.

In the same vein, Galileo and Mastercard partnered last month to enable lenders to extend a BNPL offering to their SMB clients in direct response to the friction SMBs face in obtaining fast access to flexible credit.

There’s a bigger picture here

Although BNPL firms have created one of the fastest-growing niches in consumer finance, the profitability of a few BNPL providers including Affirm remains questionable. After a bleak Q2 (ended December 2022), Affirm kicked off Q3 by laying off 19% of its staff and pulling back on its cryptocurrency business. These hard knocks were attributed to a slump in a large portion of revenue coming from a single merchant partner, Peloton -- an at-home fitness company -- since 2018. While home fitness was popular during the pandemic, consumers have moved past that trend which affected Affirm’s revenue growth, among other factors. Affirm stock further took a hit after the launch of Apple Pay Later, which threatens established BNPL players including PayPal. 

Drawing inferences from its declining growth, Affirm’s slew of notable subsequent partnerships with Amazon Pay, Worldpay, and Booking.com indicate that the BNPL provider has been looking for other ways to make up lost ground. Amazon first partnered with Affirm in June this year to embed its Adaptive Checkout as a consumer payment option for Amazon Pay. After months of see-saw battles, the Affirm stock saw a double-digit boost off the back of new deals – particularly Amazon Pay’s – that fueled transactions.

Affirm shares also surged nearly 21% last week ahead of its Q1 2024 financial results, likely driven by a positive impact from its recent alliance with Amazon Business. The expanded collaboration is a step toward increased distribution for the BNPL provider given it capitalizes on Amazon’s ecosystem approach to further increase its e-commerce market share in the evolving B2B space.

“We’ll see how the product performs and if it makes sense to expand it to a wider universe of businesses,” said Pommen. “Our assessment is that we can underwrite this very successfully and have the strong performance that we need,” he added.