Affirm strikes massive deal with Amazon — puts buy now pay later industry in focus - The Average Joe

    Affirm strikes massive deal with Amazon — puts buy now pay later industry in focus

    Victor Lei — Head of Research

    August 30, 2021

    affirm fintech buy now pay later

    August 30, 2021

    Last Friday, Affirm, the buy now pay later (BNPL) company, announced a partnership to offer BNPL to Amazons’ customers — sending Affirm’s stock up 47%.

    What’s the big deal? With Amazon as a partner, Affirm now has several of the biggest e-commerce giants offering its payment option.

    • In the past few years, Affirm partnered with Walmart and Shopify (also an investor in Affirm).
    • Between Amazon, Shopify and Walmart, over $650b in goods were sold online.

    Affirm makes commission/interest when its BNPL payment option is used, so capturing even a small portion of that $650b would accelerate its sales.

    But what investors don’t know is how much Affirm will take from Amazon’s sales — Amazon is known for being tough in negotiation terms with suppliers.

    Market moves: The buy now pay later (BNPL) industry has been on fire with big news in recent months.

    • Last month, Square acquired Afterpay, an Australian BNPL company, for $29b.
    • Apple announced plans to launch BNPL payment options — partnering with Goldman in the US and Affirm in Canada.

    Investors looking to benefit from BNPL’s growth can get exposure through Square (NYSE:SQ) or PayPal (NASDAQ:PYPL) — each with their own BNPL product.

    After Square completes its Afterpay acquisition, the only pure-play BNPL company left on the stock market will be Affirm.

    The bull case for BNPL: Credit cards make up nearly 24% of US consumer transactions but BNPL only make up 1.6% of North American e-commerce transactions.

    The industry is still in its infancy and is expected to grow 22% annually over the next 7 years — as younger consumers increasingly prefer BNPL over credit cards.

    Upcoming: Affirm will announce earnings on Sept 9.

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