Amazon customers in the UK may soon be able to split the cost of their purchases into smaller monthly payments.
The e-commerce giant has partnered with buy-now-pay-later provider Affirm, with its flexible payments soon to be available to customers at checkout in the US.
The partnership is being tested across select customers to begin with, but in the coming months Amazon plans to make BNPL more widely available to shoppers.
There are concerns that buy-now-pay-later service providers operate in an unregulated market and may exacerbate debt among the financially vulnerable.
“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,” said Eric Morse, Affirm’s senior vice president of sales.
Affirm’s alternative to credit cards also provides more payment options and flexibility that consumers want on Amazon.
An Amazon spokesperson added, “Amazon is always looking to add flexible payment options, and Affirm is doing just that by offering transparent over-time payment solutions that customers can choose from based on their needs, without any late or hidden fees.”
For now, the BNPL partnership will mean select Amazon customers will have the option to split the total cost of purchases of $50 or more into smaller monthly payments.
Confirm claims that it does not charge any fees like those you might expect for late payments, or when opening or closing your account.
However, depending on the purchase volume and where you shop, payment plans may include interest.
Thousands of stores offer Affirm as a payment option at checkout.
How will it work?
Amazon customers will shop as normal, but at checkout they will have the option to select Affirm as their preferred payment method instead of their debit or credit card.
They will then be able to select the number of months they want to spread their payments over and see if there is any interest payable.
Once a loan is confirmed, customers can download the Affirm app or log in via its website, and the app will send emails and text reminders to prevent shoppers from missing out on payments.
Affirm is one of the most popular buy now pay later providers and is currently working with over 12,000 companies including Walmart.
What does that mean for UK shoppers?
Pending a successful rollout in the US, there is a possibility that the UK could follow.
The UK BNPL market more than tripled 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, which are partnering with retailers to let shoppers link payments, often into three parts over the course of three months.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Use of buy-now-pay-later is already growing at a rapid pace. In the UK more than five million people used it in the year after the onset of the pandemic.
If Amazon is going to make it a feature in the UK, it can further grow it.
Amazon has begun a trial with Firm but expects to roll it out across the US in the coming months.
Although some payment plans will include interest, BNPL providers such as Affirm will argue that they provide a more transparent and cheaper alternative to credit cards.
“Unlike credit cards and other time payment options, we show consumers exactly what they will pay upfront, never increase that amount, and never charge any late or hidden fees,” Affirm says on its website.
But the Wallard Review has raised major concerns about the fact that the BNPL market is disorganized and may exacerbate debt among the financially vulnerable.
One bank told the review that of the 677,000 checking account customers who made a payment to two major BNPL providers in November 2020, 10 percent also exceeded their overdraft limit in the same month.
“Wallard has sounded alarm bells about buy now, pay later,” Coles said.
A big part of the risk lies in the fact that people don’t 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 payments structure also encourages people to focus on the cost of each installment, rather than the total price, which can convince them to make purchases they can’t really afford.
“The fact that you only need a very basic credit rating to get a deal also means that you can take on a large number of them at the same time, racking up significant debt, without ever thinking about whether they are affordable.”
Some of the links in this article may be affiliate links. If you click on it, we may earn a small commission. This helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to influence our editorial independence.