Amazon.com, Inc. (AMZN) has announced a partnership with Affirm Holdings, Inc. (AFRM), a company in the hot "buy now, pay later" (BNPL) arena. The move could bring in new, younger customers for Amazon and generate more revenue from big-ticket items.
BNPL is just like it sounds—a customer buys something now and defers payment until a later date. It's similar to a car or home loan, where the customer receives the item immediately and then pays for it over time (usually in monthly installments).
- Amazon jumped into the hot "buy now, pay later" (BNPL) space through a deal with Affirm.
- Amazon continues to innovate, keeping the company one step ahead.
- These types of innovations keep the Big Money flowing into Amazon shares.
The BNPL purchase method is increasingly popular online and in person. This is especially true with younger consumers, who prefer BNPL to traditional credit cards and their higher interest rates. (Many BNPL services don't charge interest.) In Amazon's case, customers can split purchases of $50 or more into smaller installment payments.
Firms specializing in BNPL have been gaining a lot of traction recently. Square, Inc. (SQ) announced that it bought Afterpay for $29 billion about a month ago. Meanwhile, PayPal Holdings, Inc. (PYPL) recently acquired Paidy, a Japanese BNPL startup, for $2.7 billion. And there's been talk of more deals happening, so this could be just the beginning of a bigger trend.
Clearly, the BNPL digital payment solution is gathering steam. Amazon obviously wants in on the movement. I think this is great news for customers who want to purchase big-ticket items but need to pay in installments.
That brings me back to the stock. I like to see what the Big Money is doing, and Amazon stock is a Big Money favorite. That makes sense because, while it started as an online bookseller, Amazon keeps innovating year after year.
It bought Whole Foods and started delivering groceries. It gave us the Prime Video service and two-day delivery (less in some places). Amazon drones can deliver your purchases. Amazon Web Services (AWS) helps organizations across the globe deliver cloud-based products and services, from health care imaging to real estate listings to golf broadcasts. Name a business, and Amazon probably has a hand in it on some level.
BNPL, while not invented by Amazon, should certainly help generate revenue and may open doors to other lines of business. This is why Big Money loves Amazon stock—the growth doesn't seem to stop.
Looking at Big Money activity is what I do professionally, and as far as Amazon stock goes, the Big Money keeps flowing in. If you want to see what I mean, here's a chart displaying some of those signals:
It's pretty obvious that the BNPL movement is here to stay. Not only that, it's likely to grow. Thus, Amazon is smart to ink a deal. The company is constantly innovating and has a track record of success. While deals like this could draw questions at first ("Amazon bought a grocery store chain?"), the Affirm acquisition will probably look smart and shrewd down the road.
The Bottom Line
Amazon inked a deal with BNPL company Affirm. This will likely bring more consumers to Amazon. Innovations like this are what keep the Big Money pouring into Amazon shares. I wouldn't bet against that trend in the long term.
Disclosure: The author holds no position in AMZN or AFRM at the time of publication. He holds long positions in PYPL and SQ in personal accounts and PYPL in managed accounts.