By Natalie DeCoste

Amazon continues to find ways to bring consumers to its platform, and the latest way has the retail giant teaming up with Affirm to offer customers a buy now, pay later service.

The deal, announced Friday, Aug. 27, brings Affirm’s payment network that empowers consumers and helps merchants drive growth to Amazon and Affirm are currently testing the new service with select customers. In the coming months, Amazon plans to make Affirm more broadly available on its platform.

Affirm offers its customers a new kind of payment network which allows shoppers to buy an item and split the payment up into smaller sections. The company claims to empower millions of consumers to spend and save responsibly while giving businesses the tools to grow. The company also claims that its service, unlike credit cards and other pay-over-time options, shows consumers the exact amount they will pay upfront and do not increase that amount or charge any late or hidden fees. 

The new deal between Amazon and Affirm allows Amazon customers to split purchases of $50 or more into smaller, monthly installments.

“By partnering with Amazon, we’re bringing the transparency, predictability, and affordability that Affirm provides today to the millions of people who shop on in the U.S.,” said Eric Morse, Senior Vice President of Sales at Affirm. “Offering Affirm’s alternative to credit cards also delivers more of the payment choice and flexibility consumers on Amazon want.” 

The partnership shows the growing popularity of the buy now, pay later space over the last few years. This method of installment loan has been around for decades, used primarily for bigger purchases such as furniture. In the last few years, the practice has expanded to smaller items. Online payment companies and fintechs are competing to launch their own installment loan products for online items in the low hundreds of dollars range.

Affirm is one of the largest providers in the buy now, pay later space, working with more than 12,000 merchants, including Peloton and Walmart. The company has well-known competition, with big-name competitors such as PayPal, Klarna, Mastercard and Fiserv, American Express, Citi, and J.P. Morgan Chase offering similar services.

The popularity of installment loan services reflects a much larger consumer trend away from the offerings of traditional banks. Amazon’s deal with Affirm and other agreements such as Square’s $29 billion deal to buy Australian fintech Afterpay show that companies are responding to younger consumers who seek out alternative lines of credit.

Wall Street seems to approve of the Affirm and Amazon partnership as Affirm’s stock jumped significantly in the wake of the announcement. Shares of Affirm jumped more than 44% on Aug. 30. Analysts at Bank of America called the news of the deal an “unambiguous positive” and said it highlights Affirm’s “technological leadership and strong reputation in the BNPL market.”