Affirm shares surged by nearly 50% on Wall Street on Monday after its after-hours deal last Friday to provide buy now pay later services to Amazon in the US.
Select Amazon customers will now have the option to split the total cost of purchases of $50 or more into monthly payments by using Affirm.
Consumers will not be charged late fees in the deal which will be apply to Amazon Fresh, Whole Foods or sales of books or music.
Affirm already has a BNPL deal with Walmart and earlier in August announced a partnership with Apple in Canada (which seems a little odd given that Apple has indicated it is looking at a similar product for its iPhone).
Affirm shares ended Monday at $US99.59, up more than 46% on the day.
The deal only applies in the US – at the moment. Zip has a BNPL deal with Amazon in Australia. Zip shares fell 1.1% on the ASX on Monday to $6.82.
US Deutsche Bank analyst Bryan Keane says Affirm will see a material tailwind to its financials thanks to Amazon.
“Although it is difficult to forecast the exact impact of this partnership, our first back of the envelope CY22 estimate would be an annual total payment volume (TPV) contribution of ~$7.7 billion, with a potential revenue contribution of $385 million (potentially ~22% of Affirm) and incremental contribution profit of $74 million (potentially ~12% of Affirm),” Keane estimated, according to Yahoo.com.
“Since Amazon will likely bring material volumes, Amazon likely attained attractive pricing especially given the competition for a deal of this size.
However, we believe this deal is a positive for all buy now, pay later players given a solidification of the sector by Amazon and further advancement of industry adoption.”
Shares in Square Inc, which is buying Afterpay for $US29 billion in shares, rose 1.4% on Monday to $US271.92. That’s only $US2 or so above the level when the Afterpay deal was announced at the start of August.
