Amazon Picks Affirm for Buy Now Pay Later

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Amazon late Friday announced a deal with fintech credit company Affirm to offer delayed payments to customers. Affirm shares spiked in after-hours trading and opened Monday 35% higher.

Affirm is one of a new breed of financial technology companies including Afterpay and Klarna that are trying to replace credit cards with low- or no-interest consumer loans. Max Levchin, founder and CEO of Affirm, was also a cofounder of PayPal — and when I first talked to him about the company three years ago, he framed it as a better, fairer deal for consumers (see below).

Why does it matter?

Major retailers and payment processors are forming alliances with buy-now-pay-later (BNPL) contenders, and Amazon is surely the most prized partner of all. This relationship gives a credibility boost to Affirm, which some people have criticized as being overly dependent on Peloton, a niche brand with a big-ticket product. Amazon is the ideal counterbalance to that narrative; it’s the ultimate mainstream online retailer, offering both big-ticket and convenience items.

This also matters for this new credit market overall, as we ponder what will happen in a future with higher interest rates. Surely more consumers will default on their debts, putting the algorithms and capital structures of the BNPL crowd to the test. But more consumers will also look for alternatives to credit cards, perhaps giving a boost to the best positioned BNPL operators.

This Amazon deal gives Affirm a chance to show it can be one of the survivors when rates shift.

Coming up today on CNBC’s TechCheck, 11 a.m. ET / 8 a.m. PT …

Marvell Technology CEO Matt Murphy

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On the horizon …

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