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Why are E-commerce Giants Like Amazon Embracing “Buy Now Pay Later”?

Mar 23 2021

Pretty much every major e-commerce platform, in recent months, has adopted alternative payment plans of one kind or the other. Amazon installment plan is one such attempt by the e-commerce giant to capitalize on the ongoing trend of ‘Buy Now Pay Later payment options. But why has Amazon embraced this payment model? Is this beneficial for amazon customers? Read on to find out.

What is the amazon installment plan?

Just like any other “Buy Now Pay Later” payment option, the Amazon installment plan, or Amazon Pay Later as it’s now called, allows customers to split the cost and pay for their purchase in equal monthly installments(EMI). These installments are interest-free. Amazon installment plan is a simple, transparent, low-cost alternative payment method that customers can use to buy stuff on Amazon.

Characteristics of Amazon Monthly Payments

  • Amazon only offers this payment plan to certain customers who have qualified its criteria of selection. 
  • Also, the amazon installment plan is only applicable to specific products. Hence, if what you are purchasing is not an eligible item, then you won’t be able to finance it via the amazon installment plan.
  • The e-commerce platform has partnered with a host of banks and financial institutions that are credit card issuers, for instance, Synchrony Bank, Chase, and Citi.
  • These institutions are presenting cardholders with a slew of lucrative and flexible payment options. 
  • Customers pay through five, equal monthly payments or installments.
  • The first installment amounts to the total of the tax, shipping charges on the product, and 20% of the total cost of the product. This combined amount becomes due as soon as the product is shipped from the amazon warehouse. 
  • Customers can pay the rest of the due amount in four equal installments, over the next 4 months. Thus, there are 5 installments in total.
  • Amazon installment plan allows customers to buy 1 qualified product under every product category. For instance, if you are buying multiple items in both electronics and home-utility categories, then at the time of checkout, you will be able to get the advantage of only one amazon installment plan in every category.

Eligibility of customers

One of the biggest benefits that the amazon installment plan offers to customers is that there is no credit check mandated by Amazon to figure whether you are eligible for the plan or not. This means your credit score is unaffected by the amazon installment plan. Below is the eligibility criteria laid out by amazon for customers to enroll in its installment plan:

  • You are required to be an amazon account holder for at least one year, to be eligible.
  • You must reside in the U.S.
  • You have to have a valid credit card that is linked with your Amazon account.

Why is Amazon embracing “Buy Now Pay Later”?

There are three primary reasons why Amazon has jumped aboard the BNPL(Buy Now Pay Later) ship:

1. More value from loyal customers

Some buyers regularly shop from Amazon, irrespective of the payment methods being provided by the platform. However, there is no certainty about the amount of spending they do on the platform. Simply put, there is no minimum guaranteed amount that amazon is earning from its loyal customers. BNPL plans like the Amazon installment plan can change that. BNPL options can impact the amount of money people are willing to spend and also how frequently they shop on Amazon. This will, ultimately, elevate the revenue of the platform.

2. More sales

This one is easily the biggest reason for amazon introducing its BNPL option in the form of the amazon installment plan. You too have probably abandoned your cart at checkout, at one point or the other. It is often just before when money is about to leave your bank that you realize how expensive your cart items are and that you do not want to buy them. However, if someone detached the products from the immediate price tags they come with, you are more likely to check out your cart. This is exactly what BNPL options like the amazon installment plan are designed to do. By detaching and delaying the payment obligation from the product, Amazon can get more conversions, and more conversions mean more revenue for the platform.

3. Enhanced customer experience

BNPL options such as the amazon installment plan, are well integrated into the e-commerce platform. The result is a seamless service where the customer can easily choose the BNPL option at the time of checkout. There are no additional hoops that customers have to jump through, to get access to the plan. They can easily use the plan to order the product of their choice and pay over an extended period, without any hassles. This simple and transparent integration of the payment plan within the e-commerce store or website allows for a greater customer experience. 

Takeaway

It is evident that the amazon installment plan, like other BNPL options, is proving incredibly profitable for e-commerce platforms like Amazon. However, the platforms are not the only ones benefiting from these services. Customers are also finding it hard to resist the flexibility and ease of these payment options.