Canadian e-commerce firm Shopify and American buy now, pay later (BNPL) tech company Affirm have opened up access to Shop Pay Installments for eligible Shopify merchants in the United States.
“We have taken a complex technical problem and built a simple, easy-to-use tool to help businesses of all sizes and in many verticals thrive.”
The service gives consumers that use Shop Pay and the Shop App access to an interest-free payment installment option when purchasing products from merchants that have the option enabled. Shop Pay Installments, which is powered by Affirm’s BNPL technology, avoids sending buyers to another website to complete their purchase, which Affirm claims makes it unique among BNPL solutions.
Prior to this official launch, 12,500 merchants had early access to the Shop Pay Installments function. Now, the two tech giants are opening the product up across the United States. Merchants looking to use Shop Pay Installments are subject to an eligibility check, and Shopify noted the service may not be available in all states.
The launch follows almost one year after Shopify signed a three-year exclusivity agreement with Affirm to offer its installment financing plan to Shopify’s merchants. Since that agreement was signed, Affirm, which is based in San Francisco, completed an initial public offering (IPO) and is now listed on the Nasdaq.
Shopify was one of the beneficiaries of Affirm’s IPO. As of January, when the IPO closed, Shopify owned over 20 million shares of Affirm, worth approximately $2 billion.
“Over the past year, [Shopify and Affirm] have been deeply engaged in integrating our systems and technology,” said Max Levchin, Affirm’s CEO and founder, in a blog post. “Together, we have taken a complex technical problem and built a simple, easy-to-use tool to help businesses of all sizes and in many verticals thrive.”
Affirm claimed one-quarter of the merchants that received early access to Shop Pay Installments saw 50 percent higher average order volume compared to other payment methods. Affirm also claimed checkout abandonment decreased by 28 percent for merchants that switched to the new service.
BNPL refers to a form of retail payment that allows consumers to pay for a product through two or more installments over a specified period of time, rather than requiring customers to front the total cost of a purchase in one transaction.
The BNPL niche has emerged as an area of interest in the broader FinTech and e-commerce sectors, both in Canada and abroad. According to management consultant company Oliver Wyman, BNPL solutions facilitated $20 billion to $25 billion in transactions in the United States in 2019.
Recently, other large companies, such as PayPal, have looked to create their own BNPL offerings, and a number of startups, such as Toronto-based GoTo Loans and New York-based Kafene have also drawn investor interest.
Affirm has been involved in some of the Canadian developments in this area. In January, Affirm completed its acquisition of Toronto-based BNPL startup PayBright, in a deal valued at $340 million CAD.
Another large BNPL firm, AfterPay, has also made moves in Canada, officially expanding its service in the country last year. At the beginning of this year, the firm launched a French-language version of its offering to appeal to consumers in Quebec.
Over the last year, Shopify has significantly grown the number of partnerships it has with other large tech firms. The Canadian company has been busy inking deals with social media platforms such as TikTok, Facebook and its subsidiary Instagram, and Google by way of YouTube, to introduce new e-commerce offerings to social media users.
Image source Shopify.