Shopify Teams Up With PayPal Co-Founder in Battle With Amazon

(Bloomberg) -- Shopify Inc. is stepping up its competition with Amazon.com Inc. by adding another U.S. partner, Affirm Inc., to capitalize on the surge in online shopping during the pandemic.

The Canadian e-commerce giant is working with Affirm to offer flexible payment plans to U.S. consumers. The partnership means merchants using Shopify’s platform will be able to offer an installment plan that gives shoppers the option to split purchases into four payments. It’s expected to roll out before the end of the year.

By forming an alliance, Affirm believes it can help Shopify attract younger consumers who are looking to avoid credit cards with high interest charges, said Affirm Chief Executive Officer Max Levchin. “We’re excited to help them convert those shoppers,” said Levchin, who was one of the founders of PayPal.

Shopify shares have risen 148% this year, making it Canada’s most valuable public company as Covid-19 shutdowns forced retailers to gravitate online. Investors have also been enthusiastic about the company’s partnerships with larger companies including Walmart Inc. and Facebook Inc.

The pandemic has sent the U.S. economy into turmoil, with more than 20 million jobs lost in April and the unemployment rate rising to double digits. That has led more shoppers to opt for Affirm’s payment plans: demand on the platform has nearly quadrupled, Levchin said.

Shopify, which sells software and other services to online retailers, says the aggregated online sales of its U.S. customers ranks second to Amazon’s. About 52% of its merchants using its platform were in the U.S. as of Dec. 31.

“We view this partnership with Affirm as the most merchant- and buyer-friendly way to offer more payment choice and flexibility through ‘buy now, pay later’ in the U.S.,” Shopify vice-president Kaz Nejatian said in a statement.

Affirm, which counts Peloton Interactive Inc. and Dyson Ltd. as merchants, does not currently have a formal partnership with Amazon, though consumers can use Affirm’s virtual card to spend on Amazon.

Analysts at Credit Suisse said in May that Shopify’s platform has the potential to be a “formidable rival” to Amazon longer-term. “Competition is good,” Levchin said. “Any form of pressure they put on each other is great to make merchants and consumers ultimately the beneficiaries.”

“My guess is every platform, even Amazon, will eventually want to offer this buy-now-pay-later option,” said Levchin.

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