Point of sale financing is all the rage in fintech right now. Consumers are looking to continue buying habits despite lower income and merchants are vying for ways to boost consumer spending.
So when it comes to one of the biggest online merchants launching a buy-now-pay-later offering, its a big deal. It is, anyway for Citi, which struck up a partnership with Amazon this week to provide a buy-now-pay-later option for Citi credit cardholders.
The tool is called the Citi Flex Plan and offers Citi credit cardholders a way to pay for larger purchases over time. Loan terms range from three to 48 months with terms ranging from 6.74% APR to 8.74% APR depending on the amount financed. Borrowers face no credit inquiries, no incremental fees, and are not required to fill out a formal application.
“Amazon is one of the most popular destinations for our customers to shop and redeem ThankYou Points,” said CEO of Citi U.S. Consumer Bank Anand Selva. “We want to meet them where they are with another instant, convenient and easy payment option.”
Essentially, Citi cardholders have two forms of credit in one when they shop on Amazon. How do the logistics work? When they place their order, the total purchase amount will be deducted from their available credit. The monthly payment– the amount that varies based on the purchase price– is due to Citi at each billing cycle.
After Citi initiated a partnership with Google in 2019 and yesterday’s news of six more traditional banks following suit, today’s announcement comes as no surprise. Challenger banks are on the rise, and consumers are opening new accounts with these alternative banking providers at a faster rate than before.
By providing its customers with the new buy-now-pay-later option, a traditional financial services provider such as Citi is appealing to the lower income group that is most attracted to challenger banks. The bank is also helping to position its card at the top of consumers’ virtual wallets when they shop at Amazon. This is key since more than one-third of active Citi cardmembers made at least one purchase on Amazon in the past year.
Additionally, partnering with a big tech company helps Citi align more with the tech side of banking. And indeed, the bank has been closer to the forefront of fintech than many of its rivals. At our developers conference Citi showcased its developer hub and sandbox.