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Amazon.com Inc.’s deal with Citibank N.A. to add Citi Flex Pay, the card issuer’s installment-loan program, to its Amazon Pay digital wallet is expected to pay big dividends for both parties.
By adding Citi Flex Pay, Amazon Pay will gain access to one of the largest cardholder bases in the United States, which should significantly raise the digital wallet’s visibility. For Citi, the deal provides to its customers that use Amazon Pay a service that keeps Citi’s cardholders and their spending in the bank’s platform, rather than losing a buy now pay later sale to another BNPL player, such as Klarna AB or Splitit Payments Ltd., says Thad Peterson, a strategic advisor for the consultancy Aite-Novarica Group. The move also represents the first time Citi cardholders can use Citi Flex Pay as part of a digital wallet.
“Citi is one of the five largest issuers in the U.S., so Amazon gets an opportunity to increase Amazon Pay’s visibility and potential usage with a large customer base,” Peterson says by email. “The Flexpay offering is a line extension for Citi credit cards and it’s a differentiator from offerings from other issuers. It will lessen friction and accelerate the sales process for Citi cardholders.”
Citi Flex Pay allows eligible cardholders to choose a payment plan ranging from three to 48 months for purchases of $50 or more. Monthly payments, which are split into equal monthly installments, are included in a cardholder’s minimum monthly payment due at the end of each billing cycle. To entice Amazon Pay users to take advantage of the installment loan, Citibank will charge 0% interest on three-, six- and 12-month installment plans through July 31. Citibank cardholders with rewards cards will earn rewards on their purchase as they normally would.
Another benefit to Amazon from adding Citi Flex Pay, as opposed to another BNPL offering, is that it reduces the potential friction of requiring Amazon Pay users to opt for a BNPL payment at checkout.
“Adding a traditional BNPL player would broaden access to all Amazon Pay users, but customers have a lot more thinking to do in the midst of the purchase process to use it,” Peterson says. “First, there’s the decision to use BNPL, and then they have to go through the added process to enable the sale. It’s not a lot of additional friction, but in e-commerce, friction is failure, and anything that Amazon can do to lessen friction increases sales and revenue.”
