Amazon: Can't afford something? We'll loan you the money

Does Amazon really want to get into the loan business? That's the part of shopping that customers hate.

young man in plaid shirt holding pile of cash money

Paying homage to its classic big box ancestors, Amazon UK is experimenting with a page lifted from 1970s Sears: loaning customers money to make purchases.

Whether it's called an installment plan or a loan, the idea is simply to make it easier for shoppers to make those more expensive purchases though Amazon. And Amazon UK is doing it out of affection for its customers — and, oh yeah, interest rates starting at 16.9%.

The Amazon U.K. experiment, called Amazon Pay Monthly, focuses on orders worth more than £400. "The loan can be spread over two, three or four years depending on the size of the purchase. Customers do not have to pay a deposit, meaning the first payment is their opening monthly instalment," said a story about the move in The Guardian. "Only products sold and dispatched by the company are eligible, meaning that products sold on Amazon by third parties are not included."

The argument can be made that Amazon has already been in the loans-to-customers business because it has its own branded credit card. If a customer chooses to not pay that off right away, it's in effect a loan. Although it may be similar in the sense that customers can pay high interest rates and slowly pay for Amazon products, the way shoppers perceive it is entirely different.

Amazon's credit card is co-branded with Visa and Chase. Shoppers likely see it as another Visa card, and they will think of it as part of all purchases made through the card. Merely having Amazon's name on the card won't make shoppers see it as an Amazon loan.

But this Amazon UK effort will feel like an Amazon loan, even though another company — Hitachi Capital — is handling a lot of the mechanics. That's where this gets intriguing. On the plus side, Amazon is heading ever more completely into the one-stop-for-all-your-shopping-needs site, even to the point of financing those things a shopper can't afford. (And, no, we're going to get into a "if they can't afford, they shouldn't buy it" discussion. This is a retail column. People buying stuff they don't need and can't afford is the core underpinning of the U.S. economy.)

There is, however, a massive downside. Before this move, Amazon was in the happiness business. Want something? Click here and you'll have it. Pay however you want and we're fine. As noted earlier, it's not that Amazon is getting into the payment and collection business. It's that it will now, for the first time, be perceived as being in the payment/collection business. And that is placing Amazon in the sadness/angriness business.

With no loan effort, Amazon gets the smile-only part of the transaction: discovering the goodie and delivering it to the customer. The paying-for-it-part is some payment card's headache. Amazon gets the positive thoughts and someone else gets the negative thoughts. That's powerful branding.

With this move, Amazon's site will deal with payment terms and discussions of interest charges and late fees and penalties for not paying anything. And if things don't go well, repossession. Amazon's marketing really want a piece of that? For Amazon's sake, I am hoping that this British idea stays in Britain.

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