Why Amazon stock rose on Monday

The e-commerce giant just came up with a new way for you to give it money.

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Image source: Affirm

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Amazon.com (NASDAQ: AMZN) are up a modest 2.4% as of 1:30 p.m. EDT on Monday -- which may not sound like much, but on a $1.7 trillion stock, it equates to an additional $40.8 billion in market capitalization.

So what

Why are Amazon shares up so much?

To find out, let's go back in time to Friday afternoon, when buy now, pay later (BNPL) stock Affirm Holdings (NASDAQ: AFRM) announced that Amazon will begin allowing customers to choose its service as a payment option during checkout.

Now, this is obviously bigger news for Affirm than for Amazon. The former's stock is up 43.5% on the news, gaining 20 times as much as Amazon's shares are. But this is also an incremental positive for Amazon itself. It will be able to offer customers who spend $50 or more an alternative to paying up front in cash, buying with a credit card (which they might not have or might not want to use), or paying interest on their purchases (shorter-term Affirm payment options don't charge interest).  

Instead, they can simply pay for larger purchases through an installment plan with Affirm.

Now what

On the one hand, this new payment option may increase spending at Amazon, which would be good news for the company. On the other hand, you have to imagine there will be some cannibalization of purchases through Amazon's Prime Rewards, Prime Store, and Prime Secured credit cards. And that would imply that Amazon will be giving up at least some of the revenue that it gets from its credit card partners in exchange for making a little more by (hopefully) scoring more sales with Affirm.  

Whether the latter outweighs the former will determine if this is as good news for Amazon as it's already turned out to be for Affirm. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Rich Smith has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Affirm Holdings, Inc. and Amazon. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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