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Amazon is rolling out its first buy now, pay later checkout option for the millions of small business owners that use its online store, CNBC learned exclusively.
The tech giant plans to announce Thursday that its partnership with Affirm is expanding to include Amazon Business, the e-commerce platform for companies.
The move is a boost in a crucial relationship for Affirm, which has had to search for revenue growth after demand for expensive Peloton bikes collapsed.

Alain Jocard | AFP | Getty Images

Amazon is unveiling its first buy now, pay later checkout option for the millions of small business owners that use its online store, CNBC learned exclusively.
The tech giant plans to announce Thursday that its partnership with Affirm is expanding to include Amazon Business, the e-commerce platform that caters to companies, according to executives of both firms.

Affirm shares jumped more than 10% in premarket trading following the news.
The service, with loans ranging from $100 to $20,000, will be available to all eligible customers by Black Friday, or Nov. 24. It is specifically for sole proprietors, or small businesses owned by a single person, the most common form of business ownership in the U.S.
It’s the latest sign of the widening adoption of a fintech feature that exploded in popularity early in the pandemic, along with the valuations of leading players Affirm and Klarna. When boom turned to bust in 2021, and valuations in the industry dropped steeply, skeptics pointed to rising interest rates and borrower defaults as hurdles for growth and profitability.
But for users, the option is touted as being more transparent than credit cards because customers know how much interest they will owe up front. That’s made its appeal durable for households and businesses coming under increasing strain as excess cash from pandemic stimulus programs have dwindled.
“We constantly hear from small businesses that say they need payment solutions to manage their cash flow,” Todd Heimes, director of Amazon Business Worldwide, said in an interview. “We offer the ability to use credit cards and to pay by invoice; this is another option available to small business customers to pay over time.”

Amazon Business was launched in 2015 after the company realized businesses were using its popular retail website for office supplies and bulk purchases. The division reached $35 billion in sales this year and has more than 6 million customers globally.

Amazon customer with access to a buy now, pay later option at checkout from Affirm.
Courtesy: Amazon Inc.

If approved, users can pay for Amazon purchases in equal installments over three to 48 months. They are charged an annualized interest rate between 10% and 36%, based on the perceived risk of the transaction, according to Affirm Chief Revenue Officer Wayne Pommen. There are no late or hidden fees, the companies said.
“The financial industry is not great at providing credit to really small businesses,” Pommen said. “They can’t walk into a bank branch and get a loan until they reach a certain scale. So us being able to provide this for purchases” helps business grow and manage their cash flows, he said.
The move is a boost in a crucial relationship for Affirm, which has had to search for revenue growth after demand for expensive Peloton bikes collapsed. Affirm first began offering installment loans to Amazon’s retail customers in 2021, then was added to Amazon Pay earlier this year.
Affirm decided to target sole proprietors first because they make up most small businesses in the country, with 28 million registered in the U.S., according to Pommen.
“We’ll see how the product performs and if it makes sense to expand it to a wider universe of businesses,” he said. “Our assessment is that we can underwrite this very successfully and have the strong performance that we need.” More

A month ago, on the eve of Hamas’s attack on Israel, there were reasons to be hopeful about the Middle East. Gulf states were ploughing billions of dollars of oil profits into flashy investments, building everything from sports teams and desert cities to entire manufacturing sectors. Perhaps, optimists thought, the wealth would even trickle down to the region’s poorer countries.What prompted such hope was the longest period of calm since the Arab spring in 2011. Gnarly conflicts, such as civil wars in Libya and Yemen, as well as organised Palestinian resistance to Israel, appeared to have frozen. Violent clashes were rare, which some believed a precursor to them disappearing altogether. The region’s great rivals were inching towards warmer relations. International investors flocked to the Gulf to get in on the action.Hamas’s attack and Israel’s response suggest that the region will now be laden with a bloody, destructive conflict for months to come, if not longer. Under pressure from their populations, Arab leaders have blamed Israel for the situation, even if they have been careful in their language. Overnight, their focus has shifted from economic growth to containing and shortening the war. Countries across the region, including Egypt and Qatar, are pulling out all the diplomatic stops to stop the spread of fighting.Even if the conflict remains between just Hamas and Israel, there will be costs. Analysts had been upbeat about the prospects for economic integration. In 2020 the United Arab Emirates (uae) and Bahrain normalised relations with Israel, opening the door to deeper commercial ties. Although many other Arab countries refused to recognise Israel, many were increasingly willing to do business with it on the quiet. Even Saudi Arabian firms surreptitiously traded with and invested in their Israeli counterparts, whose workers are among the region’s most productive; the two countries were working on a deal to formalise relations.How long the pause in such negotiations lasts remains to be seen, but the greater the destruction in Gaza, the harder it will be for Arab leaders to cosy up to Israel in future, given their pro-Palestinian populations and pressure from neighbours. Although Thani al-Zeyoudi, the uae’s trade minister, has promised to keep business and politics separate, others are unsure that will be possible. A Turkish investment banker, who draws up contracts for firms in the Gulf, reports that most of his clients considering Israel as an investment destination are waiting to see what happens next.For the Middle East’s poorer countries, the consequences will be worse—and nowhere more so than in Egypt. The country was already struggling, with annual inflation at 38% and the government living between payments on its mountain of dollar debts by borrowing deposits from Gulf central banks. Now it has lost out on the gas that flowed from Israel. On November 1st officials in Cairo allowed across the border a handful of injured Gazans, as well as those with dual nationalities. Some diplomats hope that a larger influx might follow, perhaps even on the scale seen by Jordan when it welcomed Palestinians in the 1940s and Syrians in the 2010s, if Egypt were given the right financial incentives. In 2016 looking after 650,000 Syrian refugees cost Jordan’s state $2.6bn, much more than the $1.3bn it received in foreign aid. There are twice as many internally displaced people in Gaza.What if the conflict escalates? In the worst case, the region descends into war—perhaps including direct confrontation between Iran and Israel—and economies are turned upside down. Any such war is likely to see a sharp rise in oil prices. Arab oil producers might even restrict supplies to the West, as they did during the Yom Kippur war in 1973, which the World Bank reckons could push up prices by 70%, to $157 per barrel. Even though the world economy is less energy-intensive today, the Gulf’s oil producers would benefit. All-out war, however, would hinder efforts to diversify their economies. Migrant workers would leave. Manufacturing industries would be hard to get off the ground without secure transport. Futuristic malls and hotels would lack the tourists to fill them. And for the region’s energy importers, which include Egypt and Jordan, a spike in oil prices would be a disaster.There is another, more plausible escalation scenario. So far Iran has declined to turn threats and errant missiles into a direct attack. Israel’s ground invasion—smaller and slower than expected—is helping keep a lid on things. Nevertheless, conflict could still spill across Gaza’s borders. Imagine, say, fighting in the West Bank or greater involvement from Hizbullah. In this scenario, investing in the Middle East would look much riskier. If fighting flashed in neighbouring countries, leaders in the Gulf would find themselves working harder to convince investors that a return to calm and closer ties with Israel might happen soon.In need of a parachuteIn such a world, Egypt would not be the only country exposed. Lebanon’s economic free fall—now in its third year, as inflation rages above 100%—would accelerate with clashes between Israel and Hizbullah, which is based in the country. Fighting in the West Bank, where tensions are high, would spell trouble for Jordan, which sits next door. Like Egypt, the country is almost broke. It took out a $1.2bn loan from the imf last year, and was recently told by the fund that its annual growth of 2.6% was insufficient to fix its problems. Refugees could leave the state unable to repay debts. Unrest along its borders could deter creditors.If either Egypt or Jordan were to run out of cash the results would be destabilising for the region. Both countries border a Palestinian territory, feeding it with supplies and providing allies with information. Both have the ear of the Palestinian Authority. And both have a young, unhappy population. The Arab spring showed how easily unrest in one Arab country can spread to another. Even Gulf officials, relatively insulated though they may be, would rather avoid such instability. ■Read more from Free exchange, our column on economics:Israel’s war economy is working—for the time being (Oct 26th)Do Amazon and Google lock out competition? (Oct 19th)To beat populists, sensible policymakers must up their game (Oct 12th)For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newslett More

When the Federal Reserve began to raise interest rates more than a year ago, American banks enjoyed a nice little boost. They increased the interest they charged on loans, while keeping the rates they offered on deposits steady. In other countries this move attracted public opprobrium and politicians floated measures to ensure that customers were not swindled. Americans were happy to rely on a more American solution: competition.It has done its job. Average yields on interest-bearing bank deposits have soared to more than 2.9%, up from 0.1% when the Fed began to raise interest rates. The extent to which higher rates have been passed on to customers—known as the “deposit beta”—has been a popular subject on recent quarterly earnings calls. Despite assurances by bank bosses that they have peaked, betas are likely to keep rising in the coming months, pinching profits.image: The EconomistThe process is being driven by customers shifting their money from low-yielding products to higher-yielding ones. Data from quarterly filings show that the share of bank deposits held in interest-free accounts has fallen from 29% at the end of 2021 to 20%. Had this figure remained constant, bank interest costs would be roughly 10% lower than they are now. Quarterly filings also show that banks which have lost more than 5% of their deposits since the start of the year have increased the average rate on interest-bearing deposits by 2.7 percentage points, compared with a more miserly 2.1 percentage points at those institutions with more secure deposits.This much is familiar from past Fed tightening cycles. Historically, however, big banks have enjoyed an advantage over smaller peers, owing to their pricing power—something that now appears to be dwindling. America’s “big four” banks (JPMorgan Chase, Bank of America, Wells Fargo and Citigroup) reported average deposit costs of 2.5% in the third quarter of the year, identical to the median rate across all the country’s banks. And the funding gap between the biggest and smallest institutions has flipped since the last tightening cycle. In 2015-19 banks with assets of at least $250bn paid 0.3 percentage points less on their deposits than banks with less than $100m in assets; today they are paying 0.8 points more.Brian Foran of Autonomous Research, an advisory firm, suggests that this may reflect greater competition among big banks for corporate and high-net-worth clients, who are most likely to be aware of other, higher-yielding places to stash their cash. When rates were at zero, competition for such deposits was non-existent, notes Mr Foran. Now, with money-market funds offering 5%, the competition is much fiercer.How much longer will the squeeze continue? Chris McGratty of kbw, an investment bank, says that banks have felt most of the pain, but that costs have a bit further to rise and are likely to stay elevated, given that the Fed has signalled it will keep rates higher for longer than previously expected. Even if the Fed’s policymakers are done raising rates and banks keep yields steady, customers will continue to shift deposits from lower-earning to high-earning products, pushing up costs for banks. This will put pressure on deposits, forcing banks to slow their lending. While savers will benefit from higher rates of return, borrowers are another story altogether. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Evergrande is fighting for its life. On October 30th the property developer was granted its fifth, and probably final, stay of liquidation by a court in Hong Kong. Yet the situation on the mainland is a little more comfortable: the firm’s representatives have not even had to visit a courtroom. This is not unusual. Despite the many horrors visited upon China’s property sector, an industry publication reports that just 308 of the country’s 124,665 developers declared bankruptcy last year.China’s ultra-low corporate bankruptcy rate—about a fifth of that found in America—might seem like unalloyed good news for officials in Beijing. That is until you consider the fact the country is experiencing a wave of corporate defaults, which includes half of the 50 largest property developers in 2020. With many unable to shed their bad debts through restructuring, businesses are struggling to reduce new borrowing and pay back outstanding loans. Policymakers, banks and firms all want to stave off formal bankruptcies in order to avoid a “Lehman moment”, or crisis-triggering event. The result is stifled productivity and deeper economic malaise.Creative destruction, the process by which market economies replace failing firms with more efficient ones, has few fans in China. Local officials press lenders to prolong the lives of even the most unproductive businesses. Lending rules restrict debt forgiveness, an important tool in restructurings, because banks are state-owned, ultimately putting the government on the hook for losses. A corporate bankruptcy requires the consent of courts, creditors, local government and often a regulator, which all have a strong interest in keeping firms alive. As a deterrent for other company bosses, the threat of prison is never far away. In September Hui Ka Yan, Evergrande’s chairman, was detained. The next month a former chairman of Bank of China was arrested for a bevy of misdeeds, including the creation of financial risk.Barriers to bankruptcy mean that struggling firms have little choice but to refinance, replacing existing debts with new ones. China’s approach of keeping bad companies on life-support weighs on its economy, according to research by Li Bo of Tsinghua University and co-authors. Ms Li has found that provinces which have introduced special courts to arbitrate bankruptcies at arm’s length from local authorities have seen more firms created and improved productivity. Corporate borrowing becomes cheaper, too. In the rest of the country creditors demand a premium, since recovering debts is so hard.Rules that seek to keep sick companies alive also push up the number of liquidations when cases do reach court, because those that make it so far tend to be in a terrible way. Indeed, 83% of companies that arrive in court end up liquidated, compared with a mere 5% in America. Bankruptcy courts themselves drag out proceedings in attempts to avoid liquidation: cases average 539 days in court, around 50% longer than American ones. For its part, Evergrande has been in default for two years, during which it has been unable to propose a restructuring plan that is acceptable to its offshore creditors. The value of its assets has been driven lower still by the lengthy default. Deloitte, a consultancy, reckons that in a worst-case scenario offshore creditors will recover a miserable $0.02-0.04 per dollar owed.China’s bankruptcy rules also have international ramifications. The country has become the world’s largest sovereign creditor, having lent $1.5trn to governments around the globe. Yet its refusal to accept write-downs has slowed multilateral debt negotiations—as was evident in October, when an imf deal on Sri Lanka’s debt was scuttled. The failure was partly a result of rules restricting China’s bankers from recognising and forgiving bad debts, says a mainland lawyer involved in overseas lending. Writing down the debt would have left Chinese firms that built Sri Lanka’s infrastructure out of pocket, triggering the same political concerns that exist in cases of domestic debt distress. A Lehman moment would have ramifications abroad. So, too, does China’s desire to avoid one. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

The bank of japan (boj) failed to deliver a Halloween thriller. Even as central banks elsewhere have raised interest rates in recent years, the boj has stuck with its ultra-loose policy, designed to stimulate growth. Japan’s benchmark interest rate sits at -0.1%, where it has been for seven years. And on October 31st, despite building pressure, the bank decided merely to tweak its cap on ten-year government-bond yields. The 1% ceiling on yields, which the bank makes enormous bond purchases in order to defend, is now a reference rather than a rule. Indeed, yields on the benchmark bond are at 0.95%, their highest for over a decade (see chart).image: The EconomistAfter the boj’s announcement, the yen fell to ¥151 to the dollar, its lowest in decades. Inflation, long quiescent, is no longer so low—the boj raised its forecasts for underlying “core” inflation over the next three years. Many analysts expect the central bank to end its yield-curve-control policy once and for all early next year, and to have raised interest rates by April. But even when the boj does finally raise interest rates, it is likely to be by just a fraction of a percentage point, meaning the gulf between Japanese bond yields and those in the rest of the world will remain large, with major consequences for global financial markets. A fright is still in the offing.To understand why, consider the impact Japan’s rock-bottom interest rates and continued intervention to suppress bond yields have had. Low rates at home have generated demand for foreign assets, as investors seek better returns. Last year the income from Japan’s overseas investments ran to $269bn more than was made by overseas investors in Japan, the world’s largest surplus, equivalent to 6% of Japanese gdp. The huge gap between bond yields in Japan and those in the rest of the world now presents dangers to both the Japanese investors that have bought foreign bonds and the global issuers that have benefited from Japanese custom.Jeopardy is particularly apparent at Japan’s largest financial firms, which make big investments abroad. The cost of hedging overseas investments depends on the difference between the short-term interest rates of the two currencies at play. America’s short-term interest rates are more than five percentage points above Japan’s equivalent, and the gap exceeds the 4.8% yield on ten-year American government bonds. This means Japanese buyers now make a guaranteed loss when buying long-term bonds in dollars and hedging their exposure. Hence why the country’s life insurers, which are among the institutions keenest to hedge their currency risk, dumped ¥11.4trn ($87bn) in foreign bonds last year.The huge gap between short-term interest rates means that Japanese investors now have more limited options. One is to continue buying overseas, but at greater risk. Meiji Yasuda Life Insurance and Sumitomo Life, each of which held more than ¥40trn in assets last year, say they will increase their overseas bond purchases without hedging against sudden currency shifts, in effect betting against a sudden rise in the yen. Life-insurance firms are usually conservative, but the longer the enormous gap in interest rates persists, the more they will be encouraged to take risks.Meanwhile, rising yields on long-term Japanese bonds, which will surely rise further still if the boj does abandon yield-curve control, may tempt local investors to bring home their money. Japan’s 40-year bonds offer yields of 2.1%—enough to preserve the capital of investors even if the boj hits its target of 2% inflation. Martin Whetton of Westpac, a bank, says that this prospect ought to worry firms and governments in America and Europe used to a voracious Japanese appetite for their bonds.In such a scenario, a source of demand would turn into a source of pressure on the funding of Western firms and governments. The yen might then surge, as Japanese investors sell foreign-currency debt and make new investments at home. Bob Michele of JPMorgan Asset Management warns of a decade of capital repatriation.The flow of Japanese capital to the rest of the world, which emerged during a decade of easy monetary policy around the world, looks likely to be diminished. Whether the resulting pain will be felt by local financial institutions, or foreign bond issuers, or both, will become clearer over the months to come. What is already clear is that it will be felt by someone. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Revolut said that it had appointed Francesca Carlesi, a former executive at Deutsche Bank and Barclays with 15 years of experience in financial services, as its new U.K. chief executive.
Carlesi would be in charge of the company’s U.K. operation — which, once it receives a banking license in Britain, would manage the company’s banking division.
Revolut has been struggling to get a banking license in the U.K., after first applying for one in 2021.

Nikolay Storonsky, founder and CEO of Revolut.
Harry Murphy | Sportsfile for Web Summit via Getty Images

European fintech firm Revolut on Thursday said it appointed former Barclays executive Francesca Carlesi as its new U.K. CEO.
Carlesi, who also worked at Deutsche Bank and has 15 years of experience in financial services, was most recently CEO of digital mortgage lender Molo Finance.

A spokesperson for Revolut told CNBC that the move was not linked to its application for a banking license.
Carlesi would be in charge of the company’s U.K. operation — which, once it receives a banking license, would manage the Revolut banking division.
The appointment comes at a time when Revolut is beefing up its local operation amid a long wait to obtain a coveted British banking license. A company spokesperson declined to comment on the status of the company’s application.
A banking license would allow Revolut, which is one of one of the companies featured in CNBC and Statista’s list of the top 200 global fintech firms, to offer lending products, including mortgages, personal loans and credit cards. It would also enable Revolut to get a stickier userbase, which would benefit from insurance on deposits of up to £85,000.
This could become a potentially lucrative line of business for the firm, letting it earn interest income — at a time when interest rates are at multi-year highs.

Since applying in 2021, Revolut has been in negotiations with the Bank of England and the Financial Conduct Authority about getting licensed in the U.K. It has so far faced pushback amid issues surrounding internal working culture, accounting issues, and complex share structures.
Revolut was late to file its accounts earlier this year, which exposed the company to criticisms over whether it is ready to become a fully licensed bank. For its part, Revolut says it has been working to improve its internal controls. More

The U.K. government said Wednesday that it will invest £225 million, or $273 million, into an AI supercomputer, highlighting the country’s ambition to lead in the technology as it races to catch up to the U.S. and China.
The government said Isambard-AI will be the most advanced computer in Britain and once complete, it will be “10 times faster than the U.K.’s current quickest machine.”
The investment comes as the U.K. hosts its landmark AI safety summit in Bletchley Park, the home of the World War II codebreakers.

Bletchley Park was a codebreaking facility during World War II.

The U.K. government said Wednesday that it will invest £225 million, or $273 million, into an artificial intelligence supercomputer, highlighting the country’s ambition to lead in the technology as it races to catch up to the U.S. and China.
The University of Bristol will build the supercomputer, called Isambard-AI after the 19th century British engineer Isambard Brunel. The announcement coincided with the first day of the U.K.’s AI safety summit, which is being held in Bletchley Park.

The U.K. government said Isambard-AI will be the most advanced computer in Britain and once complete, it will be “10 times faster than the U.K.’s current quickest machine.” The computer will pack 5,448 GH200 Grace Hopper Superchips, powerful AI chips made by U.S. semiconductor giant Nvidia, which specializes in high-performance computing applications.
Hewlett Packard Enterprise, the American IT giant, will help build the computer, with aims to eventually connect it to a newly announced Cambridge supercomputer called Dawn. That computer, built by Dell and U.K. firm StackPC, will be powered by more than 1,000 Intel chips that use water-cooling to reduce power consumption. It is expected to start running in the next two months.
The U.K. government hopes the two combined supercomputers will achieve breakthroughs in fusion energy, health care and climate modeling.
The machines will be up and running starting in summer 2024, the government said, and will help researchers analyze advanced AI models to test safety features and drive breakthroughs in drug discovery and clean energy.
The government previously earmarked £1 billion to invest in the semiconductor industry in an attempt to secure the country’s chip supplies and reduce its dependence on East Asia for the most commercially important microchips. More