Amazon Lending

 Jeff Bezos has been more forthcoming about Amazon’s desire to build out its lending arm than other financial service offerings.

In his 2016 annual letter to shareholders, Bezos outlined Amazon’s goal of expanding Amazon Lending: By continuing to work with partner banks to manage the bulk of the credit, the retailer can mitigate credit risk and calm investor nerves.

Today, Amazon’s business lending is available in the US, UK, Germany, Canada, China, France, India, Italy, and Spain.

Amazon also offers consumer lending in the US in the form of partner cards and partnerships with buy now, pay later (BNPL) providers.

SMB LENDING

Amazon Lending initially launched in 2011 to help small businesses finance and sell more goods on Amazon. In 2018, Amazon Lending partnered with Bank of America Merrill Lynch to issue loans on an invitation-only basis that could range between $1,000 to $750,000.

But by 2019, reports surfaced claiming that Amazon’s lending operation wasn’t performing well, and the company was looking to breathe new life into the business. The revival strategy included new partnerships with Goldman Sachs in the US and ING in Germany.

As part of its deal with Goldman Sachs’ Marcus brand, the bank invited selected merchants to apply for a credit line of up to $1M. The application process is digital, and sellers are notified of approval results instantaneously. The credit line delivered through the Marcus brand comes with a fixed annual interest rate ranging from 6.99% to 20.99%. The amount approved can be drawn in several instances and repaid like a typical credit card.

This was the first time that Amazon opened up its treasure trove of sales data on its sellers to a third-party financial institution to make underwriting decisions.

In Germany, Amazon and ING provide loans between €10,000-€750,000 ($11,250-$852,327) to SMBs.

In 2021, Amazon continued inking new partnerships to expand its lending services. SMB lender Lendistry, which focuses on supporting businesses in underserved communities, collaborated with Amazon to launch the Amazon Community Lending program. It allows merchants to borrow up to $100,000 at annual percentage rates ranging from 8% to 9.9% and repay the loan in a period of up to 2 years.

From launch in 2011 to September 2021, Amazon and its partners issued over $800M in loans to SMBs nationwide.

In October 2018, Amazon expanded beyond loans to corporate cards issued by American Express in an effort to build its Amazon Business suite and attract new businesses to the marketplace. Amazon Business has over 5M business customers worldwide as of February 2022. The service has witnessed steady growth since its launch in 2015, and eMarketer projects it will reach sales of $59B in 2025.

The card serves as a way to attract customers that have been turned down by traditional banks due to limited business credit history. Initially launched in the US, Amazon Business Prime is now available in the UK, Germany, Japan, and most recently Canada.

Perks include giving businesses control over employee spend, analytics tools for spend and inventory management, and discounts on Amazon Web Services (AWS). Prime members receive extra incentives, like priority shipping and pricing.

Amazon also offers services such as Pay by Invoice, which allows selected small businesses to buy now and pay within 30 days — or 45-60 days, if the customer has an Amazon Prime Business account. In addition, it offers SMBs a revolving credit line and a pay-in-full credit line, in partnership with Synchrony Bank.

B2B e-commerce transactions are expected to reach $20.9T globally by 2027 — reportedly growing at a faster rate than online retail sales. Amazon is looking to replicate the network effects of its consumer arm with SMBs, as having more Amazon Business customers will improve its ability to connect B2B buyers and sellers to transact directly, unlocking cost savings.