Amazon teams with Bank of America for lendtech leap
It’s a big one. Amazon Lending is partnering with Bank of America Merrill Lynch as it looks to expand its lendtech programme for small businesses that sell on Amazon’s websites.
CNBC says Amazon Lending, which launched in 2011, has found a partner in the bank – according to “people familiar with the matter who asked not to be named because the alliance is confidential”. It’s not a secret anymore.
Partnering with Bank of America allows Amazon to “reduce its risk and access capital specifically to provide credit to more merchants so they can acquire inventory”.
CNBC reminds people that in a shareholder letter two years ago, Amazon CEO Jeff Bezos said he was looking to team up with banks for such a move.
Amazon Lending is invitation-only and makes loans of $1,000 to $750,000, with terms of up to a year, for firms that may find it difficult getting traditional business loans. Quite a common ploy in the fintech world.
In June 2017, Amazon said it issued more than $1 billion in loans during the previous 12-month period, compared to $1.5 billion in combined loans for the four years prior to that.
As you may know, and according to Amazon’s annual report published earlier this month, Amazon Lending hasn’t had a lot of growth of late. It almost doubled to $661 million in 2016, but last year outstanding loans increased to $692 million. Not a huge leap.
CNBC says “one person familiar with the programme” explained that there was a deliberate effort by Amazon to slow the expansion in 2017 as the company attempts to better understand the credit risks that come with a large-scale lending practice. The total staff size was also reduced as the team scaled back its customer outreach efforts, the person adds.
Another source involved with Amazon Lending told CNBC that the slowdown is not surprising because the team has always taken a measured approach to growth.
For example, there’s “never been a public website to promote the lending service, and it still remains available only to top Amazon sellers that need additional financing”. The programme is not oriented around making money from interest payments, but to support merchants selling on Amazon’s marketplace and to boost Amazon’s overall sales growth, this person says.
CNBC has got a lot of handy sources.
If you dig a bit deeper into the matter, then Amazon indicated in its 2016 annual report that it received a $500 million revolving credit facility from an unnamed “lender” in October 2016. The company said in its latest annual report that the facility was raised to $600 million “and may from time to time increase in the future subject to lender approval”.
Sources told CNBC that this “lender” is Bank of America.
Representatives for Amazon and Bank of America declined to comment.
Deals and flings
Staying on the theme of lending, then last year, India’s second largest bank, Bank of Baroda, got itself an “exclusive” micro lending partnership with Amazon.
But before that, in 2016, Amazon and Wells Fargo Education Financial Services ended their partnership to offer US college students a discount on private student loans. It was a brief relationship… it only lasted six weeks.
Away from lendtech machinations, Amazon was recently involved in another significant partnership.
Last month, it teamed up with Warren Buffett’s firm Berkshire Hathaway and JP Morgan Chase to form an independent insurtech company for US healthcare ambitions.