Amazon is reportedly partnering with Goldman Sachs to launch a digital line of credit for its U.S. sellers through the bank’s digital-only banking arm, Marcus, through CNBC.
Amazon sellers will receive invitations to apply for lines of credit up to $ 1 million from Marcus, with a fixed annual interest rate between 6.99% and 20.99%. Sellers can apply digitally through Amazon’s merchant hub, via a two-step process of a few minutes that will yield real-time results. For context, Goldman entered consumer banking in 2016 with the launch of Marcus, which offers a high-yield savings account and personal loans.
This is the first time Amazon has allowed another company to lend to sellers on its platform. Talks A partnership with Goldman dates back to February, although the product has been in development since 2018 and the e-commerce giant has also considered creating an online marketplace of lenders instead. Goldman executives surveyed Amazon sellers to identify what is needed in a fundraising product, finding that because so many get paid every two weeks, they often run out of money they need to fill their inventory or invest in marketing.
Amazon’s decision to work only with Goldman on the loan product will provide Marcus with two key growth opportunities:
- Access to vendor data can help Marcus improve their lending model. If the sellers agree, Goldman will be able to access their merchant data, like income and seniority selling on Amazon, which it can use to determine loan approvals. This may ultimately allow Marcus to improve his lending model, as the more data he has to work with, the more accurately he can assess the creditworthiness of potential borrowers.
- The scale of Amazon’s platform provides Marcus with a huge revenue generation opportunity. Over 1.9 Million US SMBs Work With Amazon, Based On Its 2019 SME Impact Report, and it has already become a player in SME credit, with more than $ 863 million in outstanding SME loans at the end of 2019. If Marcus obtains part of this loan volume, he will generate substantial income, including through fees: borrowers do not use at least 30% of the loan line. credit.
The partnership could also support Goldman’s growth initiatives aimed at consumers outside of Amazon:
- Goldman may reinvest a portion of the income earned in expanding its consumer business. Marcus To come up Efforts aimed at consumers include the launch of a current account in 2021 and a wealth management platform. And so far this year it debuted its long-awaited mobile application and announcement an installment product. These steps all bring Marcus closer to Goldman’s goal of “providing a retail bank branch through your phone”, as executive Eric Lane previously noted. The income generated by loans on Amazon could be reinvested in the development of retail banking products or in the deployment of those already underway.
- The brand’s exposure on Amazon could boost the acquisition of Marcus customers. Sellers on Amazon will learn about Marcus’ product line through Amazon’s highlighting of business loans, even if they ultimately don’t take out a loan from the bank. The exposure could make Marcus a priority for sellers when looking for personal financial services like personal loans or a savings account, and ultimately move the volume to Marcus’ platform regardless of his Amazon product.
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