Reports that Amazon is in the process of agreeing a deal with Goldman Sachs to offer small business loans via its lending platform, should worry traditional financial institutions.
In recent years there has been a slow creep by the tech giants into the banking space and it is one that concerns traditional players. With huge cash reserves and untold numbers of customers, there is plenty to fear.
As if it wasn't enough that the likes of Apple and Google have successfully worked their way into the payments space with services that consumers seem to love, Silicon Valley is now eyeing up small businesses.
According to the Financial Times, Goldman Sachs is looking to offer loans to SMEs via Amazon Lending, a move that as Goodbody analyst John Cronin noted, would allow the online behemoth to "significantly extend" its platform "without any associated credit risk of regulatory obligations".
Such a move would be a big win for Amazon, whose lending product has stalled in recent years.
It would also solve another issue that tech companies face – they may have plenty of consumer data but little in terms of credit history information.
Cronin previously said the Seattle-headquartered company’s difficulties in growing Amazon Lending highlighted “the complexity of underwriting decisions”. Teaming up with Goldman Sachs would resolve such issues in one fell swoop.
The partnership would also be good news for Goldman Sachs, whose chief executive David Solomon recently promised improved returns by winning revenues from new sources.
The company’s latest investor day, held last week, saw the bank focus on plans for a digital future that includes a move into banking-as-a-service, rather than on traditional sources of income.
“We really believe that we can build a very interesting world-class digital bank,” Mr Solomon told CNBC. “We are always looking for opportunities to accelerate some of the things we’re trying to do, especially some of the new business fields.”
Teaming up with Amazon falls firmly into that category and could shake-up the market for lending to SMEs.
