Amazon loans will really shake up the banking industry

Amazon is moving in to the banking industry, making loans available to sellers in its market place. That’s very scary news if you’re a banker, says Merryn Somerset Webb.


Amazon is to make cheap loans available to sellers in its market place

It took a long time most would say far too long but it's really happening now: the traditional banking industry is being properly disrupted.

Peer-to-peer (P2P) lending has been growing fast, as has crowd funding. Scores of challenger banks' are finally getting their hands on banking licences and starting to build brands I've just had a lunch invitation from an interesting one (Hampden) based in Edinburgh.

And now Amazon's getting in on the game.

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Today, the internet giant is launching an invitation-only lending service to "thousands" of the sellers that use its market place. That, it reckons, should allow them to expand their stock and diversify their ranges. That will make them more money. And it will make Amazon which takes up to 15% on their sales more money too.

Good news all round. Unless you are a traditional bank, says Stian Westlake of Nesta in the Times. For them, this is "scary news." Amazon has piles of capital but it also has excellent relationships with its vendors. Banks spend endless time and money on lead generation, while Amazon has a "captive audience", to say nothing of all the data it could ever need to model the risk in those businesses.

It's also planning to fight on price. AnAmazon loan will cost 5.9% plus a 1% arrangement fee. There's no early repayment fee and no admin repayments are taken directly from monthly sales proceeds. It's going to be cheap and it's going to be easy. And it is going to be very hard for the banks to compete with. Interesting times.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.