Goldman Sachs is in advanced talks with Amazon to offer small business loans in the United States, as the Wall Street bank turns to Big Tech to break into mainstream areas of financial services.
Goldman has begun building technology that would allow it to offer loans to small and medium-sized businesses over Amazon’s lending platform, according to two people briefed on the situation. The project – which is likely to involve attaching Goldman’s brand to the Amazon product in some way – could go live as soon as March, one of them said.
Last week Goldman's chief executive David Solomon promised shareholders the bank would boost returns by winning revenues from new sources such as consumer banking and wealth management.
An agreement with Amazon would follow March's announcement of a credit card partnership with Apple, a tie-up which features the bank's branding on the physical card and in some marketing and gives Goldman a direct channel to Apple's more than 100 million US subscribers.
Executives at Goldman, which lacks the physical branch network that most banks use to attract SME customers, have described the Apple Card as the “most successful credit card launch ever”. Card lending is understood to account for a significant portion of the $7 billion (€6.3 billion) of consumer loans and card balances the bank had at the end of last year. Goldman also offers consumer lending in the US through Marcus, its retail banking arm.
Amazon had outstanding small business loans of more than $863 million (€780 million) on its own balance sheet at the end of 2019. For the past eight years it has lent to small businesses that sell on its site, using the data it holds on their cash positions to offer quick-decision loans in a handful of countries.
But Amazon Lending’s growth has been patchy in recent years, and the tech company now uses bank partnerships in some markets outside the US.
John Cronin, an analyst at Goodbody's, said banking partnerships could allow Amazon to "significantly extend" its SME lending platform "without any associated credit risk of regulatory obligations [in the context of capital and liquidity and so forth]".
Amazon declined to comment on the Goldman deal and said lending was “part of the services, tools, programs and infrastructure we provide to our selling partners, mostly small and medium-sized businesses, who account for more than half of everything sold in Amazon’s stores”.
A spokesman for Goldman also declined to comment.
Goldman is in the midst of a dramatic transformation from a trading and investment banking powerhouse to a broader financial services group that more closely resembles that of rivals JPMorgan Chase and Citigroup.
Its new consumer ventures accounted for less than 3 per cent of revenue last year, while the cards and consumer loan balances at the end of 2019 were less than 1 per cent of its $993 billion (€898 billion) in total assets.
Goldman has said that while it will be moving into businesses such as consumer banking and cash management, it will be doing so in a more efficient way by using new technology and avoiding some of the legacy costs that have held back other banks.
At its recent investor day it said it would pursue “banking-as-a-service” this year, one aspect of which involves banks allowing third parties to “white label” their products.
– The Financial Times Limited