Will the Goldman Amazon lending partnership open up the way to 3-1-0 Lending

Amazon Lending is now new business. Tearsheet reports a total of $5billion of loans have been issued since its launch in 2011.  

These loans have been by invitation-only. So, on Amazon lending, there is no application or evaluation process. It is a one-sided market compared to lending businesses like Kabbage or Square, or Paypal (alternatives for SME borrowing in the US). 

On top of this, the Amazon loans come with several restrictions. The loans can only be used to get more inventory and do more business on the Amazon marketplace, NOT on any other distribution channel. Merchants of course, can spend their borrowed funds to `invest` in upping up their game to competing with the Amazon advertising algorithm. Which points to the growth of Amazon`s advertising revenues (read more here Advertising is the new high-priced tobacco and vendors are addicted to it). 

Amazon has close to 6 million sellers on its marketplace, however, only 2.5 million are active sellers and furthermore, only 24,000 generate sales over $1million (as of 2018). That explains why the Amazon lending business has only serviced around 20,000 enterprises since its launch. 

Amazon lending is only offered to select merchants strictly for in-house spending.

Amazon continued to use the same cautious approach to lending – by invitation only and with restrictions – even after establishing a partnership with Bank of America in 2016. Larger sellers report that they can get much better rates from other lenders (Paypal, Square, Kabbage). 

Amazon lending data over the past four years shows that it has not been a business that Amazon sees as strategic.

$661 million loans in 2016

$692 million loans in 2017

$710 million loans in 2018

$863 million loans in 2019

What will change with the Goldman Sachs lending partnership? It can`t simply be the access to a bank`s balance sheet because Bank of America had that capacity too. Last year also, Payoneer, the global payment platform, partnered with Amazon offering working capital for merchants selling on Amazon (figures not yet available). 

Amazon lending serves currently, only 1% of its active merchants. Will this change with Goldman Sachs? 

What percentage can the Goldman Sachs partnership attain, while still keeping a high percentage of the borrowed funds spent within the Amazon ecosystem? 

Will Amazon open up to loan applications aiming to reach Ant Financial`s 3-1-0 lending model - borrowers complete their online loan applications in 3 minutes, obtain approval in 1 second with 0 human touch.

As Matt Levine says, could there be another scenario which is more in the spirit of Goldman`s interestingness. A Goldman Sachs 3-1-0 lending offering for the AWS ecosystem. 

The New Breed Of Lender That's Making Loans To Amazon Sellers Based On Their Sales Data

Goldman and Amazon's lending partnership presents a huge threat to fintechs  Business Insider

Amazon and Goldman Sachs Wade Deeper Into Financial Services Motley Fool

Goldman Has Some Boring Plans Matt Levine Bloomberg