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.
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. An Amazon 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.