Amazon is going to make a push to revitalize its loan business after a recent slump, according to a report by the Financial Times.
The eight-year-old business offers annual loans at interest rates of between 6 and 17 percent, but growth has slowed in the past few years.
In the year between 2015 and 2016, outstanding loans almost doubled, to the tune of $661 million, and growth fell to 4.7 percent in 2017. In 2018, growth was down to 2.6 percent. Amazon stopped giving out new loans in Japan, which is one of the first markets the loan company entered.
It was reportedly trying to get a better understanding of credit risks and cutting staff as well. The company is now ramping up efforts to revitalize the business, however. It has put out job ads for jobs all over Europe, Asia and in Seattle. The job listings show that Amazon wants to completely overhaul the products that it does have, and expand into new territories. It says it wants to “turn the finance industry on its head.”
Amazon Lending is a fairly secret operation, by design. There’s no website and it doesn’t allow reporters when it does presentations at events.
The job postings, however, show Amazon is serious. The application asks the question, “Are you interested in helping us disrupt an entire industry?”
Some analysts don’t think that the new push will be successful, and some say that Amazon is too dependent on its own data and doesn’t have a full understanding of creditworthiness.
“They only see part of the picture if all the data are related to sales on one marketplace,” said Rob Frohwein, co-founder and chief executive of Kabbage, and “you really have to try to draw a more 360-degree view [of potential borrowers].”
John Cronin, an analyst at Goodbody, said Amazon’s struggles show “the complexity of underwriting decisions.”
“The reality is that while Amazon and other Big Tech firms have access to substantive customer data, what they do not have is credit history data. This is a major gap in the context of lending decision-making,” he said.