Amazon is set to boost its small business loans in the UK. After lending $1 billion in the past 12 months to companies in the UK, USA and Japan, Amazon has pledged to invest even more over the next year.
In total, Amazon’s Lending service has sanctioned loans totalling $3 billion since it was inaugurated in 2011. The service offers sellers on its ecommerce marketplace instant small business loans for 12 months, with an annual interest rate of between 6 and 17 per cent. As part of the loan agreement, Amazon reserves the right to prevent the seller from marketing its product via the Amazon marketplace, if the seller is unable to pay back the loan.
More than 20,000 small businesses have received a loan from Amazon and more than half of those have taken a second loan from the company, it said. Loans range from $1,000 to $750,000.
And with Amazon’s Lending service expect to generate even more funds for SMBs over the next year, the UK’s financial sector faces losing a lot of business it previously took for granted. In a recent PwC report 61% of UK financial service industry leaders said that they believed they could lose as much as 40% of their revenue to standalone FinTech firms (such as Amazon). On a global scale this number rose to 51%.
Amazon is just the latest business to challenge the traditional finance industry, as the rise of FinTech forcies banks to rethink the way they operate. Many banks have in fact followed the FinTech industry’s model and are pumping funds into areas like blockchain and A.I. For example, Barclays recently opened Europe’s largest FinTech accelerator in London, while JP Morgan pumped $600m into FinTech programmes as part of its $9.5bn tech investments in 2016.