It would seem that Amazon is gearing up to provide a whole new world of benefits to its merchants, according to reports. It was announced on June 10, 2020, that the company would be offering a new line of digital credit for their merchants. This development will be done in partnership with Goldman Sachs.
Amazon Merchants Can Access Credit Lines
The credit lines in question will be delivered through Marcus by Goldman Sachs and will be available for merchants within the United States only. Furthermore, the lines will be up to $1 million for the merchants. Marcus is a purely digital bank created by Goldman Sachs, and it is expanding on its market base with this new partnership.
This announcement marks the first time that Amazon will allow an external financial institution to conduct business with their merchants. The offer of a credit line will appear on Amazon’s Seller Central through which they can apply. The application can be completed in two steps, and if successful, the merchants can access the funds.
The lines will attract an annual interest of 6.99% to 20.99%. The lines can be withdrawn from and repaid as a typical credit card can. Considering the fact that hundreds of thousands of merchants operate on Amazon, this service has a large potential customer base.
Amazon has had a small business loan service available, but it was not on this scale. Instead, certain algorithms and sales data were used to determine recipients of loans. This merchant data will now be shared, with merchants’ consent, with Goldman Sachs.
Amazon and Goldman Sachs have a long-standing business relationship that predates this deal. When Amazon took over Whole Foods for $13.7 billion, Goldman Sachs was the bank that facilitated the deal.
Marcus Making an Entrance into the Consumer Market
This move is beneficial for not only Amazon but for Marcus as well. Back in January 2020, CEO David Solomon stated that the company planned to become a “banking-as-a-service” provider for firms. So far, the company has done this through strategic partnerships with various firms.
In 2019, Goldman Sachs partnered with Apple for its credit card integrated with iPhones. Other partnerships in this vein were with JetBlue, Intuit, and AARP. The creation of Marcus in itself was an effort by Goldman Sachs to diversify its operations.
Historically, Goldman Sachs had dealt with large institutions and wealthy clients. The financial giant has also shown interest in emerging technology, including Bitcoin derivatives.
Now, with the access they will have to data from Amazon, they can improve their lending model. This, along with their new partnerships, will aid the diversification of their business model.
Marcus, on its part, has had a profitable year thus far. According to a recent presentation at the Bernstein Conference, deposits in Marcus have increased by $26 million in the first quarter of 2020 compared to the first quarter of 2019. In the same quarter, deposits increased by $2 billion from $5 billion to $7 billion.
As Goldman Sachs moves into the future and digital banking becomes increasingly popular, it seems that they are aiming for more retail services. In this vein, Marcus, which has been identified as a top lender for debt consolidation loans, will be leading the way. Should Goldman Sachs be able to venture into retail services while staying in tune with its larger clients, this goal can be achieved.
Will this partnership benefit Amazon merchants in the long run? Can Goldman Sachs truly diversify their operations? Let us know your thoughts below.