Monday, 8 October 2012

Google, Amazon and The Shape of SME Finance

In November 2007 it seemed clear that facilitators like Google and Amazon would capitalise on their alignment with their customers' day-to-day activities to disrupt banking. Both of these giants already have e-money licences in Europe (I helped Amazon apply for its own), and the latest foray is into trade finance. Google will offer a line of credit for AdWords advertising spend, while it appears Amazon will lend to selected small businesses against their projected sales over the Christmas season. 

While these services may be offered initially in the US, where there are lots of small business funding options, bear in mind that only four UK banks control 90% of the small business finance market and are lending less and less to them. And while some UK banks enable some merchants to obtain cash advances against their card receivables, it's not exactly a core activity.

The competition alone must prove welcome, yet the critical feature of both the Google and Amazon services is that they are seamlessly intertwined with customer behaviour. Both businesses could have decided to launch free-standing, me-too banking services (like the UK supermarkets), but they have not done so. No doubt they also intend to attract new customers with the latest services, but only by showing that they support what small businesses want to do - namely, sell their own goods and services across a staggering array of markets and demographies.

And by patiently facilitating their customer's activities, neither Google nor Amazon needs to incentivise staff to sell services to people who don't need them, as banks have done.

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