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Is this because of a looming threat of regulation? These businesses strike me as essentially online payday loans (extremely high rates, short term).
by seneca 6y ago
Is this because of a looming threat of regulation? These businesses strike me as essentially online payday loans (extremely high rates, short term).
- Swizec 6y agoI’m guessing it’s the looming threat of defaults. Most small-medium businesses are restaurants, hair salons, high street shops, and other places heavily impacted by covid.
- seneca 6y agoIt seems like Kabbage specifically targets loans to online businesses, which are booming right now. Even still, it seems the decline predates the pandemic.
- cm2012 6y agoKabbage's loan portfolio is so underwater AMEX didn't even buy it in the deal.
- quickthrowman 6y agoAMEX already has enough loan risk on its books that it tends to correlate up and down moves with DFS rather than V and MC, it makes sense they wouldn’t want more.
- techsupporter 6y ago> rather than V and MC I'm not sure if I understood you correctly, so I apologize if I misunderstood. I would expect American Express--a lending bank--to track more closely with Discover Financial--also a lending bank--rather than Visa or MasterCard, which are card network operators. Visa and MasterCard don't write the actual lines of credit issued to customers; the card-issuing financial institutions (Bank of America, Chase, Your Local Credit Union[tm], and so on) do and the latter carry the loan risk. American Express and Discover also happen to operate their own card networks and issue card-accessed loans on them. You can get an American Express network card from other banks (like Wells Fargo and Bank of America) and you used to be able to get Discover network cards from other banks but I can't think of a non-debit one off the top of my head at the moment.
- cm2012 6y agoNo, it's that the market size for expensive, short term loans is smaller than they thought.
- ethbro 6y agoIt's likely not smaller. But the market for expensive, short term loans, from people who can access and use the internet and/or apps is smaller. I don't imagine a payday loan customer is thinking about that new financial service option they read about in the paper. Which increases cost of customer acquisition. Which makes this more of a Palantir market and less of a scalable one. Square has a much better shot, as pivoting an existing customer relationship seems a much better angle.