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Thing is, Amazon is in a different game than your normal lending agency. Proper lending agencies make their money from the interest, and thusly, they have a des
by quaunaut 14y ago
Thing is, Amazon is in a different game than your normal lending agency. Proper lending agencies make their money from the interest, and thusly, they have a desire to make your interest higher. Amazon on the other hand makes money from direct sales- they might have interest there to discourage people from borrowing without reason, but they can also chance it at a lower rate because of the possibility of making more money via real sales.
- InclinedPlane 14y agoIt's more than that actually. Let's say that Amazon lends money to a high volume seller. And we know that Amazon is going to take a cut of sales. But, let's say, hypothetically, that all of this is a wash, in the end it ends up netting Amazon zero direct profit. Has Amazon lost money on this effort then? Consider the indirect benefits to Amazon. By increasing the amount of business flowing through the site they further cement their brand and they increase the network effect of using the site. They bring more customers to the table who then become repeat customers due to a good experience on the site. Or they bring additional business as people buy related or unrelated merchandise on the site, perhaps in the same order. And they increase the potential customer base for buying Amazon gift certs. All of these things tie together and help bring Amazon more business. Now, in reality Amazon is going to make sure it makes money on these loans and on direct sales as well, but it doesn't have to make a very high margin on such things because of the indirect effects I mentioned which provide additional margin.