Goldman Sachs + Amazon: Small Business Lending May Never Be The Same

Goldman Sachs may be making good on CEO David Solomon’s promise to boost revenue by finding new sources of income by pairing with Amazon to make business loans to small and medium-sized U.S. businesses.

The Financial Times reported Monday Goldman and Amazon are in advanced talks that would allow Goldman to offer loans to small- and medium-sized businesses on Amazon’s 8-year-old lending platform, which offers quick-decision loans.

Quoting people familiar with the talks, the Financial Times said the collaboration could go live as early as next month.

Goldman already has a credit card partnership with Apple that has given the investment bank entre to U.S. Apple subscribers. Goldman has said the credit card launch was the most successful ever.

Consumer ventures made up 3% of its revenue last year, with credit cards and consumer loan balances representing just 1% of its $993 billion in assets.

Its digital consumer banking division, Marcus, was founded in 2016, named after Marcus Goldman, one of the 150-year-old investment bank’s founders. The company sees retail growth as important.

“For every $10 billion in new deposits, Goldman can reduce the cost of capital by $80 million,” chief financial officer Steven Scherr said last week.

It currently boasts 4 million customers in the U.S. and U.K., $60 billion in deposits and $7 billion in consumer loan balances. The Financial Brand reported those number are expected to grow this year with the introduction of a mobile banking app and no fee wealth management services.

Small- and medium-sized businesses account for more than half of everything on the Amazon website. Amazon showed $863 million in outstanding small business loans on its 2019 balance sheet.

Goodbody analyst John Cronin told the Financial Times a partnership with Goldman would allow Amazon to greatly increase its business lending without taking on “any associated credit risk of regulatory obligations.”

Goldman is trying to remake itself into a banking and investment operation more akin to JPMorgan Chase and Citigroup, but it currently lacks the branch network that gives it easy access to smaller businesses borrowers.