How Amex Is Going After Banks with Its New SMB Lending

amex1American Express is taking a page from Square’s book and launching an online platform for small business loans of up to $750,000 — but its main target may be banks.

The news came today via Bloomberg, which reported funds could be available as soon as two days after loan approval. The venture, called Working Capital Terms, seemingly puts Amex in the path of online lenders such as Funding Circle, and OnDeck, as well as Square Capital and PayPal Working Capital.

“We’ve combined the convenience of the online lender with the competitive pricing of a bank loan,” Susan Sobbott, president of global commercial payments at American Express, told Bloomberg. “It’s a big opportunity for us to go into an area where businesses want to pay vendors that don’t accept any credit cards.”

American Express has longstanding ties to small and midsize businesses, and a deep knowledge of their credit situations. The company announced in March it would pursue more forms of lending to make up for lost revenue in deals such as Costco — lost to a partnership of Citigroup and Visa  — as well as general pricing pressure in the industry.

Amex’s small-business savvy has positioned it well for this kind of lending, according to David O’Connell, senior analyst with Aite Group.

“American Express has been in pole position for a long time in this space,” O’Connell told Bank Innovation. “The data it has on these businesses allows for extremely rapid underwriting.”

Rapid underwriting and fast approvals mean a better experience for borrowers, and allows for potentially tremendous scale. Both of these areas elude banks, O’Connell said, and noted that the interest rates Amex is offering — 0.5% for 30-day loans to 1.5% for 90-day loans — are much closer to bank rates than those offered by alternative lenders. Lenders such as OnDeck can exceed banks in speed, but their rates are typically far higher.

O’Connell said there is a class of creditworthy SMB borrowers that will not pay an alternative lender’s rates, but will not wait for or endure the experience they would be offered at banks, either. “Amex will see a great deal of business,” O’Connell said, because banks fail to properly serve this segment.

“Banks may take a day to reply to a loan application,” O’Connell said. “They bring in one or two loan officers to look over the application. Once you do that you’re already almost losing money on it, and it will never scale. Amex does the whole thing in minutes.”

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Philip Ryan is Senior Editor of Bank Innovation and Senior Director of INV Fintech. He began covering financial services in 2012 and has more than 15 years' experience in online journalism, which makes him quite old. He can be reached at

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