American Express plans to enter into the online lending space with a new short term funding solution for businesses.
AmEx, the $55.13bn market cap credit card giant, is launching a short-term lending platform named Working Capital Terms. The entirely digital platform is designed to help US business owners bridge the gap between vendor payments and customer purchases, allowing greater control over cash flows.
Eligible American Express Card Members can receive loans ranging from $1k right up to $750k. According to AmEx, loans can be approved within 60 seconds, with no collateral required. Once approved, AmEx expects to pay vendors within two business days on the customers behalf, and will make it clear that payment came from the borrowing business. When the loan term is up, the principal, plus a fee, is auto-debited from the business’ linked bank account.
The fee structure is as follows: 30 days with a 0.5% fixed fee, 60 days with a 1.0% fixed fee, and 90 days with a 1.5% fixed fee. The product will be rolled out to existing AmEx Business Card Members over the course of this year, as the company seeks customer insight and feedback on the new initiative.
AmEx is just the latest major financial services company to make the leap into the new-fangled world of online lending. Goldman Sachs has long been rumoured to be working on an online lending operation, codename Mosaic, which it will reportedly fund loans through its New York State-chartered banking subsidiary, which holds over $100bn in assets. JPMorgan Chase, the largest US bank by deposits, struck a licensing agreement with NYSE-listed OnDeck in December 2015, as a means of sprucing up the bank’s small business lending offering.
“We’ve combined the convenience of the online lender with the competitive pricing of a bank loan,” said Susan Sobbott, AmEx’s president of global commercial payments, in a telephone interview with 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.”