Google and Amazon are ready to shake up the small business lending world and place competitive pressure on traditional banks, according to Karen Mills, advisor for small businesses to former President Barack Obama. Reports in CNBC said Mills, speaking at London’s LendIt Europe conference, predicted these tech conglomerates would disrupt the industry.
“I think they are going to dominate the market and that is the next phase that’s coming,” Mills said, “But the question is, in what form would that come, and … under what regulatory authority?”
Amazon has already made inroads in the small business lending space over the years. To date, reports said, the company has provided more than $1 billion in small business loans to merchants selling on its platform. It’s putting pressure on banks to rebound from lost market share, Mills told CNBC in an interview following the conference.
“When I look at it from a U.S. view and from a global view, the banks are going to come back in full-force, including Barclays and others, and then, on top of that, you’re going to have definite presence of Amazon players,” she said. “Amazon has clearly signaled they’re going to provide at least financing for their merchants that they know, and that’s very smart.”
She added that the Googles of the world — the tech companies aggregating information and making use of artificial intelligence — will similarly emerge as an industry force.
“If you think about what Amazon already knows about its merchants, and then you think what Google knows about everybody who is buying and selling through its platform, one can imagine a world where they have much more information about both on the credit side but also on the small business itself,” Mills said.
But, amid this shakeup, there are uncertainties — including how regulators will respond, Mills added.
“I think this is one of the as-yet-untold stories of FinTech,” she stated. adding there is a “spaghetti soup” of financial authorities like the Federal Reserve, the U.S. Securities and Exchange Commission, and others that
Mills explained there is a “spaghetti soup” of financial authorities like the Federal Reserve, the U.S. Securities and Exchange Commission (SEC) and others resulting in fragmented oversight of the small business lending industry. This has led to fear for both traditional and alternative lenders that technology conglomerates like Amazon and Google will be able to shake up the industry, she said.
“If you look at the small business hierarchy needs, they need access to cash, funds, they need time and they need more sales,” Mills said. “And, what if you were able to provide an efficient system that gave them more time to do all their work, access to capital and something that boosts their sales line? You could see how that player could win over a traditional player or even a new FinTech.”