American Express is the world’s largest commercial card issuer and competes with Visa and Mastercard, which are issued by banks. He declined to disclose the number of cardholders he has in Australia.
American Express is a bank in the United States and is partially funded by deposits, as well as funding from wholesale markets. AmEx launched SME loans in the United States in 2017, which are issued by American Express National Bank, its American banking subsidiary. He declined to provide details on the terms of financing Australian loans.
The new offering will not only compete with the big banks, but also with Judo, which had a loan portfolio of $ 1.8 billion in June and has more than 800 lending clients, and a host of fintech lenders. , including Prospa, Moula and Capify, which generally charge more. interest rates than those targeted by the AmEx.
Competition in business loans is intensifying. NAB is the largest corporate lender, but the Commonwealth Bank, which will release its half-year results on Wednesday, is growing aggressively in the space. Just over a third of CBA Group’s profits come from its commercial and private bank, which in the six months to June 2020 increased lending volumes by 7.2 percent per year to $ 145 billion.
American Express has historically adopted a different model from other credit cards by requiring its balances to be paid in full at the end of the month. It allows business customers to run a balance for an interest rate of around 20 percent.
However, the new loan product will be specifically aimed at businesses looking for growth capital and will be available on terms of 6, 12, 18 or 24 months.
AmEx is partnering with the global ODX origination platform to create the application process and says it will produce quick decisions, with approval and delivery of funds within two business days.
AmEx estimates that Australian SMEs will need an additional $ 130 billion in capital to recover from COVID-19.
Income under pressure
Since introducing business loans in the United States in 2017, AmEx has seen double-digit growth, but does not disclose the size of its US SME loan portfolio or the number of clients. However, Mr Seward said loans “are becoming a more important part of the relationship we have with small businesses and that is the intention.”
AmEx’s revenue has come under pressure during the COVID-19 pandemic, particularly with respect to travel and entertainment payments. But 80 percent of its business portfolio in Australia is in âB2B,â or supplier payments, which have increased.
Two weeks ago, the company reported global fourth quarter net income of $ 1.4 billion, down on lower card spending. Its total revenue for the year as of Dec.31 was $ 36 billion.
Research commissioned by AmEx and conducted by Lonergan Research found that one in four SMEs, as a direct result of the end of JobKeeper, intend to borrow this year and will seek out on average just under $ 100,000.
Interviewees said bank application processes are usually complex and lengthy and SMEs often have to contact multiple lenders before obtaining financing and even then they often do not receive the full amount requested.