Finance

How Amazon Overtook Google in Finance

In a few years, the e-merchant has loaned 3 billion dollars to SMEs and its payment service has exploded. For its part, the search engine multiplies the failures.

Google boss Eric Schmidt said in 2014: “A lot of people think that Bing or Yahoo are our biggest competitors. In fact, our biggest competitor when it comes to online search is Amazon.” Three years later, the American e-merchant can has transformed the test. According to a study by the American firm specializing in Internet marketing BloomReach Inc., 55% of American online shoppers start their product searches on Amazon.

But there’s another area where Amazon has outperformed Google: financial services. The e-merchant has two successes to its credit. The first is its SME lending offering, Amazon Lending. Launched in 2011, it allows companies selling on the platform to take out short-term loans between $1,000 and $750,000. In six years, the e-commerce giant has already granted more than 3 billion loans, including 1 billion in the last twelve months. According to Amazon, 50% of the 20,000 companies that have already taken out a loan take out a second one. Available in the United States, the United Kingdom and Japan, the program must be extended to other European countries including France, but no date has yet been communicated.

How to explain this success ? First reason: the link between Amazon’s core business and the world of credit. “We saw the same phenomenon with French distributors twenty years ago. They gave birth to credit companies like Cofidis for Les 3 Suisses. These entities benefited from the sales reserves and data from distributors. today the same thing with Amazon”, explains Thomas de Bourayne, CEO of Credit.fr, a crowdlending platform dedicated to SMEs. But Amazon has a greater strike force than our tricolor distributors. Two million wholesalers, sole traders, small stores and individuals sell products on Amazon.com. In 2016, Amazon stocked and shipped 2 billion products on behalf of these third-party merchants, twice as many as in 2015. “Today, sellers use the marketplace to connect with producers. Getting credit is therefore natural since a supplier must cover itself with credit insurance for the risk of non-payment”, adds Julien Madonato, consulting director specializing in innovation subjects in the financial industry at Deloitte.

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Amazon has another strong point: its omnipotence. The American giant knows everything about what is happening on its platform. “There is a lot of information on Amazon: the comments of people who can complain about a package, the delivery time… He also knows if the merchant sells his goods”, notes Olivier Goy, president of Lendix, another crowdlending platform. “Amazon, like Alibaba, has built very precise databases and scoring bases. It therefore has incredible predictive power,” explains Julien Maldonato. “The data, which he alone has, allows him to offer a relevant credit offer. He can price his offer well, limit the risks and offer development capacities to his client”, adds Thomas de Bourayne. The e-merchant offers loans only by invitation, when it deems that a merchant needs them. A good way to limit the risks. According to Amazon, 95% of requests are approved.

Last success factor, the simplicity of the offer. On her blog dedicated to selling on Amazon, Diana Poisson shares the different steps to take out a loan. As she points out, there is very little paperwork to complete because Amazon already has all of the merchant information. Most loans are issued in just two days compared to thirty for a bank.

Amazon’s other success in finance is Amazon Pay, a payment method that allows you to log in and pay on third-party websites with your Amazon account information. Since its launch in 2012, it has won over 33 million users and doubled its payment volumes in one year (the amount is not disclosed). “Amazon has an image of trust with buyers. A user who has already put his credit card data in Amazon considers Amazon Pay to be a secure service”, underlines Lionel Vincke, director of the consulting firm specializing in means of payment Azzana Consulting. “Above all, Amazon already has all the buyers’ delivery information. This step, which consists of filling in their address and delivery method, is often a blockage when buying. With this service, Amazon provides a real value proposition for the customer. .”

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Google also made a foray into the world of payment by launching the Google Wallet in 2011. This solution was not imposed due to disagreements with the major American telephone operators who blocked the operation of the application. The search engine returned to the charge in 2015 with its Android Pay electronic wallet. Like Apple Pay and Samsung Pay, it allows you to pay for in-store purchases using your smartphone. But as for its competitors, Android Pay is not a big success at the moment. According to a study by Juniper Research, Google’s wallet claimed 12 million users in 2016, compared to 45 million for Apple Pay.

Users worldwide, in millions
2015 2016 2017 (estimates)
AndroidPay 2 12 24
Apple Pay 15 45 86
Samsung Pay 3 18 34

For Lionel Vincke, these portfolios are restrictive. “Apple Pay in France is a failure. Most of the big banks have refused to play the game (only BPCE accepts iteditor’s note). For the merchant, a collection of 2 to 3% of the population has no interest.” Android Pay, which has not yet been launched in France, could therefore experience the same scenario.

Google had another financial failure. In 2012, he launched Google Compare, a financial services comparator in the United Kingdom which was extended three years later to the United States. Finally, the Mountain View firm closed its service a year after its launch across the Atlantic. Google took commissions from the actors to be well referenced on the site. He was also commissioned by some of his partners to sell products directly to customers online. One of the reasons for this failure is in the tool itself. “After the launch in England, Google realized that it was not possible to replicate its tool in another country and that it was therefore necessary to make country-by-country variations. However, this is not its cup of tea. Google likes to make very globalized products and services. It will never design a heavy technical tool intended for a single market”, explains Hervé Hatt, CEO of Meilleurtaux.com, a group which has several comparators including Meilleurbanque.com .

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Another problem: the American did not manage to seduce all the players in the sector. Its offer was therefore incomplete for Internet users. “Google’s business is to give the most relevant answer possible. If they are not all referenced, we lose relevance”, underlines Guillaume Clavel, president of Panorabanques.com, a comparator of banking services. Finally, Google continued to charge banks and insurance companies to appear in the sponsored links at the top of the “insurance” and “bank” search pages… and placed its comparator just below! “Google was shooting itself in the foot by itself competing with the banks. It was putting itself on the backs of large customers. This generated a huge conflict with them”, recalls Hervé Hatt. Going against banks and insurers was not an option for Google. “It is the first advertising agency in the world. A large part of its income is derived from this activity. And the sector that earns it the most is insurance”, continues Hervé Hatt. We do not eat from the hand that feeds us.

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