Ebay Wades Into The SMB Lending Market Helped By Square

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Sarah Kocianski Head of Competitor Strategy
5min read

eBay announced recently that it would begin offering merchants access to credit in partnership with Square Capital as of Q3 2018. eBay sellers will be able to apply for loans from $500 to $100,000. Square is facilitating the process, which can be done entirely digitally and sees successful applicants receive funds in as little as 24 hours. The partnership is interesting for two main reasons — it signals a deepening commitment from eBay to providing financial products and the joint offering marks another powerful entrant to the SMB lending space.

Ebay surprised many in the financial services industry when it announced it was replacing PayPal with Adyen as its main payments processor back in January. The move was part of a plan to take control of the entire payments journey in a bid to cut costs and improve merchant experience, according to eBay. But it also came with additional benefits for the e-commerce giant — by replacing PayPal with a firm that doesn’t have customer facing banking products, it’s now easier for eBay to offer a wider range of financial services with a broad range of partners. On that note, Square Capital feels a good choice of partner for eBay. In Q1 2018, it facilitated over 50,000 business loans totalling $339 million, up 35% year on year. Initially only available to merchants using Square’s services, it started offering loans to other small businesses through its partner program in 2016. The program gives Square access to a much larger number of potential borrowers with little in the way of additional customer acquisition costs. And, by choosing partners with the ability to share financial data about their customers, such as restaurant software provider Upserve and now eBay, Square can also ensure it delivers the same user experience across the board. Given these factors, the partnership looks like a strong one as it enters the increasingly busy US SMB lending space. While incumbent lenders continue to be sluggish when it comes to serving small businesses, the tech giants have been targeting the market for some time and succeeding. Amazon launched Amazon Lending back in 2011 and by last year had lent $3 billion to companies selling through its platform. PayPal’s Working Capital product, which was first made available in 2013 and offered to eBay merchants, has gone on to lend $5 billion in the interim. It will be phased out by eBay over the next few years. The increased activity in this space is good overall for the US’ SMBs. However, for now it is concentrated on those with digital capabilities as businesses that sell online or use the newer payments providers have the best choice of credit options. While that remains the case, less technically capable businesses will continue to turn to their banks and continue to be turned away until those providers realise what a valuable demographic they are failing to serve and up their game. You can read my research reports and see user journey video and images from leading financial services brands here. This article was first posted on Forbes.com where you can find more articles contributed by Sarah Kocianski in the near future.