American Express Archives

PeerIQ’s Q4 2018 Lending Earnings Insights Report

PeerIQ's latest Lending Earnings Insights Report points to a strong economy but bank and card issuer CEOs are cautious about being late in the credit cycle.

November 20, 2018 By Todd Anderson 1 Comment

PeerIQ released their Q4 2018 Lending Earnings Insights Report which points to a number of themes showing the economy is strong but CEOs are striking a cautious tone. Delinquencies and defaults continue to be low as consumers have seen their wages rise and taxes drop. Lenders are increasing reserves as they anticipate credit to renormalize in the near future, saying the economy right now was too good to be true.

The report covers earnings reports from big banks and fintech lenders. Stock performance was mixed with the flattening yield curve causing banks and card issuer stocks in particular to suffer. Companies covered include Enova, LendingClub, One Main Financial, OnDeck, GreenSky, Bank of America, Citibank, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Wells Fargo, Capital One, Discover, Synchrony and American Express.

One of the growing trends has been the pull back by banks lending directly to consumers and small businesses. Banks are instead increasing funding lines to non bank lenders, credit facility volume has grown 6x since 2010. The growth in originations from non bank lenders has forced regulators to look at them more closely, while the FDIC is considering granting ILC charters to non banks.

Broadly across the credit spectrum fintech lenders have seen delinquencies and charge offs remain at near record lows. All the companies in this segment saw double digit revenue and origination growth YoY. Lenders have started to raised borrowing rates, though not at the same pace as the Fed Funds Rate. The flattening yield curve has raised the cost of borrowing on credit facilities, causing margins for lenders and investors to be compressed.

Big banks experienced another strong earnings quarter as all covered in the report saw double digit increase in earnings. Revenue drivers vary from bank type to bank type. Big banks covered within the report saw deposits rise due to a better digital banking experience, an integration between wealth and banking products and a retail branch expansion. As a group the banks are growing, albeit slower than in the past, through digital means and are focused on the long term potential of products they are currently building.

Credit card issuers all saw their earnings grow by more than 20 percent YoY. Most card issuers also saw growth in revenue and their loan books. Growth in total allowances for losses outpaced loan growth, pointing to the fact that most card issuers see a credit normalization coming. Card issuers have used the partnership model with stores like Walmart, JC Penney and Lowes to grow revenues.

Overall economic health, low delinquencies and low charge offs show that the credit space is doing quite well. Though the report points out that most of these companies do not expect this environment to last forever, they are in the midst of preparing for a change while they keep growth humming along.

An Inside Look at the GreenSky-American Express Partnership

The multifaceted partnership is the first of its kind between a leading fintech platform and major credit card company

August 9, 2018 By Peter Renton 2 Comments

We heard on Monday that newly public fintech company, GreenSky, has partnered with American Express in a wide ranging deal. While we have seen some interesting fintech/bank partnerships over the last few years this is one of the most significant. It is also one of the first examples of a company that facilitates installment loans partnering with a large credit card company.

I reached out to both GreenSky and American Express to find out more. But before I get to our conversations there let’s tease out the three ways in which GreenSky is partnering with American Express.

Select American Express merchants will be able to offer financing through GreenSky

American Express merchants will be able to offer GreenSky point of sale financing as an option for consumers. This will happen in the two main verticals where GreenSky operates: home improvement and elective healthcare. Merchants are able to offer financing through the GreenSky Merchant app available for Android or iOS.

American Express consumer card members can apply for an installment loan

This is a pilot project that will be available in the home improvement category in five U.S. cities initially. Consumers will be able to apply for an installment loan through their American Express login. The technology for this program will be provided by GreenSky and development is still ongoing before this will be a production offering.

Access to American Express vPayment

American Express vPayment is a virtual payments solution that provides a virtual account number for each transaction. In this system a token can be provided to a customer for a single use. This obviously makes the digital payment more secure and reduces fraud risk.

[Read more…]

An Overview of Small Business Loan Funding

We delve into the various ways small businesses can access capital.

December 19, 2016 By Todd Anderson 2 Comments

As non bank lenders continue to gain market share across different loan segments, we wanted to give a complete overview of online small business lending and how diverse the options are for all types of businesses today.

Understanding your company and where you fit within the ecosystem of small businesses is still the most important question you can ask. The options available vary in loan size, interest rates and term length dependent on the type of business you run. Though one thing is certain, today there is such a wide array of options available that most business owners should be able to secure funding.

SBA Loans

SBA or Small Business Administration loans are considered some of the best funding options available for their low interest rates, though their detailed paperwork and lengthy approval process tend to limit the types of firms who can secure these loans. There are three different types of loans offered by the SBA; 7(a) SBA Loan Program, CDC/504 SBA Loan Program and the less used Microloan Program. We will delve deeper below but these loans are designed for companies with very good credit, collateral and a solid business plan. The loans are not delivered directly by the SBA, the SBA acts as a guarantor so the banks can then allocate some of their small business lending to the SBA programs. Some of the top lenders in this space include Wells Fargo, US Bank and JP Morgan Chase; national, regional and community banks are the main lenders of SBA Loans.

7(a) SBA Loan

Loan Amount – $5,000 – $5,000,000
Loan Term – 5 – 25 years
Interest Rates – 6 – 13%

This is the most well known and most commonly used loan that the SBA program offers. This loan can be used to expand a company, finance equipment, purchase real estate or to make an acquisition. Businesses consider SBA loans as the top financing product to get approved for, however the process of applying and ultimately being approved is quite extensive. Companies need to provide financial statements, explanation of use of proceeds, details on collateral and full business descriptions. The process is still very similar to getting a traditional loan through a bank as the entire period can last about 90 days. [Read more…]