
American Express to Acquire Kabbage - prostoalex
https://www.businesswire.com/news/home/20200817005350/en/American-Express-Acquire-Kabbage
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lioeters
> ..Kabbage, a leading financial technology company providing cash flow
> management solutions to small businesses in the U.S.

> American Express will acquire Kabbage’s team and its full suite of financial
> technology products, data platform and IP built for small businesses.

> Kabbage’s products include access to flexible lines of credit, online bill
> payment, cash flow visualization tools, e-gift certificates, and the ability
> to centralize funds through the company’s recently launched business
> checking account

> This product suite is integrated into a single online platform that uses
> real-time data processing to help small businesses better understand,
> forecast and manage their cash flow.

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cm2012
For context, the small business lending tech space is about dead now. OnDeck
and Kabbage were the two frontrunners, valued at billions in past years. Their
valuations plumetted over the last few years and Covid put a nail in the
coffin. OnDeck just sold for $90m, Kabbage undisclosed.

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seneca
Is this because of a looming threat of regulation? These businesses strike me
as essentially online payday loans (extremely high rates, short term).

~~~
cm2012
No, it's that the market size for expensive, short term loans is smaller than
they thought.

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ethbro
It's likely not smaller.

But the market for expensive, short term loans, _from people who can access
and use the internet and /or apps_ is smaller.

I don't imagine a payday loan customer is thinking about that new financial
service option they read about in the paper.

Which increases cost of customer acquisition. Which makes this more of a
Palantir market and less of a scalable one.

Square has a much better shot, as pivoting an _existing_ customer relationship
seems a much better angle.

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sfblah
This makes me curious how lending club and prosper are doing right now. Does
anyone have loans they’ve extended on the platforms who is willing to say if
they’re seeing a rise in missed payments?

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PossiblyKyle
A lot of small businesses in Europe and the Middle East don’t accept Amex, due
to the transaction fees. I understand that they’re interested in maintaining a
luxurious image, but it just means I drive my finances elsewhere with these
businesses by using MasterCard. I hope they will increase the card’s outreach

~~~
chrisseaton
> I understand that they’re interested in maintaining a luxurious image

They give you a lot of value back compared to other cards I've tried in
Europe. I don't know it's something as flippant as 'luxurious image' \- people
use them because when they are accepted and you're buying something expensive
like corporate flights and hotels, you can earn an a significant amount of
value back. I flew transatlantic first-class a few times completely free on my
AmEx. My Visas give me so little I don't even bother checking what the current
total is.

It's free money to you (the actual cost is amortised across all consumers and
it's there if you use you card or not) so might as well take as much as
they'll give you.

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rco8786
OP is talking about merchant fees. Amex is the most expensive card for
merchants to accept.

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chrisseaton
Yes that's what I'm talking about as well.

Merchants don't accept them because of their high merchant fees, but AmEx
don't have high merchant fees for some flippant reason like to create a
'luxurious image' \- they do it to create value for their card holders.

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bhupy
“Free money” paid for by merchants is a luxury, not a necessity.

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chrisseaton
The consumers overall cover the costs - the merchants don’t just eat the cost.

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bhupy
Yup, point remains. It’s an externality masquerading as a luxury.

It’s also arguably regressive, since the beneficiaries of those rewards tend
to be overwhelmingly rich, while the inflated prices are paid for by everybody
else.

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rvnx
It seems like a cashback card then

~~~
bhupy
Yup, point remains. Cash back cards maintain the same characteristics.

Traditional cash back cards are arguably less regressive since it isn’t just
the wealthy that have cash back cards. In theory, a broader set of people are
beneficiaries of a system that a broad set of consumers pay into via higher
prices.

AmEx cards OTOH are expensive enough to process that there still exists a
broad set of merchants who refuse to process them. For those that do process
them, it’s harder to say to what degree the costs are passed on to all buyers.
And unlike cashback cards, Amex rewards beneficiaries heavily skew rich.

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tempsy
This is pretty old news by now...

