We were poring through the quarterly SEC filings of Amazon and were intrigued by one item in their Balance sheet, “Seller Receivables”. On further investigation, we found that it’s actually a business line within Amazon, which lends to sellers for inventory purchases. Btw, this business is mentioned in a small footnote at exactly one place in the entire 10Q filing and ditto in the annual 10K filings and obviously, nobody talks about it anywhere.
TAM: So, we looked at what is the potential of this business. Its current lending book size is $1.3B which is about 3x the size of Pagseguro, one of the largest Brazilian fintech with a similar receivables financing business for SMBs. Moreover, AMZN’s global TTM third-party seller services revenues were $107 B and so at $1.3B the business is not even scratching the surface. It’s growing in high teens CAGR for the last few years and that also seems to be due to the brakes amazon applied to this book of business during the pandemic to avoid any credit risk.
Earnings Impact: At its current size the earnings impact is not material, however, as the business keeps growing in size and even if it captures 20% of amazon’s third-party sales it would be one of the top SMB lenders in the world and would be quite material to earnings as it grows. The program is by invitation only and loans disbursed are in the range of $1000-$750,000. We believe this could be the next driver of growth for Amazon outside of AWS.