American Express Company AXP is in talks with Kabbage, an online fintech lender backed by Softbank SFTBY, over an $850 million acquisition, according to Bloomberg.
What Happened? After a tumultuous first and second quarter, Kabbage, one of the largest lenders by application volume, recently announced it was considering a sale, seeking up to $1 billion.
The development came after Kabbage managed to outperform many of its peers during the pandemic. The firm was founded in 2009 targeting small businesses underserved by traditional lenders.
"AMEX’s purchase of Kabbage shows the relevancy and resilience of alternative lenders in the larger fintech landscape," said Eden Amirav, CEO and co-founder of small business loan marketplace and Kabbage partner, Become. "When a giant corporation consumes an alternative lender, it highlights the necessity of that industry."
“This proposal may be the writing on the wall, signaling in the near future we may see fewer independent lenders on the field, as those without a larger fintech backer are unlikely to survive as competition for customers stiffens.”
Why It Matters: The all-cash deal comes as a natural evolution of AmEx’s small business portfolio.
According to Bloomberg, American Express spent years expanding its products and professional services to small businesses.
“From the customer’s standpoint, this is likely to lead to better fees on the table and ultimately a return to increased spending, helping the economy stabilize and grow,” Amirav added.
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