Amazon's U.K. Amex card takes aim at post-COVID small-biz spending

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With travel spending still largely sidelined by the coronavirus pandemic, Amazon is looking to harness more of the spending that small and medium-sized businesses are focused on for recovery.

In the U.K., Amazon is launching two co-branded American Express business credit cards. The cards, which offer a choice of cash back or deferred payment terms, are designed to address the short-term financing needs of British SMEs.

The Amazon Business B2B marketplace has been Amazon’s fastest- growing unit, growing even faster than Amazon Web Services, according to a December 2019 report by Mark Mahaney, RBC Capital Markets’ managing director. Mahaney estimated that Amazon Business’s global gross revenues rose to $16 billion in 2019 from $10 billion in 2018.

Pre-COVID-19, the SME segment was one of Amex’s fastest-growing businesses internationally, with the lead markets of the U.K., Mexico, Canada, Australia and Japan all expanding at double digits, according to Amex U.K. spokesperson Atalia Da Silva.

The launch of the co-branded cards comes at a time when the U.K.’s estimated 5 million SMEs are suffering from the negative economic impact of lockdown. Nearly two-thirds (63%) of U.K. small businesses participating in an August 2020 survey by Amex and YouGov said that cash flow issues have led them to delay purchasing goods and services needed to run their business. Nearly a quarter (23%) of respondents had delayed bigger-ticket purchases over the last six months until they had funds available, and 38% were only buying the essentials they needed to keep their business operating.

SMEs account for 50% of the total revenue generated by U.K. businesses and 44% of the country’s labor force, according to McKinsey.

The new cards are similar to the co-branded business rewards credit cards that Amazon and Amex launched in the U.S. in October 2018. They are part of Amazon U.K.’s business procurement platform Amazon Business, which also offers payment by invoice 30 days after shipping. Intended for short-term financing, the U.K. cards offer an interest-free loan period, after which interest is charged at a 32.6% representative APR.

Currently, Amazon Business U.K. doesn’t provide the longer-term financing features offered by Amazon Business U.S. such as corporate revolving credit line at 12.99% APR. Amazon U.S. also offers the Amazon Business Line of Credit from Synchrony Bank, with 55-day payment terms. Amazon U.K. declined to comment on its plans for longer-term business financing.

“Amazon Business is focused on delivering a B2B procurement solution, realizing that SMEs want to save time and money by buying from one source, so they can focus on growing their business,” said Dave Brittain, director of Amazon Business U.K. “With the launch of the Amazon Business American Express cards, small businesses including sole proprietors and startups get an enhanced checkout experience on Amazon Business UK and Amazon.co.uk.”

Brittain said that Amazon expects both the options of cash back and deferred payments to be attractive to SMEs in the current economic climate. "At a time when so many businesses are carefully managing their cash flow, we feel the deferred payment option will be an important feature,” he said.

Rewards on the cards can be used to shop with points on Amazon U.K. or to cover the balance on cardmembers’ monthly statements.

“Amex and Amazon’s card launch is an intelligent move highlighting some of the broader shifts we’re seeing in the small business card space,” said Gilles Ubaghs, an Aite Group senior analyst. “Globally, spending on SME commercial cards took a major hit in 2020, likely to be down by around 30% by year-end in the U.S. and by a similar amount in the U.K. Some segments such as T&E cards have been hit particularly hard. As a result, issuers are looking for new ways to make up revenue, while SMEs are looking for payment solutions providing better data integration and functionality.”

This is especially the case in a post-lockdown work-from-home environment, where older incentives such as travel rewards have lost a lot of their luster, Ubaghs said.

“Benefits and incentives are still critical to driving card usage over alternatives, especially when the U.K.’s Faster Payments bank transfer system has a lot of rapid functionality,” he said. “So, the new cards are a good example of a wider shift to card rewards and incentives that tie in more directly to the actual cost of running a business. Their ability to delay payments is particularly attractive, as this adds a lot of functionality for small businesses in terms of improving their liquidity management during very complicated times.”

“B2B is key for us, globally and in the U.K.,” said Colin O’Flaherty, Amex’s general manager of U.K. global commercial services. “A lot of B2B spending still occurs via inefficient methods such as ACH and checks. The U.K. is a very digital economy and is ahead of the U.S. in adopting newer payment methods. But, when we talk to British small businesses, we find that many still use checks. There’s still a big opportunity for us to work closely with SME customers to make their life easier in the payment space through the digital products we offer.”

O’Flaherty said that, when an SME makes a purchase on Amazon, they are automatically offered an Amex-Amazon co-branded business card. If their application is accepted, they are granted instant credit on the card, which helps their cash flow in real time.

“We think the option of deferred payments will play well in the U.K., where, according to banking association UK Finance, a fifth of U.K. small businesses had less than one month of cash in May,” said O’Flaherty. “We saw a good response from U.S. businesses to the similar cards we launched with Amazon two years ago.”

O’Flaherty said he expects the new cards to be used by large and small businesses. “We see a significant volume of annual spending by SMEs on our business cards, including some fairly big-ticket items,” he said.

As well as helping with cash flow, the new cards provide data on Amazon purchases to support SMEs’ transaction reconciliation process. This includes information such as invoice numbers, quantities, unit costs, shipping, value-added tax (VAT) and shipping details.

“Spending transparency and control is ever more important for businesses of all sizes,” said O’Flaherty. “A lot of businesses don’t have the tools at their disposal to see spending information quickly.”

Designed for Amazon Business Prime members, the Amazon Business Prime American Express Card offers 2% Amazon Rewards points on the first £120,000 in purchases at Amazon.co.uk, Amazon Business UK and Whole Foods Market UK each calendar year, or 90-day payment terms on these purchases.

The Amazon Business American Express Card offers 1.5% Amazon Rewards points on the first £120,000 in purchases at Amazon.co.uk, Amazon Business UK and Whole Foods Market UK each year, or 60-day payment terms on these purchases. Both cards offer 0.5% Amazon Rewards points on all other purchases, plus up to 99 supplementary cards for free.

Although Amex will include Pay Over Time revolving credit in its U.S. Green, Gold and Platinum Business Cards from the November billing cycle, Amex U.K. doesn’t currently offer Pay Over Time.

“While we can’t comment on future plans, it’s our intention to expand our range of card, financing and payment solutions across key countries to help SMEs pay for and finance the products and services they need for their businesses,” Da Silva said.

Correction
An earlier version of this story misstated the rate at which the Amex SME business had been growing pre-COVID.
October 06, 2020 12:13 PM EDT
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B-to-B payments Credit cards Retailers Amazon American Express U.K.
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