Will Kabbage Deal Help Improve Amex’s Image with SMBs?

We have covered in some detail the journey fintech start-up Kabbage has been on over the last couple of years. Most recently we wrote about the acquisition of Kabbage by American Express where we suggested that Kabbage’s shareholders probably didn’t fare very well given the massive raise the company had done over time and the relatively low acquisition price. 

That being said, we did find this piece in Business Insider Intelligence revealing in a couple of ways. The foundation of the piece is an interview with co-founder Kathryn Petralia.

Tech-Driven Efficiency Puts Banks to Shame

There were a lot of interesting nuggets in the article, including:

  1. Kabbage is the second-largest PPP (Paycheck Protection Program) processor. Kabbage achieved this by helping SMBs with a remarkably fast median approval time of four hours versus a 15-day average from banks. 
  2. Kabbage’s average loan size was $27,500 versus the overall PPP average of just above $100,000. This speaks to the breadth of Kabbage’s lending portfolio, both in terms of geography and business size. 
  3. More than 98% of Kabbage’s PPP customers were new to Kabbage.
  4. Kabbage made some $7 billion in loans to some 300,000 Kabbage claims and saved more than 900,000 jobs. 
  5. And according to Petralia, Kabbage’s reliance on technology enables it to employ one person for every 790 employees at major U.S. banks.
  6. Kabbage research shows that 91% of small businesses spend upwards of 20 hours a week managing their cash flow. That is nearly 50% of a standard workweek, but probably just a quarter of what a typical small business owner puts in every week.

In the interview, Petralia also pointed to a number of Kabbage solutions that are available to small businesses. These include an “Insights” solution that helps predict cash flow, support contactless payments, and a “Checking” solution that reduces traditional fees for the smallest of businesses.

Amex Needs More Than Small Business Saturday

For years we’ve watched American Express bob and weave trying to build more relationships with small businesses. While they have rolled some really good marketing initiatives like Small Business Saturday, it seems like they have never really come to terms with the raw fact that its transaction fees are consistently higher than most other institutions.

Maybe, just maybe the Kabbage acquisition will help change minds inside of American Express. It might also change the culture of engaging with small businesses where they feel things the most — in their wallets. 

Smart Hire?

One final note. Yesterday Amex hired former Wells Fargo senior executive Colleen Taylor to lead the U.S. merchant services group. This is the group that signs up local and small businesses to accept the credit card at their stores.

While Ms. Taylor may be a tremendous executive, we wonder if her association with Wells Fargo will haunt her tenure at Amex.

These days, Wells Fargo is known less for its stagecoach imagery and more for its strong-arm business practices. Will that history cast a pall over Amex’s overall efforts to broaden and deepen its commitment to helping America’s small businesses, as signaled by the Kabbage acquisition? Time will tell of course.  

More from Localogy

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Kabbage Offers New Solution to Improve SMB Cash Flow

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