How Amazon, Google, and Facebook Changed Business Lending Forever
The ATM was invented in the 1960s. It took 25 years before most Americans actually used one. That’s how slow banking technology moved. Meanwhile, Amazon went from selling books online to becoming the most trusted checkout system on the internet in a fraction of that time.
Chapter 4 of Charles H. Green’s The Banker’s Guide to New Small Business Finance explains how Amazon, Google, and Facebook didn’t just change shopping and social media. They changed the entire foundation that lending could be built on. And banks mostly missed it.
The Long Tail Changed Everything
Chris Anderson wrote a book called The Long Tail that nailed something important about the digital economy. Here’s the core idea.
Walmart could stock about 4,500 music CDs in a store. Physical shelf space is expensive. So they only carried the hits. Amazon listed 800,000. No shelf space problem.
In a traditional record store, 80% of sales came from 20% of titles. The classic 80/20 rule. But when a company called Ecast put 10,000 albums on a digital jukebox, something wild happened. 98% of those albums got played at least once per quarter. Almost everything found an audience when you removed the physical limits.
Digital removes scarcity. That was the big lesson. And it applies to way more than music.
Amazon’s Real Innovation Was Trust
Forget the books and the warehouses for a second. Amazon’s biggest contribution was trust.
Before Amazon, buying something online from a small retailer meant typing your credit card number into some random website and hoping for the best. People were terrified of that. Reasonably so.
Amazon fixed it with one familiar checkout. You stored your payment info once. Then you could buy from thousands of different sellers through that same trusted interface. One click. Done. You didn’t need to trust the seller. You trusted Amazon.
That was massive. It unlocked online commerce for millions of small merchants who could never have built that trust on their own.
And then eBay came along and matched Walmart’s total sales volume. Except eBay did it with roughly $5 million in revenue per employee. That’s about 30 times what Walmart generated per employee. PayPal rode that same wave and made online payments feel normal.
Google Reinvented How Businesses Find Customers
By 2012, Google was processing 1.8 trillion searches per year. That’s 5.1 billion searches per day. Think about that number for a second.
Google took advertising and flipped it completely. Old advertising was a spray-and-pray model. You bought a billboard or a TV spot and hoped the right people saw it. Google made advertising consumer-driven and keyword-targeted. People told Google exactly what they wanted by typing it into a search box. Then Google showed them ads that matched.
The result was about $50 billion in annual revenue. 95% of it came from ads. Google built one of the most valuable companies in history by connecting people who wanted things with businesses that sold those things. No guessing needed.
Facebook Built a Data Mountain
Facebook hit 1 billion users. And here’s the uncomfortable truth that Green points out. On Facebook, people aren’t the clients. People are the product.
Facebook collected an absurd amount of data. Nicknames. Birthdays. Political leanings. Relationship status. Aspirations. What you liked. What your friends liked. What you clicked on at 2 AM when you couldn’t sleep. They even developed face recognition technology.
All of that data can be monetized. Green brings up the 2012 Obama presidential campaign as a case study. The campaign used micro-targeting to reach specific voter segments with tailored messages. It worked incredibly well. That same approach could be applied to financial products.
The data was there. The tools were there. The question was whether banks would use any of it.
So What Does This Mean for Lending?
This is where Green gets frustrated. And honestly, it’s easy to see why.
While Amazon, Google, and Facebook were building the digital future, banks were still handing out paper loan applications. Literally paper. In person. At a branch.
A company called nCino built a modern lending platform on top of Salesforce. It automated the loan process, made it digital, and brought it into the current century. How many banks adopted it? About 40. Out of thousands of banks in the United States. Forty.
Green saw three specific lessons that banks should have learned from tech companies.
The long tail applies to lending. Banks mostly compete on price. Who has the lower interest rate. That’s it. But the long tail says you should offer more choices, not just cheaper versions of the same thing. More loan structures. More product types. More flexibility. Serve the borrowers that don’t fit neatly into your standard boxes.
Google Ads can find borrowers. Instead of waiting for people to walk into a branch, banks could target potential borrowers through keyword advertising. Someone searching “small business loan” is literally telling you they need what you sell. That’s a warm lead handed to you on a silver platter.
Checking account data is an underwriting goldmine. Banks sit on mountains of transaction data from their own customers’ checking accounts. Cash flow patterns. Revenue trends. Seasonal cycles. Innovative funders were already using this kind of data to make lending decisions. Banks had it and weren’t using it.
The Gap Between Knowing and Doing
The tech revolution didn’t just create new consumer experiences. It created new infrastructure that lending could run on. Digital trust. Massive data collection. Targeted customer acquisition. Faster, cheaper ways to evaluate risk.
All of these pieces were available. The innovative funders that Green writes about in later chapters grabbed them. Banks, for the most part, watched from the sidelines.
The ATM took 25 years. Banks were still moving at that speed while the rest of the world had shifted into a completely different gear.
This post is part of a series on Charles H. Green’s The Banker’s Guide to New Small Business Finance, published by Wiley in 2014.
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