Amazon and Wells Fargo Shake Hands on Student Loans. Who is Surprised?
Some might have seen this coming eventually but Amazon is dipping its feet into student loans with Wells Fargo.
Through Amazon Prime Student, the online retailer will offer discounts on student loans when they apply for a Wells Fargo private student loan. The bank will shave half a percentage point off the interest rate for referrals from Amazon.
“We are focused on innovation and meeting our customers where they are – and increasingly that is in the digital space,” said John Rasmussen, Wells Fargo’s head of Personal Lending Group.
Wells Fargo is banking on this multiyear agreement to reach millions of potential borrowers. Five of the largest private student lenders, including Sallie Mae, Wells Fargo and Discover Financial Services Inc., distributed $6.46 billion in loans between July 2015 and March 2016, up 7% from the same period a year earlier, the Wall Street Journal reported.
While the federal government is still the primary student loan lender, banks and other private lenders are steadily increasing their market share. Earlier this week, New York-based private student loan lender CommonBond raised $30 million in equity and $300 million in debt and acquired a startup that opens the gate to employers. San Francisco-based lender SoFi also has similar partnerships with employers for their student loan refinancing product.
“Over 99.99 percent of the student loan market is driven by the federal government and private banks and the tiny piece of the market is made up by CommonBond and SoFi,” said David Klein, CEO of CommonBond to deBanked earlier. “And as big as that sounds, relative to the largesse of the market, we don’t even make up a percent of that.” The ilk of alternative lenders are tilling away at establishing such partnerships to widen their net but will the banks let them?Last modified: July 22, 2016
Srividya's work has appeared in publications like Money magazine, Advertising Age, FirstPost and The Economic Times. She has also dabbled in business intelligence solutions, and holds a Masters degree in Business and Economic Reporting from NYU.