Katie Dayton (3:02)

How does Block say its model differs from a traditional credit score?

Imani Moise (3:06)

Since it's built internally, it could only use internal data. Whereas a traditional credit score is based on things that appear in your credit report, which will be things like how much you carry on your credit cards or whether or not you make your mortgage payments on time. The Cash App score is based on things like how much money do you have in your cash App account, do you carry a balance and what is your track record with paying back cash app loans or block loans specifically. So it's a much narrower score, but it is unique in that it could also integrate deposit level data, AKA how much you actually have in the bank versus just your borrowing history.

Katie Dayton (3:43)

And like you said before, the company doesn't share its consumer data with traditional credit reporting systems. But banks and credit unions have said it's getting harder to determine consumers risk as more lending is happening outside of that traditional system. So what are some of the implications of all of that for consumers?

Imani Moise (4:01)

What banks have told me is that they are really skeptical of these small dollar loans because in a lot of traditional underwriters or loan officers view if you need a small dollar loan like say $100, that can be a potential red flag, that maybe you're not handling your personal household balance sheet properly, that you're really squeezed for that little amount of money. But for right now, it doesn't mean much for consumers because it's the status quo. So that means that you can continue to use these types of services and not have to worry about them appearing on their credit report. But what you should look out for is when they start appearing because banks look at them sideways and so will.

Katie Dayton (4:38)

We might have a system eventually. Looking forward to the future if more of this happens where people have to manage multiple credit scores potentially because the.

Imani Moise (4:49)

Fastest growing kinds of consumer credit right now are happening outside of the traditional credit scoring system. So that is things like buy now, pay later or these small dollar loans, earned wage access, things like that. But increasingly these types of loans are catering to an audience that aren't well served by the traditional credit reporting system anyway. They specialize in people with so called thin credit files, which means that maybe you haven't taken out a loan, like maybe you are just a young person or an immigrant that doesn't have an established credit history in this country. The Cash apps and Buy now pay laters of the world. They tend to cater to a lower income younger than our credit file consumer.

Patrick Coffey (5:29)

That was WSJ personal economics reporter Imani Moise speaking to our colleague Katie Dayton. Have you used a non traditional lender like block before? If you're a listener on Spotify, be sure to let us know in this episode's poll or leave us a comment. Coming up, we're breaking down Amazon's plans to rev up sales. The latest allowing you to add cars to your cart. That's after the break.

Outsystems Announcer (6:02)

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Patrick Coffey (6:36)

Amazon is betting big on big purchases. The e commerce giant has begun to work with more companies that sell high end merchandise like $25,000 pre loved watches and even automobiles. WSJ reporter Sean McClain writes that the question is no longer whether these companies will sell through Amazon, but ra rather who's buying. The answer so far is less than 1% of Amazon shoppers, but that still means millions of Americans are opting to make $10,000 plus purchases in the same place where they buy their USB cables. Sean, I think it's safe to say most shoppers don't hit Amazon to browse chanel handbags and SUVs. Why do these brands with these big ticket items sign on as sellers? Why are they convinced that people will eventually make these kinds of big purchases online?

Sean McClain (7:29)

A lot has changed in the past couple years to make brands more willing to sell on Amazon. In particular a lot of them for as long as Amazon's been trying to get them on the platform, which is the better part of a decade, thought the same thing most people did is that we all shop on Amazon for our everyday essentials, our toothpaste, our toilet paper. Not for Hyundai cars and not for Rolex watches and not for Chanel handbags. However, a couple things happened during the pandemic when we were all locked inside. We didn't go to stores, we all shopped online and folks have been more comfortable buying online. And while we are all returning outside and going to stores, a lot of those online shopping habits have stuck around. And a lot of brands who worried about, you know, the cannibalistic potential nature of selling goods online or selling goods on third party platforms have learned that there is a way in which those sales can be additive, that there are new customers out there to be found.

Patrick Coffey (8:25)

And to your point, E commerce or online shopping went from 9% of retail sales in 2018 to about 15.5% this year. So the growth is there. At the same time, there's been a lot of chatter and data about a return to brick and mortar shopping in the post pandemic period. A lot of companies say now that they over indexed on E commerce and they've stepped back a bit as more people shop in person. So why is Amazon doing this now?

Sean McClain (8:52)

Amazon's been trying to do it for a while. What they're finding now is an increasing number of companies willing to do business with them and look like 15%. That's still 85% of the retail market. That's still in store. So yeah, everything is not going online. That much is clear. And certainly for something like a car, people still want to touch and feel it in person. If you're going to spend $40,000 plus on a car, you're not just going to press buy without thinking about it. It's pretty clear that this is not a meat and potatoes section of Amazon's business. This is the outer fringes of the everything store that are getting filled out. But that said, look, take Hyundai for example. Their own study shows that nine out of 10 people browsing, you know, the Amazon Auto section of the website, which is dominated by a lot of Hyundai cars right now are new to the brand and good. Half of them are buying a Hyundai for the first time. And there's even some early signals that people are more likely to buy a Hyundai because of the Amazon tie up. That there is something about the halo of Amazon's marketplace as a place of easy, reliable returns and easy delivery that makes people more likely to buy a brand they're unfamiliar with.

Patrick Coffey (10:01)

You can't exactly take a new car to the UPS store to return it. So how will that work when you're.

Sean McClain (10:07)

Talking specifically about cars? By virtue of the laws in the US you still have to purchase a car from a physical dealership, even through Amazon. So you go to pick up the car there, you fill out all your financial paperwork, but you're still going to see the car and drive it off the lot from there.

Patrick Coffey (10:23)

Amazon's real advantage comes from its massive scale and the fact that customers can theoretically use it to buy anything. Can any other retailers truly compete? We have Walmart, of course. But do we think Amazon's domination of say like the online used car market is inevitable?

Sean McClain (10:41)

That's the, I don't know at this point. The trillion dollar valuation question. Look, Amazon has a strong foothold in the e commerce market. Obviously the rise of AI has companies like Amazon and Walmart concerned about whether or not there can be a behemoth storefront, if that's the sort of thing that survives in a post agentic AI world. That said, look, there's a strong competition between particularly Amazon and Walmart right now to offer everything to everybody with fast and easy delivery. And there's a reason for that. Like clearly prime has been an amazing engine for a place like Walmart to get us to shop there more regularly. The same way we buy a Costco membership, because the access to the goods there makes sense. And so building that loyalty and then offering everything to everybody, like clearly there's a competition there and clearly Amazon feels the heat from the growth of like the Walmart plus program. Walmart's competition for membership and easy delivery. So clearly the companies think there's a fight going on and increasingly it's at the outer edges of the marketplaces. It's not how much toilet paper and cereal can you pack in there, it's can you deliver bananas in a couple hours and can you offer somebody high end luxury goods? Or now at Amazon cars.

Patrick Coffey (12:08)

That was WSJ reporter Sean McClain. And that's it for Tech News Briefing. If you're a listener on Spotify, make sure to take this episode's poll or leave us a comment. Today's show was produced by Julie Chang. I'm your host Patrick Coffey. Our supervising producer is Katie Ferguson. We'll be back later this morning with TNB Tech Minute. Thanks for listening.

Outsystems Announcer (12:36)

So many organizations choose Outsystems because it's an outstanding way to quickly deploy apps and AI agents and deliver results. A top US bank deployed apps for their customers to easily open new accounts on any device. We helped a leading global insurer quickly deliver a portal and app for their employees. While a global brewer developed an app to automate tasks to clear Bottlenecks. OutSystems, the 1 AI powered low code platform.