Leaked documents show Amazon's seller lending business is booming. But the company's economists are worried about defaulters.

• Amazon economists expect its seller lending volume to roughly double this year.
• Amazon's lending business has rebounded in recent years after scaling back during COVID.

Amazon is expecting to roughly double its loans to sellers in 2023, though its underwriting process could get more stringent, Insider has learned.

Amazon's lending program is part of a broader business to business payments and lending team, known internally as ABPL. The group also offers other services, like invoice financing to sellers and co-branded credit cards.

The company's economists are forecasting that third-party sellers will owe it over $2 billion over the next year, according to internal document obtained by Insider. That's an over 80% increase from the first quarter of last year's $1.1 billion in outstanding loans. And it's more than double the balance Amazon reported at the end of 2021, when it reached $1.0 billion in total outstanding loans for the first time.

But Amazon plans to tighten its underwriting and credit management policies as it anticipates further macroeconomic headwinds into 2023, the document said. Of the $2 billion-plus outstanding loans projected for this year, Amazon expects a 1.34% loss rate.

"The increased uncertainty of business repayment ability" by sellers "necessitates higher inspection of our on-balance sheet credit/lending products," according to the document.

The potential growth in loans signals a continued rebound of Amazon's lending business. Amazon's invite-only lending program to sellers, which launched in 2011, significantly scaled back during COVID, reducing the total outstanding loan balance to under $400 million at the end of 2020, company filings show.

The lending activity reaccelerated over the past two years, however, and closed the most recent quarter with $1.4 billion on the balance sheet. The documents also said Amazon's lending arm served over 1 million customers and sellers in 2022, reaching a total transaction volume of $50 billion that generated more than $1 billion in "economic profit," the document said. It's unclear how it defines economic profit.

The loan increase also indicates Amazon's cautiously optimistic economic outlook. In the same internal report, Amazon's economists forecast a soft landing for the US economy and little chance of a recession in 2023, as Insider previously reported. The report, from November, was part of a 12-page internal macroeconomic analysis produced by Amazon's science, economics, and finance teams. It covers a number of topics, including Amazon's view of the broader economy and inflationary pressures on its pricing strategy.

In an email to Insider, Amazon's spokesperson declined to comment on the specifics of the lending program. Instead, the spokesperson said the company's leadership team disagreed with its own economists's forecasts.

"The document in question does not reflect the company's position on the economy and where it's headed. Our CFO Brian Olsavsky shared our thinking on our most recent earnings call, and our CEO shared his thoughts in a Dec. 6 interview at the Dealbook event. This document simply reflects the thoughts of some of our economists," the spokesperson said.

Third-party sellers account for a huge part of Amazon's online marketplace. More than half of the products sold on Amazon now come from third-party sellers, and Amazon generated over $28 billion, up 18% from last year, in fees from those sellers in its most recent quarter alone.

The document pointed to 3 macroeconomic headwinds for 2023. They include the potential for continued interest rate hikes in the US and the UK; uncertainty in "future business confidence in spending"; and the increased risk of loan defaults going forward.

The ABPL team is focused on balancing its loans with a "more granular" risk management process this year. The company is monitoring for early signs of credit risk and plans to reduce loan originations by 2 to 3% for certain offerings. In the UK, for example, Amazon is tightening its underwriting criteria for loans because of a "higher than expected loss rates," the document said. It also anticipates the annual interest percentage rates for its services to continue changing this year as the federal funds rate environment remains unpredictable.

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Contact reporter Eugene Kim via the encrypted messaging apps Signal or Telegram (+1-650-942-3061) or email (ekim@insider.com).