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Why American Express Acquired Small Business Specialist Kabbage

American Express is to acquire cash flow management solutions provider Kabbage to help the global payments firm increase its offering to small businesses in the US

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Why American Express Acquired Small Business Specialist Kabbage

The deal, announced 18 August, sees the global giant supplement its armory with a broad range of payment, cash flow and financial management tools. It is the latest in the stream of fintech purchases by global finance institutions to rapidly extend their traditional reach.

“For several years, American Express has been expanding beyond our industry-leading commercial card products to offer our business customers a growing set of payment and working capital solutions,” said Anna Marrs the company’s president of global commercial services. The news of the deal coincides with American Express’s Shop Small initiative, which encourages cardholders to favor participating local retailers by earning cash back on purchases. The initiative was launched in 2010 to help smaller businesses through the global recession that followed the 2008-9 financial crisis.

During the current global recession, prompted by the Covid-19 pandemic, Kabbage has also been actively assisting its small business base. It has launched a range of tools and solutions its customers can use to persuade their own clients back to spending with them.

The acquisition, the finance details of which were not disclosed, will see American Express acquire both Kabbage’s Atlanta-based team and its full suite of financial technology products, data platform and IP built for small businesses.

These include access to flexible lines of credit, online bill payment, cash flow visualization tools, e-gift certificates, and the ability to centralize funds through the company’s recently launched business checking account.

Kabbage’s single online platform uses real-time data processing to help small businesses better understand, forecast and manage their cash flow. CEO and co-founder, Rob Frohwein said the aim was to offer small businesses the same operational technology usually only available to larger companies.

“At Kabbage, we have always made the success of America’s small businesses our primary objective,” said Frohwein. “By joining American Express, we can help more small businesses succeed with a fully digital suite of financial products to help them run and grow their companies.”

Kabbage was cited as a 2020 CNBC Disruptor 50 and is funded by investors including the SoftBank Vision Fund, BlueRun Ventures, Thomvest Ventures, and others.

The acquisition is expected to close later this year, subject to customary closing conditions. Kabbage’s pre-existing loan portfolio is not included in the purchase agreement.

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