Goldman goes retail: say hello to Marcus

Goldman Sachs isn’t exactly the first company that comes to mind when you think mass market banking. For most, in fact, it wouldn’t come to mind at all. Yet, that’s exactly where the company is making a significant move with its online banking platform, formerly GS Bank, now going by the name of Marcus, in homage to Marcus Goldman, founder of Goldman Sachs. During the financial crisis, the firm became a bank holding company as part of its effort not to go the way of other failing investment banks. Initially, that didn’t have much impact on its business; its main “retail” component remained the high-net worth. As revenues from traditional business lines, such as trading, have continued to decline, Goldman has sought out other diversified sources of income, entering into both deposits and lending.

Goldman is said to consider three criteria for assessing a new business direction:

•  Is there an unmet need?

•  Can Goldman identify a competitive advantage?

•  Can the company be successful without market dominance?

Yes, was the answer

The company concluded that the answer was “yes” for both the deposit and lending side, but within very defined categories. On the lending side, its efforts were de novo, offering loans for a variety of purposes, ranging from home improvements to debt consolidation. Lines of credit per load are relatively small, capping out a maximum of $40,000, limiting risk to any one defaulter. The borrower gets to indicate how much they wish to borrow, for how long and how much they wish to pay off per month, giving it a very customized feel. There are no origination or other fees, and borrowers can pay off the loan at any time without a penalty or fee. On the deposit side, in April 2016, Goldman Sachs Bank acquired GE Capital Bank’s online deposit platform, comprising approximately $16 billion in deposits, offering high-yield savings accounts and CDs online, competing with direct banks such as Synchrony, Ally, CIT, Barclays and others. Both the deposit and lending offerings were consolidated under the Marcus brand to reduce any confusion, create a more integrated brand and build awareness among consumers.

The future of banking?

While Goldman has not expressed any intention to go beyond this initial product offering, creating a single, separate direct brand for banking appears to indicate that an expanded set of products and services could be coming down the road, with a checking account being a logical extension. Certainly, Goldman has the wherewithal and the staying power to make an impact in the direct segment. And, Goldman has been aggressive in linking the Marcus brand to Goldman Sachs, which carries a certain cachet. Perhaps, someday, we will all be able to say we bank with Goldman Sachs.