Marcus
Goldman Sachs introduced its newest line of service, a business that the company tried to avoid for many years. What is Marcus? And why did Goldman Sachs extend to a new market?
Marcus by Goldman Sachs
For many years, Goldman Sachs maintained its prestigious reputation by selectively serving wealthy clients, institution clients and even government on a multinational level. The investment bank has avoided extending its own business into the retail bank industry and has held true to its traditional businesses with big players on Wall Street.
Just this Friday, its newest product, Marcus, was introduced in the United State. This newest line of business was named in honour of Marcus Goldman — one of Goldman Sachs’ founders. Marcus is an online consumer-lending platform, which utilizes the newest technologies to bring about the best user experience for its general customers. One article from Business Insider noted, “Marcus has no origination, prepayment, or late fees…and it allows customers to choose their monthly payment date and customize payment size and loan tenure.….Customers can only take out one loan at a time“.
Harit Talwar — head of Marcus also discussed his vision about the product:
“We are building a startup inside Goldman to help Americans manage debt better”.
Threat and Opportunities
The company’s prime target customers has always been wealthy clients and institutional investors. However, after the 2008 financial crisis, the legal framework has undergone some major changes. Facing the tighter regulation climate, Goldman Sachs is seeking a new line of revenue in order to help the business maintain its competitive edge.
Coming onto the scene is the potent digital lending industry, which is now worth 1 trillion dollars. The industry is growing exponentially with new technologies. Bursting with opportunities while the economy is recovering, the industry did get a cautious notefrom US department of treasury: “As the underwriting technology, business models, and operational capabilities of online marketplace lenders remain untested through a credit downturn..”, that questioned the sustainability of the business model during a recession cycle.
With the introduction of Marcus, Goldman Sachs will face-off with two major fintech ventures: Avant Inc. and Lending Club Corp. Of course, the bank giant cannot join the race without knowing every secret in the industry, and will hold its competitive advantage as a prestigious bank. According to WSJ, Goldman Sachs planned to “..fund the loans from its own $130 billion deposit base, and has no plans to sell them on to others”. Unlike other online lenders, Goldman Sachs is under no obligation or financial pressure to sell off bad loans to other institutional investor, which allows them to offer more customizable terms and reduce significant upfront costs for user.
Marcus is also a strategic attempt by Goldman Sachs to recover its image, which was heavily shattered during the financial crisis in 2008. After having developed a reputation as greedy investment bankers, it is rumoured that Goldman Sachs is attempting to leverage an extended retail banking business to endear themselves with everyday Americans.
Conclusion
Aware of its external environment, Goldman Sachs has done a smart move by introducing Marcus to general customers. Will the joining of this banking giant to the lending industry produce a positive enough signal to eventually attract other investment banks, like Morgan Stanley, to compete? Fast forward to the next recession cycle — will the business model hold or will this is once again become a loan-epidemic that eventually destroys consumers and economies as a whole?
