Stephen Scherr, Goldman Sachs Global Head of the Financing Group, revealed more about Marcus on Tuesday, reported the WSJ, noting that “unsecured loans are an underserved part of the market where Goldman can carve out a niche between big bank rivals and small fintech upstarts. The giants—Wells Fargo, J.P. Morgan Chase & Co., and Bank of America Corp.—largely rely on credit cards, a big moneymaker they won’t want to cannibalize by offering a competing lending product.”
The WSJ also shared details about Marcus’ birth: “About two years ago, a group of executives was tasked with finding ways to turn Goldman’s new bank charter—a designation it got from the Federal Reserve to protect itself during the financial crisis—into a growth engine.”
Scherr added that while online lending startups need worry about securing funding for loans, or packaging their loans according to specifications that would make them easier to sell, according to the WSJ, this isn’t a similar concern for Goldman which gives the bank “more flexibility to underwrite more creatively, letting borrowers pick from a range of sizes, terms and payment schedules for their loans.”
Scherr explained that this flexibility “pivots off the ability to fund off our own balance sheet… [Marcus loans aren’t] tailored or conforming to a marketplace to syndicate or sell the exposure.”
The WSJ reported on Marcus’ backstory, indicating that Goldman considered buying an existent lending platform, but was deterred in part by high valuations and in favor of a “clean sheet of paper” better to meet the expectations of regulators and consumers, said Scherr. “For us, at the end of the day, it made sense to build [Marcus].”
Other key details covered by the WSJ:
- the bank would use a “conventional setup for customer acquisition” including a combination of mailings, partnerships and online channels to find people who want loans.
- On the deposit side, Scherr said the bank had added $3 billion to the $8 billion in conventional retail deposits it bought from General Electric Co.
- While the deposit-taking and lending pushes are happening at the same time—and both bring Goldman into the market for regular folks’ banking business—they were born of different rationale inside the firm.
- Goldman doesn’t plan to “cross-market” loans to its depositors, or savings accounts to its borrowers