Goldman Sachs’ Digital Bank Marcus Said to Delay Checking. Again.

It appears that Marcus by Goldman Sachs (NYSE:GS) is struggling with something so plebeian, like consumer checking. In a day when fewer and fewer people are using physical checks, opting for online payments and tap to pay with their iPhone, Marcus may delay its consumer checking product until next year, according to a report by Bloomberg. Goldman recently said it would launch it later this year.

The report states that the digital bank, anticipated to reap huge rewards of matching Goldman’s financial expertise with a consumer online bank, is not working out exactly as planned. To quote the story:

“Goldman leaders have been weighing whether to shelve the new account’s retail blitz until 2023, and instead open the platform in a more limited way, to private-wealth clients and some other existing customers, according to people with knowledge of the discussions. That would spare the firm from spending big on marketing in a year in which the online platform, known as Marcus, has seen losses accelerate. The company’s leaders have yet to make their decision.”

As the losses mount for the startup within a global investment bank, it seems that management is rethinking the Fintech equation. Perhaps instead of lowly checking accounts, more emphasis needs to be placed on revenue generators like Wealth Management.

This is not the first time there have been rumblings about its struggles at Marcus. The turnover of top executives at the digital bank has compelled the bank to adjust its leadership which can be disruptive. And competition is fierce within the neobank (non-chartered Fintechs offering bank-like services) and digital banking sector. And it will get even more intense over time as pure plays are more focused on the digital bank operations without the distractions of a global investment bank.

Things aren’t all bad at Goldman. Its Q2 earnings report was solid, topping expectations. During the earnings call, Goldman CEO David Solomon said the consumer side of the business has been built from scratch and they have a long term strategy in place to build out the consumer digital banking service, adding that a lot o the build cost is “in the ground.”

“We expect this business to build accretive returns over time,” stated Solomon.

Net revenues in Goldman’s Consumer banking division were reported at $608 million, or 67% higher than the second quarter of 2021. This was largely due to higher credit card balances and higher deposit balances. They also said they have not seen a significant deterioration in consumer credit.

But the economy is still dealing with a recession and rising interest rates, which means things could get worse before they get better.

A sinking economy and an expensive early-stage business may create enough friction for Goldman to slow things down or pursue an altered path. One thing is or certain, Goldman has never received credit for Marcus as displayed in its PE ratio of just seven times earnings. Perhaps it will take spinning it out to make it worthwhile?

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