Is Goldman’s fintech gamble over?
The second-largest investment bank in the world has boldly staked out a five-year consumer fintech strategy, but macro conditions along with competition from startups are causing the bank to pull back.
Image source: Marcus of Goldman Sachs
Goldman Sachs’ foray into consumer fintech looks to be nailing it. At least in the fearless way it has played the digital financial world since launching the “Marcus” brand six years ago.
Goldman CEO David Solomon is clearly on a mission to refocus the 150-year-old bank’s strategy as the global economy continues to sour.
Marcus costs Goldman about $1.2 billion a year, and while it has bolstered the bank’s coffers by more than $100 billion in consumer deposits in just over half a decade, there is a clear need in Solomon’s eyes for the bank to simplify its structure .
Solomon is moving the Marcus brand into its wealth unit, but made a series of comments to reporters this week, reporting third-quarter earnings, that it would be taking a step back from the mass consumer market.
“The concept of really being broad with a consumer footprint doesn’t play to our strengths,” it Financial Times reported that Solomon told CNBC.
“But when you look at our wealth platform . . . the ability to add banking to that and align that with that actually plays to our strength,” he added.
In its history, Goldman has mainly focused on typical investment banking services, as well as serving ultra-wealthy clients with asset management and wealth management.
At some point in the early years of the fintech boom, around 2015-6, it decided to take on the booming online lenders in the US such as Lending Club and On Deck by launching its own platform.
“The traditional ways in which financial services are delivered to consumers and small businesses are being fundamentally reshaped by advances in technology, the maturity of digital channels, the use of data and analytics, and a focus on customer experience,” Goldman’s then-CEO Lloyd Blankfein recalled. in 2016.
insiders, AltFi reported at the time, had originally named the project ‘Mosaic’, although when the lending platform went live the name was revealed to be a nod to its 19th-century founder named Marcus.
Instead of the financial and business elite, Goldman targeted the wealthy masses. A UK launch followed, although Marcus has only ever been a – highly competitive – savings account in the country.
In its six years, fintech watchers expected Marcus to evolve into a full-scale consumer bank complete with loans, checking/checking accounts, and a range of wealth and savings services.
While the focus in the US was more growth-oriented, a rollout in the UK and further afield appeared to be at a much slower pace.
In the world of fintech, fortunes can be made quickly and can change for good or bad even faster.
In the same time period Goldman has built Marcus, Revolut has grown to more than 20 million customers and a value – albeit one clocked up in the fintech frenzy of 2021 – of $33 billion.
While it may be tempting to view Goldman’s withdrawal from Marcus as a classic incumbent failure against nimble competition, the reality is more complex. Goldman has done much to refresh its brand with a bold fintech plan and stayed close to digital disruption in finance. As it now concentrates on its strengths, and where it makes the most money, it shows at least some of the reasons for its 150-year lifespan.
Let’s see how many fintechs there are in c.2172.
