- For most of its nearly 150-year history, Goldman Sachs has catered to the ultra wealthy.
- But the bank has been rapidly expanding services for Main Street consumers in the past two years under its Marcus brand.
- On Wednesday, the bank was reported to be in talks to acquire Clarity Money, a startup that uses artificial intelligence to help you cancel unwanted subscriptions, stay under budget, and keep on top of your investments.
- It's also reportedly in talks to provide financing for Apple iPhones, one of the most ubiquitous consumer tech products on the planet.
- These are the latest signs that Goldman Sachs is building the ultimate financial destination for retail consumers.
For much of its existence, Goldman Sachs has catered to the ultra wealthy.
Individuals looking to saddle up with the prestigious bank needed to fork over a minimum investment of $10 million for wealth management services. The typical client had more than $50 million in investable assets.
The company, which had long managed employees' investments below that amount, caused a small brouhaha several years back when it decided to offload employee investment accounts with less than $1 million to Fidelity.
So what's a bank like this doing trying to acquire a fintech startup that's selling point is helping customers more seamlessly and strategically lower cable bills, cancel magazine subscriptions, and wind-down unused gym memberships?
These are concerns traditionally relegated to the masses. Costs that amount to rounding errors in the monthly budgets of Goldman's jetsetting, Hamptons-dwelling multimillionaires.
Nonetheless, Goldman is in talks to acquire Clarity Money, according to Bloomberg, a company that uses artificial intelligence to help you cancel unwanted subscriptions, stay under budget, and keep on top of your investments.
It was also reported Wednesday that Goldman Sachs may start providing financing for Apple's iPhones, according to The Wall Street Journal, one of the most recognizable and ubiquitous consumer tech products on the planet.
On its face, these moves seem positively un-Goldman-like. But they fit in with the investment bank's burgeoning plans to provide a one-stop-shop, ultimate financial destination for the masses.
It's a radical departure, to be sure, but imagine an online platform where you not only monitor your savings accounts and investments, but where you can also take out loans or pay them off. You can see all your bills and expenses, and with one click you can finally cut the cord with Comcast.
Instead of having log-ins across the Internet for every sensitive account attached to your wallet, you have a single portal to handle everything. One log-in and one password to rule them all.
It would be a boon for savvy, digital-minded consumers - and a potentially massive new source of revenue for the investment bank.
The vision is still nascent, but Goldman Sachs is poised to take a serious swipe at retail banking without ever building a physical bank branch - without the tellers and brick-and-mortar branches that suck up costs for the Bank of Americas, Citigroups, JPMorgan Chases of the world.
Goldman's recent foray into retail banking is quickly expanding
The firm's foray into retail banking is a couple years underway, but quickly ramping up.
It started in earnest with the acquisition, amid investor pressure for low rates of return and a demand for new revenue streams, of $16 billion in online deposits from over 140,000 retail customers from GE Capital Bank in early 2016.
Weeks later GS Bank was launched, a decidedly consumer-friendly online savings platform. Entering the Goldman Sachs fold required no minimum deposit and, thanks to the absence of physical bank infrastructure, interest rates far exceeded those of traditional US retail bank giants.
Later in 2016 Goldman Sachs jumped headlong into another retail business: online personal loans, a space that had been disrupted by a cavalcade of buzzy fintech startups like Lending Club, SoFi, and Prosper.
Dubbed Marcus, in an homage to company founder Marcus Goldman, the platform offered up to $40,000 in multi-year loans to borrowers with good FICO scores, with no fees and competitive annual interest rates.
Backed by the might and resources of the nearly 150-year-old investment bank, Marcus quickly began to eclipse the smaller startups, reaching $1 billion in loan originations in just eight months - faster than any of its competitors.
It has continued to soar. The bank estimated $2 billion in loans by the end of 2017; it's now up to $2.4 billion.
The average loan size is $15,000 and the average APR is 12%, well below the typical credit card interest rate offered by retail bank competitors.
If Marcus can start grabbing a slice of the credit card business, it could become incredibly lucrative and disruptive.
The bank has previously said that it sees a $1 billion revenue opportunity in the Marcus loan and deposit platform.
CFO Marty Chavez, in the fourth-quarter earnings call, said Marcus was a "huge and important and exciting area of growth for us and one of the pillars of our growth plan."
A credible threat as the retail bank of the future
GS Bank has since been rolled into the Marcus brand, which appears to be epicenter of Goldman's budding financial network for the general public.
While the savings deposits and online lending services are the most high-profile offerings right now, Goldman Sachs is also reportedly working on a robo-advisor service - another product geared toward the general public that has soared in popularity with the rise of fintech startups Wealthfront and Betterment.
These offerings and the ones that might be in the pipeline - the capabilities of Clarity Money and lending services for big-ticket consumer products like iPhones - could all be held on a Marcus mobile app for the masses that Goldman Sachs has been building.
Throw it all together, and Goldman has on its hands a financial destination for Main Street.
The bank doesn't offer the traditional checking and cash withdrawal services, a glaring omission by retail banking standards, but with a large chunk of society moving in a cashless direction and adopting peer-to-peer payment methods like Venmo and Zelle, that may not prove to be a hang-up for many customers.
It's very early yet, but the combination of services, and the fact that consumers are increasingly migrating toward digital for financial needs, means that Goldman Sachs - the tony investment bank for multimillionaires - could poise a credible threat as the retail bank of the future.
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