Goldman Sachs is betting that its image as a temple of high finance will have broad appeal among the U.S. middle class.
The firm's soon-to-be-launched consumer lending business will be called "Marcus by Goldman Sachs," a top executive at the company said Tuesday.
It has been previously reported that the company's long-awaited online-lending platform will take the first name of Marcus Goldman, who founded the Wall Street titan in 1869. But the company made clear Tuesday that the Goldman Sachs brand is also a big part of its strategy with mainstream consumers.
Stephen Scherr, the firm's chief strategy officer, said Tuesday that Goldman Sachs put considerable work into deciding how to brand its new online-loan product before eventually deciding to use the Goldman name. His comments came during an interview at American Banker's Marketplace Lending + Investing conference in New York.
"What we have found," Scherr said, "is that there's an element of 'Goldman Sachs,' as there is [with] any other sort of well-known institutional brand, in terms of the confidence that people have placing confidential information with that organization."
Scherr pointed to a specific reason to think that the Goldman name has value in the retail banking arena. He noted that since April, when Goldman Sachs completed its purchase of an online-deposit platform from General Electric, deposits have been growing at a faster rate than they were previously, even though Goldman changed nothing but the platform's branding.
The New York-based firm has not revealed when exactly it plans to launch Marcus by Goldman Sachs but says the move is imminent. On Tuesday, Scherr was tight-lipped about certain details, but he did reveal some new information about the product's design and Goldman's strategy in online consumer lending.
Goldman's loans will be customizable.
Scherr said that Goldman will allow borrowers to make a host of decisions about their loans, including the length of the loan term, the frequency of the payment, and when payments will be due. He suggested that this element of control will provide the company a leg up in the market for unsecured personal loans.
"Are you offering a product which is a take it or leave it?" he asked, referring to the offerings of some competitors. "Or are you — and we believe we are — in a position to offer a very flexible product, which is one that can be designed by the consumer?"
Goldman believes it has competitive advantages over both the big credit card issuers and the upstart online lenders.
He said that big banks have "an extraordinary business" in credit cards, but they are unlikely to disintermediate that lucrative revenue stream anytime soon. On the other hand, fintech startups do not have the advantages that come with a bank charter. "And the challenge that they would have is one of funding, which is not a challenge that we find ourselves in," Scherr said.
Goldman Sachs decided to build its own online-lending platform, rather than buying one or partnering with an existing online lender, largely because it is focused on controlling risks.
"For us, it made sense to build this. It's probably taken a little more time, but I think what we have is a digital platform that will resonate well with the target customer base, and equally conform to what we want in terms of our own risk management and what we think the regulators are looking for," Scherr said.
Goldman's online-lending platform was built largely by a team of new employees with deep experience in consumer credit, led by Harit Talwar, a former executive at Discover Financial Services.
Goldman's regulators — the Federal Reserve Board, the New York State Department of Financial Services and the Consumer Financial Protection Bureau — have all taken an interest in the firm's foray into consumer lending.
"We've taken counsel and input from all of them, but none of them … presume to hand you the instruction booklet as to how this is all going to get done," Scherr said.
Cross-selling will not be Goldman's mantra in retail banking.
Scherr said that the firm is not assuming that its online depositors will be interested in getting a personal loan. "And so there's no intention to sort of cross-market, if you will, between the two populations. I think they'll each be distinct in the way in which they go," he said.
