The second largest investment bank in the world has played a five-year consumer fintech strategy boldly but macro conditions alongside competition from startups are prompting its retreat.
Goldman Sachs’ foray into consumer fintech looks set to be spiked. At least in the intrepid manner it has been playing the digital finance world since the launch of its 'Marcus' brand six years ago.
CEO of Goldman David Solomon is clearly on a mission to re-focus the 150-year-old bank’s strategy as the global economy continues to sour.
Marcus costs Goldman about $1.2bn per year and while it has bolstered the bank's coffers with more than $100bn of 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 has made a number of comments to reporters this week, in which it reported its third-quarter earnings, that it would take a step back from the mass consumer market.
“The concept of really being broad with a consumer footprint is not really playing to our strengths,” the Financial Times reported Solomon as telling CNBC.
“But when you look at our wealth platform . . . the ability to add banking services to that and align it with that actually plays to our strength,” he added.
In its history, Goldman has mainly focused on typical investment banking services as well as servicing ultra-wealthy clients with asset management and wealth management.
At some point in the early years of the fintech boom - around 2015-6 - Goldman decided to take on the booming online lenders in the US such as Lending Club and On Deck by launching its own platform which became Marcus.
“The traditional means by which financial services are delivered to consumers and small businesses is being fundamentally reshaped by advances in technology, maturity of digital channels, use of data and analytics, and a focus on customer experience,” said Goldman’s then CEO Lloyd Blankfein back in 2016.
Insiders, AltFi reported at the time, had originally dubbed the project ‘Mosaic’ although when the lending platform went live the name was revealed to be instead a nod to the bank's 19th-century founder and named Marcus.
Instead of the financial and business elite, Goldman targeted the mass affluent. Main Street, not Wall Street. 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 develop into a full-scale consumer bank complete with loans, current/checking accounts as well as a host of wealth and savings services.
While its focus in the US was more growth-orientated, a rollout in the UK and further afield seemed to be moving at a much slower pace.
In the fintech world, fortunes can be made quickly and can change for the good or bad even more quickly.
While it may be tempting to see Goldman's pullback from Marcus as a classic incumbent failure against nimbler competition the reality is more complex. Goldman has done much to refresh its brand with a bold fintech plan and kept close to digital disruption in finance. In now concentrating on its strengths, and where it makes the most money, it shows at least some of the reasons for its 150 years of longevity.
Let's see how many fintechs are around in c.2172.