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Home https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ Business https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ Goldman Sachs tries out banking for the masses. It was a struggle

Goldman Sachs tries out banking for the masses. It was a struggle

Two dozen

Goldman Sachs Group

Last year, the most profitable merchants were thrown out of their desks to make room for the swollen ranks of the company's Main Street loan arm.

Harit Thalwar, Allbirds Barefoot Boss Wearing Running Shoe, Ribbing by a Colleague, British by Name

Julian Salisbury

who prefers noble costumes and ties tied in double Windsor. "Thanks for making all the money we spend," he said, according to a man who heard the stock market.

With his major trading and trading businesses to the detriment of Goldman, he had to save bills and credit cards. Yet its transformation is a money pit, and it challenges its identity as a titan of high finances.

Harit Thalwar, Global Head of Marcus.


Amy Lombard for the Wall Street Journal

Goldman's new consumer bank, operating under the Marcus brand, has lost $ 1.3 billion since launching in 2016. It has spent a lot on buying startups and cloud storage, hiring hundreds of technicians and building a call center. centers in Utah and Texas.

Marcus started without a collection team to pursue delinquent borrowers, leading to early loan losses, according to people familiar with the matter. A credit card developed by Apple Inc. was a coup, but dear: Thousands of Goldman engineers were declined to complete it in time for its August debut, delaying other projects. Apple's ads for the card bore the phrase, "Designed by Apple, not the bank," a line that did not appear in a giant banner ad in the Goldman lobby this fall.

It's still early days, but Goldman has a lot of riding to get that right. The company has less revenue than in 2010. Its stock deals are lower than those of competitors with large consumer businesses, which are now in vogue with investors for their predictability and cheap retail deposits.

n. Talvar's joke with Mr. Salisbury captures the tension between Marcus and the deals whose money is burning. Even those who buy the CEO

David Solomon

The vision of a better-rounded Goldman is still shaking as their bonus checks shrink, as they probably will again this year. Dozens of long-term partners leave.

The voltage decreases in both directions. Employees of Silicon Valley-coded applications for MacBooks were rejected by Goldman's compliance department. Mr Salisbury's merchants, erected in the corner on the 26th floor of the bank's headquarters, complained that the bathroom had become too crowded.

A poll commissioned by Goldman this spring asked Marcus' clients if the brand was "down", promoting a company known for consulting billionaires and big companies.

Meanwhile, the type of loans Marcus offers are the first bad in a recession and are not backed by collateral, like home mortgages. Goldman stepped down from consumer lending this year after the losses were larger than expected, say people familiar with the matter.

CEOs say Marcus helped attract technology talent to the company and proved that Goldman can stand for new business. They also point to the success of Marcus' savings accounts, which have raised $ 50 billion in deposits, a new type of low-cost financing for the bank.

Omer Ismail, Goldman's US consumer business manager.


Amy Lombard for the Wall Street Journal

"We develop muscles that we didn't know we had," he said

Omer Ismail,

who manages Marcus in the US

A hat with the letters MVP hangs on the door of his office, a gift from the team. In the old Goldman, this would mean "the most valuable player." In the new Goldman, it means "minimally viable product", a technological talking point for a new offering that is ready to be marketed – if not small.

Profit engines

For most of its 150-year history, Goldman has dominated the high end of finance. He practically invented institutional mediation in the 1960s and modern initial public offering in the 1980s. Last year, it made corporate mergers worth $ 1.3 trillion.

These engines of profit are decomposed after the financial crisis. The new regulations have abstained from securities traders making less than half the revenue they made a decade ago. Goldman once invested billions of dollars of his own money in deals; this is also out of bounds.

Goldman's stocks remained at 2014 levels. Investors flocked instead of competitors as

JPMorgan Chase

& Co. &

Bank of America

, which earns steady profits from lending and money management.

Marcus, hatched at the 2014 leadership meeting in Hampons, the exclusive enclave in New York, aimed to grow the business again. With a blank canvas and a generous budget, executives believed they could start businesses from slow-moving rivals.

Marcus debuted two years later to make personal loans of several thousand dollars. He also offers online savings accounts that customers can open with as little as $ 1.

Naming the launch after the 19th-century immigrant bank founder gave him some distance from the Goldman brand, still tainted by his role in the crisis. Uncomfortable memories of the crisis informed other early decisions.

Executives worry that aggressive debt collection efforts will dredge a predatory image they've spent years trying to eliminate. So Marcus started without a specialist team to contact delinquent borrowers and try to recover their debt, people familiar with the matter said. When the first borrowers fell behind, Goldman lost more money than he should have, these people said.

The bank now has specialized collections staff that is specially trained, a spokesman said.

There are still greater losses than loans from competitors, Goldman write off $ 156 million in 2018 and another $ 155 million in the first six months of 2019, according to public records. During the year ending June 30, its losses amount to 5.5% of the credit book higher than that of a partner

Discover financial services

and above the 4 percent estimate previously given by Goldman CEOs.

Although the bank protects itself from heavy debt collection, in at least one case it exceeded

Last August, an Oklahoma woman filed for bankruptcy with a debt involving a $ 19,894 Marcus loan. As is usual with personal bankruptcies, the court barred Goldman from attempting to collect the debt.

Goldman contacted her nine times in the next two weeks seeking redemption, even after her lawyer sent another letter informing the bank that she had filed for bankruptcy.

Goldman settled the case.

"Not a bank"

Goldman has no brand that consumers know, no physical branches to take them out on the street. Therefore, there are other ways to get the word out by acquiring or partnering with well-known brands that can bring in customers and cash.

Has a Corporate Human Resources Officer at Marcus @ Work, which offers employee financial education. He is also in talks with AARP, a retirement organization that provides banking services to its 38 million members, said people familiar with the matter.

n. Talwar and Mr. Ismail at the Goldman Marcus headquarters.


Amy Lombard for the Wall Street Journal

Last year, it acquired Clarity Money, a personal finance app with more than 1 million users. This is one of the few suitors to watch


online lender that studies sales according to people familiar with the matter.

AARP and Goldman declined comment. GreenSky did not respond to a request for comment.

Finding clients through renowned partners spares Goldman the hassle of building network branches and sending millions of pieces of direct mail, as Marcus did in his early days.

But this casts Goldman as a salesman who, in most cases, needs these partners more than they need them.

This imbalance was demonstrated in his partnership with Apple to launch a credit card, Goldman's first. According to people familiar with the problem, the cost of killing other banks was the acceptance of a number of requests from Apple, which is known for design obsession and demanding in dealing with partners.

Goldman has agreed not to charge late fees or sell customer data, trading in two main ways credit card issuers make money.

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Apple wants control over the monthly statements sent to cardholders, demanding non-jargon disclosure and its own signature font. Goldman's lawyers warn that reporting industry standard language can cause regulatory problems, but the bank compromises. Apple got its font and Goldman trimmed the fine print.

Apple and Goldman declined comment.

Initially, Apple wanted to charge everyone the same interest, regardless of their credit scores, say people familiar with the matter. At that moment, Goldman pushed back. The card is currently charged between 13% and 24%.

When Apple unveiled the credit card on stage in Cupertino, California, in March, it did so with a zinger: "Designed by Apple, not by a bank." Solomon and other Goldman performers watched from the audience. The same line was repeated in ads that Apple launched to promote the map.

In the last snob, Marcus' managers were not allowed into the attic at Tribeca, which served as Apple's command center in the days leading up to the card release in August.

Even over $ 300 million of Goldman spent on building it, Apple's map was a drain on the company's resources. When early software tests this spring revealed a security vulnerability, Goldman redeployed thousands of engineers from across the company to patch it, people familiar with the matter said.

This put other initiatives months behind schedule, these people said. The Marcus Budgeting App and a digital wealth management tool, scheduled for early next year, is now expected to be out by the end of 2020.

Executives say the cost is justified by the chance of reaching hundreds of millions of users. iPhone, a young, rich bunch that could turn into Marcus' customers.

In particular, Goldman wants their deposit dollars, a cheap source of financing for the bank. For every $ 10 billion in deposits, Goldman saves $ 100 million a year, Goldman's Chief Financial Officer,

Stephen Cher

said in April.

Identity Crisis

For three years during this time, Goldman did not settle for identity for Marcus. It's broadcast as a buzzing startup in Silicon Valley, where coders sip fountain from a tap at a WeWork office in San Francisco, and as a nostalgic toss, its logo is simply an M-type wooden plaque that swings from small to common shop.

A Goldman poll this spring asked customers to imagine Marcus as a party guest. Is he a prickly teenager or a freezing boom? Does it drive a minivan or a hybrid? Is he standing alone at the breakfast table or DJ? Is he playful, hardworking, cultural or cool?

Customers have received Amazon Gift Cards for their reviews.


Federica Bordoni

Even Marcus products do not fit easily. It provides personal loans to unrelated money consumers who need money to finance a home renovation or pay off other debt. Its high-yield savings accounts are sold to more affluent individuals with cash. Marcus is courting technology users, but there is no smartphone application.

The culture of Goldman's buttons with a surge of new talent was also a challenge, executives say. According to a spokesman, Marcus has hired about 500 people from competing consumer banks and another 500 from technology companies.

Marcus has acquired four technology startups, including Clarity Money, a personal finance application that its founder,

Adam Dell,

zipped around Goldman's headquarters on a hoverboard until it was seized by legal staff after someone crashed it, people familiar with the matter say.

Marketing officers prepared by companies including PepsiCo and

American Express

, smooth out the jingles broadcast on sports radio this fall. ("I feel like a smart money man," calls a middle-aged man, "now that my savings rate is high.")

As Marcus headed for his third birthday, turnover jumped – some they are welcomed by senior executives who say they have learned more about what it takes to run a consumer business. Marcus has three product heads in three years. Her chief risk officer went to



Darin Kline,

As Marcus becomes more central to Goldman's future, executives have discussed completely removing his name, say people familiar with the matter. Goldman is already killing off other brands it acquired on its push to Main Street, including wealthy United Capital manager and 401 (k) startup Honest Dollar, whose logo shade of corn blue Goldman has spent months refining.

Mr. According to people familiar with the matter, Solomon prefers a single brand for the company's consumer products: Goldman Sachs.

Write to Liz Hoffman at liz.hoffman@wsj.com and Peter Rudegeair at Peter.Rudegeair@wsj.com

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