Culture and Talent

Goldman Sachs’ foray into consumer banking is getting aggressive

  • While Goldman has also been ahead of retail banking institutions when it comes to a platform approach to business, retail banks are just getting acquainted with the idea
  • Retail banks don't want to become the dumb pipes -- to save their brand -- but if that's where they're headed, Goldman Sachs is way ahead of the curve
Goldman Sachs’ foray into consumer banking is getting aggressive

Goldman Sachs is arguably the biggest name in investment banking, but two years ago it dipped its toe into the consumer space through its acquisition of GE Bank and launch of GS bank shortly after. Today, Goldman continues to amp up its consumer business.

The same year it launched GS Bank, it began building a digital-only consumer loan product, Marcus, that was fully developed and on the market 12 months later. Without having the legacy infrastructure under previously existing consumer products and services, the overhaul other major banks have been experiencing don’t exist for Goldman.

Goldman has also been ahead of retail banking institutions when it comes to a platform approach to business.

“[The] platform approach has not been an obvious approach on Wall Street. Our competitors are generally structured in deep vertical silos and we have a different architecture: these shallower silos built on top of many layers of software, tech infrastructure, cybersecurity, enterprise platforms and increasingly, client platforms,” Marty Chavez, an engineer and Goldman Sachs CIO-turned-CFO this year, said in a keynote at Harvard University earlier this year.

“Historically, the API has been human beings talking to other human beings over the telephone, and all the tools, the content, the analytics is on the internal platform only. We are shifting this radically and shifting this fast, and we’re packaging everything we do… we’re redesigning the whole company, around APIs.” Goldman did not respond to a request for comment.

Goldman Sachs loves to say it’s a technology company. At Harvard, Chavez said everything the company does “is underpinned by math and a lot of software” and that a third of the employees at Goldman are engineers. Here are three ways Goldman is has shown that this year.

46 percent of Goldman jobs are in technology 
CB Insights analyzed more than 2,000 open Goldman Sachs job listings by division and business unit to confirm it’s focused on building its technology and digital finance units. Goldman Sachs has no experience in consumer banking and has reacted by resolving to hire the right talent, CB Insights fintech analyst Matt Wong said Tuesday in a briefing on the data company’s research around Goldman Sachs strategy.

Many of the jobs are in digital finance. Goldman is hiring mobile developers “to enable the creation of an all-digital retail bank,” Wong said, speculating that the unit’s offerings may soon include native mobile apps. Earlier job postings have called for iOS developers, he said. It’s also hiring engineers to build a digital advice platform for the mass affluent market and its Marquee platform, which gives clients access to analytics, trading and data tools. Earlier this month it reportedly poached 20 employees from New York-based online lending startup Bond Street — engineers, product developers, and risk and marketing specialists — presumably to build out a lending product.

According to the research, published Tuesday, 46 percent of all of the firm’s jobs as of Sept. 14 are in technology, with the highest amount for core platform roles, followed by operations engineering and then equities technology. While traditional consumer retail banks are still getting acquainted with the idea of the platformification of banking — stubbornly, since rethinking banking services as a platform often means weakening a company’s brand by becoming the “dumb pipes” — Goldman Sachs has aspired to a platform approach and quietly been working on it and readying itself for the consumer market.

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Marcus is expanding in the U.K.
The jobs listings also show Goldman is staffing up its digital finance unit in the U.K. with London-based roles in customer support, product management, and development and operations. Earlier this month, the firm said it plans to expand its retail banking business to the U.K. by launching an online loan deposit business there. That includes launching Marcus there in the middle of next year.

Marcus, the online lending startup built inside the investment bank, has been growing tremendously in the eight months since it launched in October 2016. It has one product: a customizable personal loan for Prime borrowers, with at least a 660 credit score, of up to $30,000. It promises no fees and straightforward repayment terms. It recently passed $1 billion in loan originations with expectations to originate $2 billion by the end of this year. By comparison: SoFi, which launched in 2011, reached its first billion after 14 months; Avant, founded in 2012, took 28 months; 10-year-old Lending Club took 65 months; and Prosper, launched in 2006, passed $1 billion in 98 months.

Marcus was built in 12 months — which is impressively fast for a legacy financial institution. Before building Marcus, Goldman didn’t have an existing consumer business built on rusty rails that they needed to cannibalize in order to get the product to market so quickly. Wong said they’ve had the additional advantage of some of their non legacy IT architecture that they have been able to put in place: existing platforms, open source software and external APIs like Twilio, FICO, Facebook and Adobe.

It’s invested in every kind of fintech company
Wong said Goldman is consistently in the top two when it comes to investments in fintech startups. It’s currently invested in 23. Of the top 10 largest U.S. banks ranked by unique fintech investments, Goldman is the only one investing in at least one company in every fintech category: blockchain, data analytics, insurance, personal finance, wealth management, financial services software, lending, payments and settlement (in which has invested in six companies), real estate and regulatory technology.

Earlier this month Goldman revealed its latest investment, $134 million in Neyber, a U.K. startup (whose founders are two Goldman alums) that helps employers lend money to employees to repay through their future salary payments, showcases the firm’s interest in consumer data through lending and payments opportunities.

Investing in a diverse array of startups has allowed the company to create the back-end layers for the platform approach Chavez mentions. Goldman builds the middleware — the micro services APIs — itself. That’s what helps Goldman move so quickly. Using the example of Marcus, the bank only needed to purchase 17 “best-in-class modules from outside,” Wong said, to plug into the platform using APIs and deliver the customer experience for Marcus clients.

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