New banks

Marcus by Goldman Sachs’ CFO, Liz Ewing, on consumer finance amid rising inflation

  • Liz Ewing, Chief Financial Officer at Marcus by Goldman Sachs, reflects on the thought process behind the Marcus ecosystem.
  • She also talks about the effects of rising interest rates on consumer finance.

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Marcus by Goldman Sachs’ CFO, Liz Ewing, on consumer finance amid rising inflation

The Goldman Sachs brand has been analogous to investment banking for a considerable length of time. The firm is widely known for its mergers and acquisitions, and has a major market share in several investment banking vehicles, including M&A financial advice, equity underwriting, and debt underwriting. It provides loans for both affluent individuals and corporations.

Goldman makes money through four principal business categories under its umbrella: investment banking, global markets, asset management, and consumer and wealth management.

Launched in 2016, Marcus by Goldman Sachs is a consumer “online-only” wing of the bank that offers no-fee personal loans and rewards savers with higher-than-average rates, high-yield and penalty-free certificates of deposit via its Marcus app.

The central idea behind introducing Marcus was to start a new line of business where there was a large unmet customer need – and where Goldman Sachs could leverage its resources to obtain a competitive edge in the market by riding the wave of digitization.

Marcus may not have a broader product portfolio as opposed to other digital banks; however, with the existing line of products, Marcus by Goldman Sachs ranks highest among personal loan lenders in overall customer satisfaction, according to the J.D. Power 2022 U.S. Consumer Lending Satisfaction Study.

The ongoing financial crunch has led to a roadblock in mergers and acquisitions throughout the industry, along with a slump in financial assets, which has exerted a direct influence on Goldman Sachs’ Q2 earnings as reported by the bank last week. This is because the firm earns a big chunk through its lending and investments. However, its consumer and wealth management revenue jumped 25% to $2.18 billion, as a result of higher management fees, credit card balances, and deposits in digital banking.

I spoke with Liz Ewing, Chief Financial Officer at Marcus by Goldman Sachs, on how inflation can impact consumer finance and how to come to grips with the current economic climate.

How does Marcus by Goldman compete with agile fintechs?

Liz Ewing: Marcus by Goldman Sachs commands a unique position within the industry. We had the ability to build a startup within a large institution and capitalize on the best of both worlds without sacrificing quality. This offers us the culture and resources we need to move and innovate quickly while also being backed by more than 150 years of Goldman Sachs’ financial expertise and a strong balance sheet. As a result of this strategy and our ongoing innovation, we are one of the fastest-growing digital banking platforms since our inception. 

What differentiates Marcus from other players in the field of consumer finance?

Liz Ewing: Building our consumer business from scratch, without the restraints of legacy technology or branch debts, has made it possible for us to build a nimble and flexible technology stack. This allows us to develop innovative products that we then deliver directly to consumers through the Marcus brand, or by becoming deeply embedded in the ecosystems of our partners. All of this is backed by the resources and expertise of Goldman Sachs. Very few companies, let alone banks, can say the same.

What thought goes behind individual products with an eye toward building the Marcus ecosystem?

Liz Ewing: Over the past five plus years, we’ve taken Marcus from a direct-to-consumer lending platform to a consumer banking platform by bringing multiple products together in seamless digital experiences. Whether we’re thinking about our individual Marcus products or the complete consumer business ecosystem, our primary focus is always on our customers. We regularly collect feedback and insights to evolve how to support our customers, through surveys, social media touch points, as well as our customer service channels. We care about building products that are going to solve their pain points, so our product development process originates with the understanding of how to improve the customer experience. 

Where do you see Goldman’s consumer business 5 years from now, in terms of objectives and key results?

Liz Ewing: Ultimately, our goal is to change the relationship consumers have with their banks. We want to support consumers by elevating what their banking relationship can be with simple, transparent products that anticipate their needs and deliver value while meeting them where they are. 

We eventually hope to serve tens of millions of customers with the constant focus of keeping their best interests at the center of what we do. As we scale the consumer business to more products and distribution channels, we’re continuing to invest in the foundational elements that keep us connected to, and in conversation with, our customers.

How can inflation affect consumers’ finances and how can they weather the storm?

Liz Ewing: Rising inflation impacts the general cost of living. In time, it can slow economic growth since people have to spend more to buy less.

When inflation is too high, the Fed tends to raise its federal funds rate, which can influence the interest rates banks offer across various deposit accounts. For example, those with a deposit account that offers a variable rate, like a high-yield online savings account, might see a rate increase in their account when the Fed raises its rate.  

The federal funds rate may also affect other products like mortgages and personal loans. When the federal fund rate increases, the prime rate goes up and credit card APRs generally increase as well. Those with outstanding and higher APR debts in this rate environment might want to consider a personal loan for debt consolidation. This kind of loan can be used to combine multiple debts into a single debt. Consolidating debt with a personal loan can also have the advantage of a fixed rate, which can be an attractive option with interest rates on the rise.

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