Goldman Sachs' consumer banking division will celebrate its fifth year in operation next month. 'Marcus,' as the retail division is now known, is the investment bank's first foray into consumer banking in its 147-year history.
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Through Marcus, Goldman now offers unsecured personal loans, online savings accounts and certificates of deposit. Apple chose Marcus to underwrite its new credit card, and Goldman is expected to launch online money and investing products for Marcus customers as well.
Omer Ismail, head of U.S. consumer business at Goldman, had worked in the bank's private equity division before joining Marcus as its first employee. The interview has been edited for length and clarity.
Q: Why did Goldman decide to start a consumer banking division?
A: I would say that you can divide up the history of the consumer bank in two major phases: from the financial crisis to 2014 and from 2014 to today. We became a bank holding company in late 2008, and for those first few years it was really about getting the regulatory compliance infrastructure installed to be a bank. We really were thinking about the bank as purely a legal entity. After 2014, we started looking at the bank as an asset for growth. And it was there that we looked at opportunities where we felt like there were unmet consumer needs.
Q: Why did you start with personal loans, instead of something more traditional like a checking account?
A: We looked at consumer pain points and areas Goldman Sachs could have a competitive advantage. We were interested in places with deep profit pools, so that our success would not be predicated on getting some unreasonable market share. This isn't like Goldman Sachs's investment banking business. The U.S. consumer financial services market is massive. There are a trillion dollars in credit card debt, and $4 trillion in deposits in low-earning savings accounts.
Nobody wants to go in a bank branch and apply for a personal loan. We could do this all online, and a personal loan as a product is relatively simple to handle and is less transactionally intensive unlike other banking products like a checking account. That was one criterion for us as we were looking to decide our first foray into the consumer business.
Q: Goldman Sachs had zero history in consumer banking. What drew you to start this division?
A: Simply, it was a very unique opportunity, both for Goldman Sachs and for me personally. How often does Goldman Sachs create a whole new business? Consumer financial services is also an area where you know you can do it better than the competition, and you are really making a difference in the lives of real people. For example, I was listening in on our customer calls when there were floods down in Houston. For those customers who had personal loans, we offered them a deferment plan. It gave them one less thing to worry about, and they were very grateful. It was very personally touching.
The final thing that I will say is that you know I really feel like Goldman Sachs pays me to learn. We've been able to hire all these really smart people from outside Goldman: the best engineers, the best data scientists, the best credit risk managers, and the best people that understand digital products. I get to sit in meetings where we're really trying to solve real customer pain points and listen to the best in the world talk about their craft. It's been great, on a personal level, but it's been a great learning experience for me.