The Vampire Squid Is Lending Money To Average Joes
Marcus, the year-old consumer lending business of Goldman Sachs, has already made nearly $2 billion in loans, targeting people who wear jeans rather than suits.
Goldman Sachs, famously derided in 2010 as a greedy vampire squid, says that its year-old online lending business, Marcus, has been helping the investment bank remake its image as the Bank Next Door — or at least, the Bank Online.
Marcus — which is named for one of the firm's founders, Marcus Goldman — is an online-only lending business that lets everyday people with good credit scores borrow anywhere from a few thousand to $30,000, and to consolidate their credit card loans.
It's one of the first forays into the mass consumer market for Goldman Sachs, which is better known for working with hedge funds, helping technology companies going public, and facilitating massive mergers.
Marcus started lending last October and recently passed $1 billion worth of loan originations; it is on track to do $2 billion by the end of this year, Goldman executives say. By contrast, it has taken some startup lenders years to hit the $1 billion mark, but for Goldman, the sum is just a speck on its $930 billion balance sheet.
Omer Ismail, a near-15-year Goldman veteran who is Marcus's chief commercial officer says the business "takes the best of both worlds" of technology companies — meaning that they got to build the business from the ground up without being burdened by old technology or business models — combined with the "heft of GS Bank's balance sheet and all the regulatory, legal, and compliance infrastructure that comes with it."
And part of running a consumer financial company means doing the grubby work of letting the public know who you are, which includes running TV ads. A recent spot, the company's second national campaign, was filmed at a New York pizza shop, where the man working the counter takes a bite out of every slice he serves, and he calls it a fee.
The point is to show that Marcus, unlike some of its competitors, does not charge loan origination fees. "Don't get fee'd," the ad says. The fixed interest rates at Marcus start at around 7% and go up to just below 24%, with terms lasting from three to six years — the rates are comparable to what other lenders offer, but the lack of origination fees can give Goldman a pricing advantage on some loans.
"We used the slice of pizza as a metaphor, where you pay for a whole slice of pizza but you don't get the whole slice," said Dustin Cohn, who manages Marcus's brand and who previously ran marketing for Jockey.
Both Cohn and Ismail, were wearing blue jeans during an interview at the headquarters building of Goldman Sachs, the 148-year-old Wall Street investment bank whose name is synonymous with elite high finance. (Ismail keeps a jacket and tie in his office in case he has to ascend from Marcus' space on the 26th floor to the 41st floor executive suite.)
When it comes to the new ad campaign, "We're really happy about the way it turned out," Ismail said. The spots will be showing on TV, Facebook, radio, Pandora, and through online display ads.
Goldman executives have said that one reason the company had a poor reputation following the financial crisis was that the vast majority of people never had an opportunity to interact with it commercially. “I think there’s an element of ‘We’re a wholesale firm, and we don’t deal with the public, and so we’re mysterious," the bank's chief executive officer, Lloyd Blankfein, told New York magazine in 2011.
And while both Ismail and Cohn say that Marcus has been positive for Goldman's brand overall, they also insist that the point of this business is to contribute to Goldman's earnings.
"Hopefully," Ismail said, "we'll do it right and we'll scale, and we'll be a contributor to Goldman Sachs's earnings. One of the things we're excited about it will also be a positive contributor to Goldman Sachs' reputation and it will be brand-enhancing."
For about a year, employees in Chicago, Salt Lake City, and the 26th floor of Goldman's financial district headquarters have been working on attracting new customers to Marcus' offerings. The loans are applied for online, but Goldman has also hired 200 agents who work in a Salt Lake City call center to answer customer questions — with an internal standard of picking up before five seconds.
Marcus is not the only new consumer-facing venture for Goldman: In April of 2016, Goldman acquired an online bank from GE Capital Bank as part of an overall corporate strategy to build out its banking business. That business was rebranded as GS Bank, which offers high-yield online savings accounts. Soon it will be merged with the Marcus brand.
The small transformation for Goldman mirrors a much larger one the company underwent almost a decade ago.
In order to receive emergency aid during the financial crisis, Goldman had to formally turn itself in a bank holding company – in other words, the same sort of bank as, say, Bank of America or JPMorgan Chase. Its chartered national bank was then more or less sitting around, doing little business on its own.
That started to change at a 2014 offsite meeting, where the company's executives discussed how each business could grow, Ismail said, and what Goldman could with its bank. It hired Harit Talwar from Discover to run the business in 2015 and starting lending last October.
Mike Mayo, a banking industry analyst at Wells Fargo, told BuzzFeed News that he thought the amount of time and money invested in Marcus had been a red flag for Goldman Sachs investors. "A lot of investors shake their heads, why are they spending this disproportionate amount of time on a business that’s so small?" Mayo said.
But Mayo added, "In our view this is not a PR move by Goldman, it’s a business where they’re taking a toehold to create optionality for potential future directions."