The long awaited consumer lending platform from Goldman Sachs, called Marcus, has launched today. We have written about the Goldman Sachs effort before and much has been speculated but today we are finally learning many of the details.
Unfortunately, Marcus has launched without being made available to the general public, that will apparently come at a later date. To actually go through the borrower application process you must have received a direct mail piece with a promotion code. But thanks to a detailed FAQ section there is a lot we now know:
- Interest rates will range from 5.99% to 22.99%.
- Loan amount will be up to $30,000.
- Loans will be available to residents of all states with the exception of Maryland.
- There will no origination fee nor any late fees.
- Borrowers can choose the day of the month when their repayment occurs.
Also, there is a very detailed article by Ainsley O’Connell at FastCompany who seems to have an exclusive on the Marcus launch. This article shares virtually the entire evolution of Marcus from initial concept through to launch today and is well worth a read.
Marcus Focusing on No Fees
Here is the big differentiator for Marcus. They are very much focused on no fees. There are no origination fees, prepayment penalties or even any late fees. They will make money purely on the interest rate spread.
I think this is a smart move. Goldman Sachs does not have a great reputation with middle class Americans who I expect will be the target market here. And looking at their interest rate offerings it looks like Marcus will be going head to head with Lending Club, Prosper, Marlette and others. Each of these companies charge an origination fee to the borrower whereas Marcus will not.
While the average borrower may not be attracted to the “Marcus by Goldman Sachs” brand they will be attracted to no fees. This message is displayed in bold right on the Marcus home page. They are also quite upfront about the fact that they make money from the interest on these loans.
What the Industry Thinks
On my panel at LendIt Europe (full report coming tomorrow) this week I asked the panelists what they thought of Goldman Sachs entry into the space. Interestingly, all panelists except one were quite negative on the possibilities of success for Goldman. Business Insider was struck by this and published an entire article about these responses to the question on Marcus. You can watch the panel session here.
I also asked Scott Sanborn, the CEO of Lending Club, about Marcus in our recent interview and while he was not as dismissive as some of the people on my panel he did say, “I feel good about our ability to compete” with Goldman Sachs.
My own opinion is evolving on this matter. I initially thought Goldman Sachs would struggle to create a leading brand in unsecured consumer lending. Now, having seen their offering and thought about it some more I tend to agree with Ram Ahluwalia of PeerIQ who said “Don’t underestimate a large, well-capitalized bank that understands consumer credit risk.”
We know Goldman Sachs is well-capitalized and that it has a very low cost of capital. We also know that they understand consumer credit with the investment banking side having been involved in many securitizations not to mention the Lending Club IPO. What we don’t know is their approach to branding and consumer experience. At first glance, it seems to me they have carefully considered these aspects as well.
The new kid on the block may well end up becoming a formidable force in the industry.