Goldman Sachs Archives - Lend Academy

Crypto Custody Gets Shot in the Arm from Goldman & Anchorage

The institutional push into crypto continues to accelerate with Goldman’s RFI and Anchorage’s conditional approval.

January 20, 2021 By Todd Anderson Leave a Comment

Last year will be known for a myriad of events. While the institutionalization of crypto might not make it to the top of the list, it was among the biggest trends in financial services. The news that Goldman Sachs is entering the crypto custody market helps to push that trend even further.

Perhaps the biggest news involved Anchorage, who secured conditional approval for a national trust charter from the U.S. Office of the Comptroller of the Currency (OCC), making it the first national “digital asset bank” in the U.S.

The crypto markets in general have long been dominated by retail investors, even today retail accounts for 91 percent of crypto asset investments according to Singapore-based SC Ventures. Institutions have been quickly catching up, even the likes of JPMorgan Chase and Goldman Sachs have changed their tune.

Goldman Sachs has held multiple public positions on crypto over the years, it wasn’t that long ago they were rumored to be creating a crypto trading desk. The news from earlier this week is the clearest indication yet that the bank will be getting more involved in the space as they are rumored to reveal their plans soon.

According to reports Goldman Sachs issued a request for information (RFI) to explore digital asset custody, as part of a broader digital strategy.

Goldman is not the only large scale bank getting involved in the crypto custody business. CoinDesk reported in early December that Northern Trust and Standard Chartered’s fintech investment unit, SC Ventures, were launching Zodia Custody in the UK. JPMorgan Chase and Citi are also said to have expressed interest in the custody space.

The larger trend is the more interesting one to watch. It begs the question: is the traditional financial system finally coming to the realization that crypto is here to stay? In short, yes. Though there are a lot of questions that still need to be answered before crypto is seen as an everyday part of our financial lives.

Regulation is still very near the top of the list. There is no global consensus on crypto regulation and a new administration in the U.S. will mean changes to current regulatory thinking. Banks like Goldman, JPMorgan, Northern Trust and others should push to lead the way. Their acceptance, holding and trading of the assets, will help to push regulatory bodies to a more innovative path.

It is hard to see the digital asset momentum being stopped but crafting a safe pathway into the global financial system will certainly help to ensure long term success.

Goldman Sachs May Power Future of Lending at Amazon

Amazon merchants may soon be able to get loans with help from Goldman Sachs.

February 4, 2020 By Ryan Lichtenwald Leave a Comment

Lending is not a new business for Amazon, but it is not a burgeoning business…yet. Last year the Financial Times shared details on their offering and how growth had stalled. Amazon has been lending to small businesses since 2011. Outstanding loans nearly doubled between the end of 2015 and end of 2016 to $661 million but growth was just 4.7% the following year. Growth in 2018 was a mere 2.6% which is at least partially attributable to the company taking a careful approach to lending. Loans were offered at interest rates from 6% to 17% to small businesses selling on the platform.

The FT suggested that Amazon was slated to grow going forward, hiring both in Europe, Asia and in Seattle. Besides sharing data as part of their annual report, Amazon is secretive on future plans.

Now Amazon is reportedly going to be working with Goldman Sachs on their small business loans. According to sources as reported in a CNBC article, Goldman has been working on software which would allow them to simply plug into Amazon’s current loan platform. Last week Goldman was also in the news holding their first ever investor day which included their ambition to be a banking as a service provider and this might be the latest example of that. Many are aware that Goldman Sachs already powers the Apple Card which was released last year. Bank of America was also once involved in Amazon’s small business lending operation.

Not surprisingly representatives from both Amazon and Goldman declined to speak on the topic, but if the partnership comes to fruition it is going to be interesting to see how Amazon lending scales from here. Amazon has also been reportedly working on a checking account which we haven’t seen hit the market yet.

Goldman Sachs Hosts First Investor Day, Shares Plans for 2020 and Beyond

Goldman Sachs is opening up about their consumer banking ambitions for the future.

January 29, 2020 By Ryan Lichtenwald Leave a Comment

The long time secretive bank is now opening up on future plans in an effort to win over investors. Today, they held their first ever investor day and the bank was not shy about sharing their ambitions.

Goldman executive Eric Lane stated, “We aspire to be the leading digital consumer bank…We’re starting with loans, we added savings and cards, and we’re working to build out the balance of the digital products suite, including wealth and checking.”

It was only a few weeks ago that Marcus launched their app which was developed by the team that joined Goldman when they acquired Clarity Money. To some it is surprising that the app came so long after Marcus first launched in 2016. Though Goldman Sachs shared that they took a careful approach and spent the better part of 2019 to create it. American Banker recently interviewed Adam Dell, previously the CEO and founder of Clarity Money about the Marcus app and traditional financial institutions.

The bank expects their digital wealth management tool to launch this year with a checking account in 2021. Currently, Marcus offers a simple savings account which offers a competitive interest rate. Below is the vision for an integrated platform.

Lane went further to describe that they plan to deliver a retail bank branch through your phone. While banks such as JPMorgan Chase have been opening new branches in select cities it seems that Goldman Sachs is continuing to go in the opposite direction. Goldman aims to double their consumer deposits to $125 billion over the next five years. The investor day presentation shared that Marcus had $60 billion in deposits, 5 million customers and $7 billion in loan/card balances at the end of 2019. They hope to generate between $700 to $900 million in pretax income.

It is fascinating to get a look into detailed plans of Goldman Sachs and where they plan to go with the consumer bank. They clearly have ambitions to be a full service bank for consumers in the US and beyond. If you want to learn more from Goldman Sachs’ investor day you can download all of the presentations.

Goldman Sachs to Give Investors More Transparency on Lending Operations

The bank hopes that additional information about their business will change how investors value their stock

January 7, 2020 By Ryan Lichtenwald Leave a Comment

The Wall Street Journal reports that Goldman Sachs is planning to share more information about their different business units. The new financial disclosures will finally give investors insight into both their lending practices and their trading business, areas where the bank has previously shared very little.

Currently, shares of competing banks like JPMorgan Chase and Bank of America are valued much higher. and the Goldman Sachs CEO believes their stock is significantly undervalued. The hope is that the increased transparency will help their stock which currently trades at levels around their 2007 stock price. From the WSJ:

Mr. Solomon and his deputies, including finance chief Stephen Scherr, are betting that more openness will help in the meantime. For all of Goldman’s changes since the financial crisis—building a consumer bank, reining in freewheeling traders, lowering its funding costs—investors still view the firm as more prone to market swings than rivals and less willing to explain its results.

The build out of their consumer bank and their Marcus brand has been one of the biggest strategic changes for the firm. Marcus is now one of the leading digital banks in the US and they have also recently moved aggressively into the UK with plans to expand elsewhere in Europe.

One of the big changes is breaking out their investing and lending segment which previously included various loans and bets that the bank had made. Loans to companies will now be reported as well as loans to hedge funds, but it remains to be seen whether we will learn more about their personal loan business. Investors will also be able to see revenue from wealth management which is noteworthy given the bank has recently opened up to serving a younger demographic who aren’t necessarily wealthy.

The Ten Biggest News Stories of the Decade in Marketplace Lending

We take a look back at the news stories that shaped marketplace lending in the 2010s

December 30, 2019 By Peter Renton 1 Comment

I started writing about marketplace lending back in 2010, so I have spent almost the entire decade immersed in this space. While we have expanded our coverage on Lend Academy today beyond marketplace lending this remains a major focus.

We have certainly come a long way in the past ten years and the industry is almost unrecognizable from where it was in 2010. Back then there were just two notable companies in the space, LendingClub and Prosper, originating just a few million dollars a month in loans. No one could have predicted that by the end of the decade marketplace lending would have led to a resurgence in personal loans and changed expectations for customer experience across all lending verticals.

As I look back at the past decade here are, in my opinion, the top ten most important news stories in chronological order.

Prosper Recapitalizes and Brings in a New Management Team
(January 2013)

At the time this was a huge story. The number two marketplace lender had been struggling for some time and was in serious danger of running out of money. This new funding round was small by today’s standards at $20 million but it ensured that Prosper would remain a going concern. The deal was architected by, the now fintech legend, Ron Suber as he brought in a new management team and a new board to guide Prosper on to their future growth path. It helped set the industry up for success over the next several years.

LendingClub Becomes First Marketplace Lender to go Public
(December 2014)

This was a momentous day for marketplace lending as market leader LendingClub became the industry’s first company to go public. The IPO was a huge success by any measure. By the end of the first day of trading LendingClub was valued at $8.46 billion and they had raised $870 million in cash. Of course, at the time we had no idea what would happen to the stock but there was a sense a real optimism that this company was going to change the world.

Second Circuit Rules on The Madden Decision
(August 2015)

The biggest legal issue the industry dealt with this decade was the ramifications of the Madden v Midland decision. We have been following this case since the Second Circuit ruling in 2015 and it has had far reaching consequences for the industry. It has led to a reduction in lending activity in Second Circuit states (NY, CT and VT) but the bigger concern was that this kind of ruling would spread nationally. That has not happened and there have been multiple regulatory fixes proposed plus the OCC and FDIC have weighed in as well. But as of this writing nothing concrete has changed since the 2015 decision.

SoFi Raises $1 Billion Led by SoftBank
(September 2015) [Read more…]

The Superior User Experience of the New Apple Card

I share my experience applying for the new Apple Card and where I think it breaks new ground

August 26, 2019 By Peter Renton Leave a Comment

I just signed up for the Apple Card. I have been fascinated by this partnership between Apple and Goldman Sachs ever since we learned about it last year. So, when it went live earlier this month I knew I had to get it.

While I may not be a true Apple fanboy I use many of their products including a Mac, iPad and iPhone. The Apple Card is designed to work seamlessly with the iPhone, in fact you must have an iPhone 6 or later to be able to apply for the Apple Card. There is no web-based application, you have to do it from inside the Wallet app.

I like to play the mileage and points game so I have several Chase and Amex credit cards and I regularly (2-3 times a year) apply for new cards. It never ceases to amaze me that, despite all the credit cards these companies issue, the online application process always feels clunky and unfriendly. They could and should make it much more simple.

The Card Application Process Felt Like Visiting the Future

This is what Apple has done. The user experience in the application process is simply superb. They have clearly thought long and hard about ways to reduce friction, especially considering you are applying on your phone. Here are some screenshots of the process: [Read more…]

PeerIQ’s Q4 2018 Lending Earnings Insights Report

PeerIQ's latest Lending Earnings Insights Report points to a strong economy but bank and card issuer CEOs are cautious about being late in the credit cycle.

November 20, 2018 By Todd Anderson 1 Comment

PeerIQ released their Q4 2018 Lending Earnings Insights Report which points to a number of themes showing the economy is strong but CEOs are striking a cautious tone. Delinquencies and defaults continue to be low as consumers have seen their wages rise and taxes drop. Lenders are increasing reserves as they anticipate credit to renormalize in the near future, saying the economy right now was too good to be true.

The report covers earnings reports from big banks and fintech lenders. Stock performance was mixed with the flattening yield curve causing banks and card issuer stocks in particular to suffer. Companies covered include Enova, LendingClub, One Main Financial, OnDeck, GreenSky, Bank of America, Citibank, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Wells Fargo, Capital One, Discover, Synchrony and American Express.

One of the growing trends has been the pull back by banks lending directly to consumers and small businesses. Banks are instead increasing funding lines to non bank lenders, credit facility volume has grown 6x since 2010. The growth in originations from non bank lenders has forced regulators to look at them more closely, while the FDIC is considering granting ILC charters to non banks.

Broadly across the credit spectrum fintech lenders have seen delinquencies and charge offs remain at near record lows. All the companies in this segment saw double digit revenue and origination growth YoY. Lenders have started to raised borrowing rates, though not at the same pace as the Fed Funds Rate. The flattening yield curve has raised the cost of borrowing on credit facilities, causing margins for lenders and investors to be compressed.

Big banks experienced another strong earnings quarter as all covered in the report saw double digit increase in earnings. Revenue drivers vary from bank type to bank type. Big banks covered within the report saw deposits rise due to a better digital banking experience, an integration between wealth and banking products and a retail branch expansion. As a group the banks are growing, albeit slower than in the past, through digital means and are focused on the long term potential of products they are currently building.

Credit card issuers all saw their earnings grow by more than 20 percent YoY. Most card issuers also saw growth in revenue and their loan books. Growth in total allowances for losses outpaced loan growth, pointing to the fact that most card issuers see a credit normalization coming. Card issuers have used the partnership model with stores like Walmart, JC Penney and Lowes to grow revenues.

Overall economic health, low delinquencies and low charge offs show that the credit space is doing quite well. Though the report points out that most of these companies do not expect this environment to last forever, they are in the midst of preparing for a change while they keep growth humming along.

Marcus Scaling Back Originations Plans for 2019

The Goldman Sachs unit is reportedly concerned about where we are in the credit cycle so they are scaling back growth

October 9, 2018 By Peter Renton Leave a Comment

Source: Bloomberg

There was an interesting article in Bloomberg yesterday on Marcus. Bloomberg cites sources claiming that Marcus will be scaling back on its origination goals for next year. Now, we don’t know exactly what the origination goals were or what they have been scaled back to, we only know that their origination goals are now less than originally planned.

As we reported last year Marcus was the fastest company ever to $1 billion in loan originations, they passed that milestone in just eight months. Since then they have continued this frenetic pace, passing $4 billion in Q2 of this year, in under two years. No company has ever grown their personal loan book so quickly.

From the Bloomberg piece:

The reduction in 2019 plans is based on current market conditions for consumer lending and could still change, said the people, who didn’t provide exact figures. A spokesman for Goldman Sachs declined to comment.

It is not surprising that they are putting the brakes on somewhat. We are very likely late in the credit cycle and Marcus wants to get ahead of any possible downturn. They hold these loans on their own balance sheet so we don’t have much of a window into loan performance so far. The Goldman Sachs CFO did say that defaults are running at around 5% and other Marcus executives have said that defaults are in line with expectations.

I don’t think this changes Goldman’s approach with Marcus. The new CEO, David Solomon, has indicated his commitment to the online bank as an important part of Goldman’s future growth. It is good not to get ahead of yourself, we have seen what can happen when online lenders put origination growth as the major focus. It is very easy for underwriting standards to slip in the pursuit of ever more borrowers.

We should find out more on the Goldman Sachs Q3 earnings call coming up soon. But this pullback in growth is probably a good thing for Marcus in the long run.

How Goldman Sachs Created Marcus To Be a Dominant Force in Consumer Banking

In just two years the Goldman Sachs digital initiative called Marcus has changed the banking landscape

August 13, 2018 By Peter Renton 2 Comments

[Editor’s note: This article was written for our Chinese audience and will be translated into Mandarin and released with several other articles at the Lendit Fintech China conference in Shanghai in September.]

It all began at the home of a senior Goldman Sachs executive in the summer of 2014. A select group of leaders were there to discuss new growth opportunities for the firm. They wanted to start a new line of business where there was a large unmet customer need and where Goldman Sachs could leverage its resources to gain a competitive advantage in the market.

After 145 years serving only the very wealthiest of clients it was decided that they would launch a consumer bank. In reality, they already had a banking license because during the financial crisis they opted to become a bank holding company. But for years they had never really used this to launch any new products. That changed in 2016.

First, there was the launch of GS Bank in April 2016. Six months later Goldman Sachs introduced the world to their Marcus brand. They began as an online lending platform offering unsecured consumer loans up to $30,000 with interest rates ranging from 5.99% to 22.99% (they now offer loans up to $40,000 and rates range from 6.99% to 24.99% as of August 2018). Their big differentiator was offering no fees. There was no origination fee for the borrower, no prepayment fees and no late fees.

They gained traction very quickly. They crossed $1 billion in total originations within eight month of launch. At the end of their first year they were at $1.7 billion. At that time they brought their deposit business under the Marcus brand, it was formerly branded under GS Bank. Now when you go to the Marcus website you are presented with two options: personal loans and savings accounts (which includes certificates of deposits).

[Read more…]

Goldman Sachs Shares Their Vision for the Future of the Marcus Platform

At the recent Bernstein Strategic Decisions Conference Goldman Sachs President David Solomon provides some insight into the future direction of Marcus

June 4, 2018 By Peter Renton Leave a Comment

I write a lot here on Lend Academy about Marcus by Goldman Sachs. The reason I do so is because they are such a great example of what is possible when a well funded incumbent gets serious about fintech. Now, Goldman is an unusual case in that they have been around for about 150 years as an investment bank but they have only been a commercial bank since 2008. So, they have the big advantage of having a globally trusted brand but no legacy technology infrastructure or processes when it comes to consumer banking.

Anyway, last week at the Bernstein Strategic Decisions Conference we learned a little more about what Goldman has planned for Marcus. This is an annual event run by AllianceBernstein that goes back decades and it attracts CEOs from some of the largest companies in the world as they share plans for the company’s growth. David Solomon, the President of Goldman Sachs, and the handpicked future CEO to Lloyd Blankfein, gave the presentation.

You can listen to the full presentation here where you can also download the PDF of his slide deck. While the bulk of the presentation was on the many other Goldman Sachs initiatives towards the end he spent some time discussing Marcus. We learned that Goldman has contributed a significant amount of capital already to Marcus:

Since we started working on Marcus, we’re very pleased with our progress and have invested, through capital spend and operating losses, $600 million, including reserves. That’s up $100 million from $500 million, including reserves, at the end of 2017. It’s important to note that we’ve done this out of our operating earnings while, at the same point in 2017 and the first quarter of 2018, delivering strong returns to our shareholders.

In the slide deck there was just one slide on Marcus (slide 14) but it did reveal some interesting plans for the first time. I have reproduced the slide below (click to view it at full size):