The introduction of a Marcus-branded no-fee, interest-bearing checking account is moving closer to reality as internal testing of the product has expanded to all 20,000-plus U.S. employees, according to Stephanie Cohen, Goldman Sachs’ Global Co-head of Consumer and Wealth Management. This move by Goldman to become a primary transaction hub by the end of 2022 is the latest in a series of significant expansion moves made by the bank.
The Marcus brand was introduced in 2016, with both no-fee personal loans and high-yield FDIC-insured online savings. Both of these products leveraged established customer bases, such as a deposit platform acquired from GE Capital. Other acquisitions included Clarity Money, a personal finance management app offering actionable insights, the General Motors credit card portfolio, and the recent addition of B2B2C point-of-sale borrowing options from GreenSky.
Combined with the relationships built through the introduction of the Apple Card in 2019, the Marcus brand currently serves more than 13 million customers (up from less than ten million in the fourth quarter 2021) with an array of personal finance and investment tools available through a smartphone app. This established customer base, combined with scale and brand recognition of Goldman Sachs could easily change the battle for retail digital banking relationships.
I was fortunate to have Swati Bhatia, Partner and Head of Direct-to-Consumer Business at Marcus as a guest on the Banking Transformed podcast. She discussed the continued product expansion of Marcus by Goldman Sachs, and how Marcus intends to become a dominant force in the retail banking.
The following are major takeaways from the podcast.
A Foundation of Research, Engineering and Simplicity
Before Marcus even began, there were conversations with 10,000 consumers to understand their unmet financial needs. Since then, Marcus has spoken to a 100,000 customers to get feedback on products offered and on the Marcus app.
From a back-office perspective, the business team and engineering team work hand in hand together to build a digital bank. According to Bhatia, engineers make up a quarter of employees at Goldman Sachs, and their teams are at the forefront of innovation in the financial services space.
The brand’s focus is also on simplicity and value-creation. “It is about making every step of the experience better than it used to be”, states Bhatia. “It’s about creating more value for the consumer. It’s actually understanding their need and solving for those needs, working to an end where our financial expertise is available at all customer touch points.”
Strategic Acquisitions Supplement Organic Growth
Goldman Sachs has never shied away from acquisitions to scale-up its Marcus consumer banking unit. In every instance in the past, Goldman has sought out digital businesses that grow their customer base and provide unique technologies. Building a branch network has never been a focus for the bank.
In addition to a robo-advisory service, the growth of Marcus has been achieved through high-yield savings and no-fee loan growth as well as their credit card joint venture with Apple and recent acquisition of the GM Rewards Card customer base. The entire growth strategy at Marcus is a mix of partnering and growing the business organically, according to Bhatia. “We use digital channels, paid media, earned media and podcasts for getting our story out there and organically acquiring customers.”
GreenSky is the most recent acquisition by Goldman in support of growth at Marcus. To expand the current direct to consumer lending business, it was believed that point of sale lending was an important customer need that provided a unique embedded finance opportunity. GreenSky is a market leader in providing home improvement point of sale financing. Bhatia mentioned in the podcast that GreenSky provides immediate access to millions of customers, with an expectation to be able to add one million new customers per year from the platform.
“We have several products, but we are shooting for the experience of our customers to be an integrated end-to-end experience on our website and on our app seamlessly across products.”
— Swati Bhatia, Goldman Sachs
As with all of the acquisitions made by Marcus in the past, new customers are integrated into the Marcus ecosystem and are serviced through the Marcus digital app. They also have access to all Marcus products. “We have several products, but we are shooting for the experience of our customers to be an integrated end-to-end experience on our website and on our app seamlessly across products,” states Bhatia.
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The Coming Introduction of Marcus Checking
As referenced, Goldman Sachs is piloting a new checking account with its employee base in advance of a potential introduction later this year. This digital-only, no-fee checking, account with debit card is expected to be offered to both the existing 13 million customer base of Marcus, but also the customers of Goldman Sachs and the general public. According to Goldman Sachs Chief Financial Officer Denis Coleman, “Goldman plans to build ‘the leading global digital consumer bank’.”
According to Insider Intelligence, having a complete array of financial services, including a Marcus checking account, positions Goldman Sachs and Marcus well when the high-net-worth individuals who already are Goldman Sachs’s private wealth management customers pass along their assets to their children. According to the research referenced by Insider Intelligence, the average potential of each relationship is $60 million.
“We believe checking is a tip of the spear product that will help us in establishing a primary relationship with our consumers,” states Bhatia. “Our focus is on helping our consumers better manage their financial lives, and checking is just going to be a very important capability that will allow us to do that.”
Integrating the Goldman Sachs Brand
Many of the products in the portfolio acquisitions have been targeted toward the middle market. Historically, the Goldman Sachs legacy has been in helping people of substantially greater means. We asked Bhatia how a more down market strategy pays dividends when the consumer isn’t as familiar with Goldman Sachs as they are with Marcus.
“We are excited to extend the Goldman Sachs brand across all wealth levels, where customers can see a world where banking is done entirely digitally, without ever walking into a branch.” For instance, with our investment service, we are leveraging the broader expertise of Goldman Sachs to package it, and bring it to our customers in a digital-first way.”
Another example of how the Marcus brand will become more integrated with the legacy of Goldman Sachs is that the company will be changing the name of Marcus to be “Goldman Sachs Marcus” as opposed to “Marcus by Goldman Sachs”.
Winning the Battle for Consumers
We asked Bhatia what form of financial institution she thinks will be most successful in the next three to five years. Will it be the big legacy banks, community banks, fintech firms, tech companies or a combination of these?
Stated Bhatia, “I think customers will choose their winners. I think the criteria will first be any player that can meet the customer where they are, with a web app based banking solution. Second, they must build a true partner relationship with the customer. Third, they must provide value to the customer. Fourth, there needs to be personalized experiences. And fifth, there must be ‘transcendental magical experiences’ … not just functional ones.”
She added, “If I look at banking 40 years ago, a bank was where you walked into a branch and the people knew you. They probably knew your family, they probably knew what your potential was. And the entire banking experience was based on relationship. Over the past decade or so, the customer became a data point as opposed to being a ‘partner’. Consumers want partnerships and customers will choose their winners.”