With entire cities shutting down due to the COVID-19 crisis, consumer preferences moved full force from physical engagement to digital alternatives. This migration to digital technologies advanced at a speed unforeseen even a few months ago, with firms like Amazon, Netflix, Zoom and Instacart leading the way. While all indications are that consumer behaviors and preferences will continue to shift, the growth in the use of digital services is clearly here to stay.
This shift to digital also changed the way consumers did their everyday banking. Financial institutions needed to immediately support digital account openings, digital loan payment deferrals, online and mobile customer care and simple transactions without the availability of branches. This resulted in exponential growth in use of remote deposit capture and other digital capabilities by consumers. This shift also exposed gaps in digital functionality at many organizations.
Because of the inability of many financial institutions to deliver delightful digital experiences, consumers may be re-evaluating their financial institution relationships coming out of the pandemic. Consumers may move to larger financial institutions that provided expanded digital capabilities, or to smaller community banks and credit unions that were more proactive in serving consumer needs on a personalized basis. Or maybe consumers have already found options from fintech firms that combined advanced technology with frictionless engagement.
Marcus Gains Customers During COVID-19
One financial institution that stands to benefit from the move to digital banking is Marcus by Goldman Sachs. At a time when many traditional fintech firms struggle to gain scale, funding, and brand recognition in an increasingly crowded banking ecosystem, Marcus has leveraged the power of digital technology, and over a century’s worth of brand expertise, to create a powerful digital banking brand that continues to grow.
Goldman Sachs entered its consumer banking platform Marcus in 2016. Through acquisition, partnerships with firms like Apple and Amazon, and significant organic growth, Marcus has grown into a multi-product platform with $80 billion in deposits across the U.S. and U.K., and $7 billion in consumer loans and credit card balances, as well as millions of customers in the U.S. and the U.K. All without the traditional brick-and-mortar branch model.
Marcus has been so successful in generating new savings accounts recently ($27 billion from 500,000 customers) that it had to shut off its Marcus savings accounts to new customers in the U.K. after less than two years to avoid regulatory restrictions there.
I was very fortunate to be granted an exclusive interview with Dustin Cohn, the head of brand and marketing over at consumer investment management for Goldman Sachs and the Marcus brand as part of the Banking Transformed podcast. I’ve been following the Marcus brand from the inception and have written about the growth of the brand in the past for The Financial Brand.
The following is an excerpt from the podcast.
Previous Articles About Marcus by Goldman Sachs:
- Marcus: A Digital Bank That Should Keep Rivals Up At Night
- Marcus by Goldman Sachs: The Future of CX + Fintech in Banking?
What has been the recipe for success for the Marcus brand to date?
Cohn: A couple of things are at play. One is that we started with a blank sheet. We did not have legacy technology, we didn’t have any legacy products, and really no legacy internal organization to deal with. We were able to think with a very open mind.
We also leveraged consumers to help us build it. By understanding consumer pain points in financial services and in the banking industry, and designing products, and designing an experience, and designing messaging with those pain points in mind, we could give consumers the experience and the value in products that they deserve – that’s the first piece of it.
The second key ingredient is the mix of people. We have about a third of our employees on Marcus by Goldman Sachs from Goldman Sachs itself. We have about a third of our employees from consumer finance outside of Goldman Sachs, who can bring best practices across the industry and across different organizations. And then, about a third of us, like myself, come from outside financial services completely. We can bring best practices from completely different industries.
Do you believe your broad non-financial experience helped?
Cohn: There’s no question that it helped me, because I didn’t grow up in financial services. So there really were no preconceived notions in terms of what consumers really wanted, or how to leverage an existing infrastructure. It was through the lenses of the consumer that I helped lead the build of the brand.
Complimenting it with experts who have grown up in financial services, along with experts at the firm, created a unique combination. It’s the blend … I don’t think you can go one way or the other … it’s that unique blend.
Did your background as a brand marketer help?
Cohn: My past in consumer packaged goods helped a lot because while product obviously is king, and the efficacy and the functionality behind product is ultimately what’s most important, we also recognized how important the brand itself is. The last thing we wanted to do was to always have to compete on having the highest rate on a savings account, or the lowest rate on a personal loan.
At the same time, we understood the need to add value in other ways through our content, and our support, and our customer service experience. There is also pride in being a Goldman Sachs client, or customer, and that’s how we landed on the brand architecture of Marcus by Goldman Sachs.
“Marcus” signals something new and different for consumers, and creates relevancy, and more of a digital approach. At the same time, the “by Goldman Sachs” says this is an institution that’s been around for 150 years, and is stable, and there are financial experts. It was the best of both worlds that helped us create Marcus and grow the way we’ve been growing.
How does Marcus determine how to expand the brand?
Cohn: It first starts with understanding what the white space is in the market, and where those pain points are, and what partnerships can address those pain points. The other aspect about this is how do you combine what people love about traditional banks – which is the stability – with the customer experience that people love about the fintech firms?
When we think about our partnerships we ask, “Who can fit this unique model that we have, where we straddle both worlds of being a traditional bank, and also being a fintech, and also an early stage business?” It’s a cultural thing as well.
How do you balance the Goldman Sachs and Marcus cultures?
Cohn: I think they’ve dovetailed, over time. I think the Marcus culture, in the very beginning, was pretty unique to the firm, just in terms of having marketers, and engineers, and consumer marketing people. It was a little bit of a different animal for the firm.
Over time, some of the things that Marcus was doing a little bit different got adopted by Goldman. Even little things like dress code. It’s hard to attract and maintain a lot of engineers and marketers if you make them wear a suit and tie. I think we influenced the fact that people wear jeans at Goldman Sachs now, and they didn’t really do that five years ago.
At the same time, I think there are processes and capabilities that Goldman had that really quickly started to get embraced and integrated into what Marcus was doing.
How does Marcus position itself as being more ‘human’?
Cohn: It started with our naming. As we explored literally 10,000 different names, we ultimately landed on Marcus for a variety of reasons. One is obviously the connection to Marcus Goldman, who founded Goldman Sachs 150 years ago. The Marcus name made us more friendly, accessible, human. It created this one-to-one personal conversation for consumers, so it did start there.
But we also did our homework to understand the needs of our consumers that would make them comfortable with not having branches. The number one need we found, early on through this research, was consumers wanted a call center where a human picked up the phone. While consumers want self-serve and a digital experience, they also want the ability to talk to a human being when they want.
We actually did not have an IVR [interactive voice response system]. So when the phone rings, we pick up saying, “Hello, Goldman Sachs.” Many people are startled initially.
How have loan and savings products performed at Marcus?
Cohn: From a savings perspective, growth has accelerated during this crisis. As the market is extremely volatile, people are looking for things that are a bit more stable, something that’s FDIC insured. We have seen excellent growth in our no-penalty CD product, that has a 13-month maturity, but where you can take your money out early and not have any sort of fee or penalty, keeping the interest that you’ve earned up until that point.
Lending has been stable. We do a good job in terms of risk management, so our portfolio is performing as we expected. With our loan product, we again developed a product with consumers at the center of everything. You would expect people to say, “I want a loan product without fees,” but for us to truly claim no fees, ever … we could not even charge a late fee. This transparency has helped the growth of the product over time.
That’s another thing that makes us “human” at Marcus.
Is being perceived as ‘human’ more important due to the impact of COVID-19?
Cohn: I’m sure because of COVID-19, people have some insecurities about their personal finances. They may lack confidence in terms of knowing what the right thing to do is, and understanding what their options are. That’s where transparency becomes even more important … no surprises.
We took consumer feedback, and front and center spelled out how we make money – because that’s really what people question. “Well, if you don’t charge fees, how do you make money?” Well, it’s from interest, and here’s how the interest is calculated, and you can actually compare our interest rate to interest rates that you have. So transparency actually is not only an anti-competition element, it’s also something that is a marketing device. If you’re really transparent with consumers, then you earn their trust.
But, when you get into an environment like this, obviously we need to be ultra sensitive to how people are feeling, and the stresses we’re all having. It’s hard to be funny in this environment. Right now, we’ve definitely been very respectful of the environment, and how consumers are feeling.
What was the strategy behind partnering with Apple and Amazon?
Cohn: When we created the Marcus platform, it was scalable. “Banking as a service” is a strategy of ours, so the Apple Card is a great example of building a chassis, and having banking as a service. We’ve been extremely happy with that partnership.
With the Amazon partnership, we’re wanted to offer small business loans to Amazon vendors and partners. This again expanded upon our banking as a service functionality, while also really being focused on growing our own branded products as well.
Despite having lending and savings products, why no checking account?
Cohn: We announced at Investor Day in January that we’ll be launching our checking business in 2021, so we’re excited about that. We wanted to ensure that when we launch something, we want it to be differentiated. We want it to solve pain points. We want it to create real value for our consumers.
To do something that is differentiated and done really well takes a little bit of time. People forget that we’ve only been around for three years. We’ve grown pretty substantially in that three years, but we try to do it in a very thoughtful, methodical way. So we over-deliver on that experience, and the value behind the product.
Is it possible to acquire a legacy bank to offer checking accounts?
Cohn: We can’t rule anything out. There has been a philosophy if we think we can build it better, we’ll build it ourselves. If we think somebody else is doing it better, we would obviously contemplate buying it. In many cases, there’s a bit of a hybrid as well. Our strategy is really around borrowing, buying and building, with the mix depending on what the needs are, and whether we think we could do it better than the next guy.
How important is technology and R&D at Marcus?
Cohn: Technology has allowed us to develop some very unique products. It’s also allowed us to be more human even though we’re digital, or more personal even though we’re digital. It comes back to technology and engineering to provide personalized experiences.
The acquisition of Clarity Money is a good example of technology and helping consumers connect the dots. Consumers can link all of their accounts, regardless of whether they pay some of their bills on their credit card, some of their bills out of their checking account, some of their bills out of their savings account, we’re able to connect those dots and say, “Here’s how you’re spending your money.” And we can help people think through better ways of saving and budgeting.
That’s another good use of technology where we’re trying to just simplify personal finances and give options that allow for good choices.
Can you explain the ‘Content Hub’ at Marcus?
Cohn: Yes, we have a very robust content hub, with insights and resources, to help simplify consumer finance and help people explore options. If you go to our content hub and read about home improvement loans, we’ll actually tell you if a personal loan from us may not be your best option. Maybe a HELOC or spending on your credit card is better.
So we are product-agnostic, and want to explain to people what their choices are so they can make informed decisions. That’s another real point of difference for us, providing that education – that information – so people can compare different approaches and different options.
Does Marcus benefit from the changing consumer behavior post-COVID?
Cohn: One of the headwinds we faced in the past was that, while people hate going to their branch, they find comfort in knowing they can physically go in and speak to a human being if you’ve got a problem.
The COVID crisis has forced many people to turn to digital — it was really their only option. We’re finding is customers are saying, “Jeez, this is easy, this is convenient. I can bank from my couch, and from my phone. And oh, by the way, these big traditional banks, I must be paying some way for it, right? I can get a lot more with a digital offering like Marcus by Goldman Sachs.”
COVID-19 has made people recognize that they don’t need to physically go into a branch to do what they need to do, and can get so much more value because digital organizations can pass the savings on to the customer. That is a shift, not just in banking, but in other industries, where people have relied on physical presence.
I think people are starting to realize that, in many cases, you just don’t need a physical presence. And actually, the customer wins with better customer experiences and more value in their products.
Finally, what consumer brand do you admire?
Cohn: I’m a big fan of Warby Parker. They do a really nice omnichannel experience. Their products are high quality. And the value and the price point are spot on. Also, the connectivity between the in-person retail experience and the online digital experience is practically seamless.
I love the at-home experience of being able to try on five different pairs of glasses, and you send back the ones that you don’t like. I think they’ve created a real sense of community on top of all that. They do incredible, charitable work in terms of donating glasses to those who can’t afford glasses. So they are a brand that I respect and admire, for all those reasons, and I think some of that same culture and philosophy, and consumer centricity, you would find in Marcus.