Goldman Sachs Group Inc. hired Harit Talwar, the head of Discover Financial Services’ U.S. cards division, to help develop an online lending effort for individuals and small businesses.
Talwar will join as a partner and will work with “a group of senior leaders across the firm who will provide oversight,” according to an internal memo from Chief Executive Officer Lloyd C. Blankfein and President Gary Cohn. Discover said last week that Talwar is resigning effective May 8.
Goldman Sachs, which has largely steered clear of retail businesses, is seeking to join startups such as LendingClub Corp. in using technology to disrupt traditional banks. Rather than apply a peer-to-peer model that others have used, the investment bank will boost loans at its Goldman Sachs Bank USA subsidiary.
“The firm has identified digitally led banking services to consumers and small businesses as an area of opportunity for GS Bank,” Blankfein and Cohn said in the memo, which was obtained by Bloomberg News. “Today, we see an opportunity to leverage our competencies in technology and risk management to capture this opportunity at accretive returns and without the burdens of legacy costs and fixed infrastructure.”
GS Bank had $73.1 billion of deposits and $37.3 billion of loans at the end of 2014. The firm has increased lending to its private wealth management customers, and this latest push is separate from that.
Talwar oversaw a $54 billion card portfolio at Discover, where he previously served as chief marketing officer. He has also worked at Citigroup Inc.
New York-based Goldman Sachs is still determining several parts of its online lending strategy and is unlikely to have any major operations this year, according to a person with direct knowledge of the discussions. The firm is considering several potential types of loans for consumers and small businesses, and isn’t interested in subprime lending, said the person, who asked not to be identified without authorization to speak publicly.
Goldman Sachs, which became a bank holding company during the 2008 crisis, has promoted the benefits of focusing on institutional businesses. The firm does have some interaction with a wider swath of individual clients through its mutual fund business.
The bank is attracted to online lending because, like mutual funds, it doesn’t require branches or a large consumer-facing workforce, the person said. While Goldman Sachs is seeking to increase the amount of loans on its balance sheet, it hasn’t ruled out including other firms in the effort or securitizing the loans at some point, the person said.
Goldman Sachs has developed other financial services businesses that are outside its core areas of investment banking, trading, asset management and merchant banking. In 2004, it started a reinsurance unit that grew to more than $1 billion in annual revenue. The firm sold a majority stake in the business in 2013 after new capital rules increased the cost of keeping the unit.
Goldman Sachs’s research division released a report in March on the future of finance and the impact of technology. The report identified $1.7 trillion of consumer and small business loans that could be “served more efficiently through the online lenders.”