Goldman Says It Can Beat Fintech Ventures With Online Loan TermsBy
Head of banking arm discusses lending push at conference
Using balance sheet ‘will avail us of certain flexibility’
Goldman Sachs Group Inc., the Wall Street investment bank pushing into online consumer lending, expects it can make loans on more competitive terms than Silicon Valley upstarts that pioneered and dominate the business.
Using deposits to fund loans -- rather than drawing on outside investors -- will give the firm more leeway when setting terms and fees, Stephen Scherr, head of the company’s banking operations, told an industry conference in New York on Tuesday.
“We view this as a balance-sheet activity," he said. “That will avail us of a certain flexibility in the design of the product.”
Goldman Sachs, long focused on big clients including corporations and investment funds, is looking to consumers to boost revenue and bolster its balance sheet after becoming a bank-holding company in the wake of the financial crisis. In April, it completed the purchase of General Electric Co.’s online bank, adding $16 billion of deposits. The securities firm has since started a website where customers can open an account with as little as $1. And it’s rolling out a new consumer-lending operation this year called “Marcus by Goldman Sachs” after the company’s founder.
Scherr, 52, Goldman Sachs’s chief strategy officer, took on the additional role of chief executive officer of banking operations in May. Its lending platform plans to make unsecured loans online to consumers with strong credit histories for purposes such as debt consolidation, a person familiar with the matter said last month.
That’s a business that was popularized by ventures such as LendingClub Corp. and Prosper Marketplace Inc., which match borrowers with investors looking to earn money on interest. The platforms grew rapidly after the financial crisis, but have struggled to draw enough funding to continue the streak this year after an uptick in write-offs spooked some loan buyers. Some of the ventures have been boosting interest rates on risky debts to shore up investor demand.
Goldman Sachs last year hired Harit Talwar from Discover Financial Services to help develop the online-lending push. The initiative, which has been referred to internally as Mosaic, is expected to be unveiled in October, the person said last month.
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