Goldman Debuts Marcus Online Loans to Disrupt Cards

  • Wall Street firm is making push into consumer banking
  • Seeks to parry Silicon Valley upstarts in web lending

Goldman Sachs Group Inc., the Wall Street investment bank pushing into retail banking, debuted an online-loan service and said it will target consumers with credit-card debt.

The website for the Marcus by Goldman Sachs venture went live Thursday, after months of speculation about how the New York-based bank would design the product. Initial loan applications will require a code mailed to millions of pre-selected customers, according to a statement Thursday from the New York-based bank. Consumers can get a no-fee, fixed-rate loan for as much as $30,000 and pay it back in two to six years, according to the statement.

“Marcus offers an option for consumers who are searching for a simpler alternative to credit-card borrowing, where rates can change and multiple fees can be charged,” Harit Talwar, the Goldman Sachs partner who’s leading the initiative, said in the statement.

Goldman Sachs is pushing into consumer lending to boost revenue and bolster its balance sheet after long avoiding Main Street in favor of big clients including corporations and investment funds. The securities firm has started a website where customers can open an account with as little as $1. Stephen Scherr, head of the firm’s banking operations, has said those deposits may help the company offer loans with more competitive terms than Silicon Valley upstarts that pioneered and dominate the business.

For example, the product won’t have any fees, including origination or late charges, and customers will be able to choose the length of the loan, the monthly payment and the payment date.

Customers will also have an option to defer one month after making 12 payments on time, which they can use, say, at a time when it’s hard to pay their bills, in return for extending the term of the loan an additional month. Annual percentage rates will initially range from 5.99 percent to 22.99 percent, with an average of 12.99 percent, Goldman Sachs said.

Debt Stigma

“There is a stigma around the word debt,” Talwar said in an interview. “People are not very comfortable talking about it. We think we have an opportunity to serve our customers in our target market by being able to talk about debt in a non-intimidating fashion.”

Goldman Sachs began exploring the option of starting a consumer-loan product about two years ago, around the time it was helping LendingClub Corp., which also offers loans online, sell shares to the public. The company hired Talwar from Discover Financial Services in May 2015.

The bank will target prime consumers, or those typically thought to have a credit score of 680 or above. Customers will have an option to reject an arbitration clause in the contract, as long as they make their choice by phone or mail within 90 days of agreeing to the loan.

While the bank sent offers to millions of people who have more than $10,000 in credit card debt, have used a competing loan product like those offered by LendingClub Corp. or Prosper Marketplace Inc., or have another attribute identified by Goldman, the bank plans to eventually open the product to a broader audience, according to the statement.

Goldman Sachs has about 200 people on the Marcus team, at least 120 in New York and an additional 80 at its Salt Lake City call center.

(Corrects to remove reference to higher interest rate in fifth paragraph.)
    Before it's here, it's on the Bloomberg Terminal.