(Adds details on terms, competitors, analyst comment and name,
By Olivia Oran
NEW YORK Oct 13 Goldman Sachs Group Inc
has launched a new online lending business that targets
borrowers saddled with credit card debt, the bank said on
The business, called Marcus by Goldman Sachs after 1869
founder Marcus Goldman, represents its first major foray into
consumer lending as it tries to earn more from the $124 billion
in deposits it has on its balance sheet.
Marcus, which officially launched Thursday, will offer
uncollateralized personal loans that can be paid off in two to
six years of up to $30,000 to so-called prime borrowers who want
to manage their credit card debt. These type of borrowers
typically have a credit score of at least 640.
The bank hired former Discover Financial Services
executive Harit Talwar more than a year ago to help formulate a
digital lending strategy. Marcus engineers wrote their first
line of code for the product last November.
Goldman surveyed over 10,000 customers about their borrowing
experience and found they were frustrated by hidden fees,
changing interest rates, boilerplate payment options and
difficulty in reaching a human customer-service representative
when they encountered problems.
As a result, Marcus does not have any fees, has a fixed
rate, allows customers to create their own payment dates and
offers live customer support representatives with its own
employees in a call center in Salt Lake City, Utah.
Goldman says that Marcus can save customers 300 to 500 basis
points compared to other loan products. Marcus is also
customizable, meaning customers can choose their loan amount and
Marcus aims to be a simpler, more transparent option for
borrowers than competing products offered by credit card
companies and online lenders like LendingClub Corp. The
Marcus website touts: "We keep things simple. No jargon. No
tricks. Just straight talk."
Goldman executives said Marcus' lack of a legacy IT
infrastructure, sophisticated risk management system and ability
to fund loans through the bank's balance sheet gives the
business an advantage over other lending rivals.
Marcus represents part of Goldman's long-running effort to
reinvent itself after the 2007-2009 financial crisis, during
which it obtained a banking license and came under scathing
criticism for profits it earned from the U.S. mortgage market's
Evercore ISI analyst Glenn Schorr estimated that Marcus
could generate a return on equity of 15 percent to 20 percent as
it becomes larger over time.
Earlier this year, Goldman launched a complementary
deposit-taking platform after acquiring GE Capital's online
bank. Its moves are similar to those of chief rival Morgan
Although Marcus is a digital platform, borrowers will
initially only be able to apply for a loan after receiving a
code in the mail. As of Thursday, borrowers can use those codes
The Marcus business has around 200 employees, the majority
of whom are on the 26th floor of Goldman's New York
headquarters. Marcus fashions itself as a startup within
Goldman, with an open floor plan, white boards for brainstorming
and product design and a shared "living room" for employees to
gather complete with a popcorn machine.
About one third of Marcus employees hail from traditional
financial institutions such as Capital One Financial Group
and Citigroup Inc. One third are from consumer
technology companies such as Amazon.com Inc and PayPal
Holdings Inc and the remaining employees from within
Marcus was selected as the new brand's moniker after
internal discussion and market research from more than 2,000
choices. Goldman executives said the name was picked in part
because it sounds friendly and accessible. Consumers also felt
more comfortable sharing personal details with a business that
had a close association with the Goldman name.
(Reporting by Olivia Oran in New York; Writing by Lauren Tara
LaCapra; editing by Grant McCool)