Last week I was at the Digital Lending + Investing conference in New York. One of the most interesting sessions there, aside from the one I chaired of course, was a discussion with the leaders of Marcus. Omer Ismail, the Chief Commercial Officer (listen to my podcast with Omer here) and Boe Hartman, the Chief Information Officer were interviewed by Kevin Wack of American Banker.
Here at Lend Academy we have been following the developments at Marcus very closely since they launched a little over a year ago. We learned back in June that Marcus had already originated $1 billion in loans (in just eight months) and at the end of their first year we have now learned total originations have grown to $1.7 billion. This makes Marcus the fastest growing online lender in history, at least in this country.
Goldman Sachs Brings Their Deposit Business Under the Marcus Brand
Earlier this year we wrote about Goldman Sachs Bank aggressively going after deposits. For savings accounts and CDs they usually offer one of the highest interest rates available. They now have 300,000 retail deposit accounts with average interest rates of 1.3%.
Goldman Sachs has been very happy with the way the Marcus brand has been received by consumers given their success with personal loans. So much so, that they are going to rebrand their deposit offering from GS Bank to Marcus. This will mean that both retail deposits and lending will be under the Marcus brand. Ismail said at the conference that Marcus has reflected positively on the Goldman Sachs brand and now they will be extending that brand.
The deposit business is expanding to the UK. They plan to launch there in the middle of next year. They have no other countries on the roadmap, they will focus on the US and UK businesses for now. And the Marcus brand will be front and center in both countries.
Loan Performance Will be Key
While it is still early days in their lending business Goldman Sachs is showing that they are a force to be reckoned with. I have been impressed with their execution so far and their approach to user experience has been outstanding.
Now, having said all that, we have learned that fast origination growth, while impressive, is not nearly as important as the quality of underwriting. Given that Marcus has only been issuing loans for a little over a year we don’t have much of a window yet into their loan performance. Also, their decision to keep all their loans on their balance sheet means they won’t be tapping the securitization markets, so that won’t provide a window either. We will have to rely on what Goldman Sachs reports in their public filings.
My Take
On a panel at LendIt Europe last year, just days before the launch of Marcus, I remember asking a group of US industry leaders on what they expected from Marcus. Most thought that they would struggle given their lack of history in consumer credit and the fact that their brand was built for wealthy investors not the mass market consumer. Ram Ahluwalia of PeerIQ was the lone dissenter. I remember him saying it is a brave person who underestimates Goldman Sachs. At least so far that is proving to be true.
Here is how I see it. The entry of Goldman Sachs into online consumer lending is a good thing for the industry. It has given more legitimacy to the online lenders and brought more awareness to personal loans. Sure, it has also brought competition. But despite all this competition for debt consolidation loans, according to the latest Federal Reserve data total revolving debt has grown from $952 billion to $1.01 trillion in the past 12 months. Clearly there is room for many successful entrants in the personal loan category. And I will be surprised if Marcus isn’t right at or near the very top.
