How do you build an upstart online lending business if you're a big, heavily regulated bank holding company? Very slowly.
That was the loud and clear message repeated several times by Goldman Sachs during a conference call with analysts and investors Tuesday.
Last week Goldman launched Marcus, its much-anticipated consumer lending platform. The business is the first foray by the Wall Street giant into the world of consumer lending — and it is expected to give marketplace lenders a run for their money.
But Goldman is signaling to investors that it will take a different approach than those once-highflying fintech competitors. Following a following a period of rapid expansion, Lending Club, Prosper Marketplace and others have stumbled in recent months, as profits have plunged and institutional investors have raised concerns about credit quality.
Growing too fast won't be a problem at Goldman, according to Harvey Schwartz, the company's chief financial officer.
"We have said so many times that this is going to be a very deliberate and methodical approach, a bit of a crawl before we walk," Schwartz said on the call, without mentioning other companies in the space. "We are well aware that this is a new effort for us."
Goldman is not currently required to disclose the performance of its retail banking operations, which are too small to materially affect results. The company this spring also launched GS Bank, an online deposit platform.
But Schwartz said retail operations, though new, are showing signs of progress. As an anecdote, he said he received an email Monday night, telling him that Marcus booked its first consumer loan.
Growth will continue to be "deliberate and slow" in the short term — but it may be a key driver for the company down the road, he said.
Marcus will initially be available by invitation only, to prospective borrowers who receive a special code in the mail. The company said last week that it sent the code to "millions" of consumers who are not currently Goldman clients.
"We built this business to be accretive in the long run to Goldman Sachs returns," Schwartz said.
Earlier this year, Lending Club — the most prominent online lender — ousted its founder amid allegations that the company falsified loan documentation to meet the specifications of a particular loan buyer. Other online lenders have cut staff, amid reports of waning interest from retail investors.
During the call Thursday, Goldman reassured analysts that it cognizant of the reputational risk that comes with expanding online consumer lending.
Schwartz said the company worked with 10,000 consumers to design the new online loan product. The loans will be targeted at customers with FICO scores above 660.
The platform includes a number of perks. Marcus also allows consumers to choose their monthly payment date, among other customizable features. Additionally, borrowers who make 12 consistent payments have the option of deferring a loan payment for a month, with no charge.
"Some of these things sound simple but they're quite important in terms of what consumers want," Schwartz said, adding that it helps deliver "what the regulators want also."
Schwartz declined to speculate about whether Goldman's new consumer lending unit will develop into a major business line, alongside the company's investment and advisory units.
But he said company will continue to update investors about its progress in the coming months.
"Obviously to the extent to which down the road … it has material contribution, we could talk about highlighting more," Schwartz said. "But I think it will get a lot of attention as it grows anyway."