An ironic consequence of the rise in online lending is the massive amounts of paper it's generating, in the form of direct mail.
Goldman Sachs, a recent entrant to the field, is no exception. At the LendIt conference in New York Tuesday, Harit Talwar, head of digital finance at the investment bank, explained this and other components of Goldman’s strategy for its four-month-old online lending division, Marcus.
1. It's tackling a pain point for consumers: credit card debt.
"There are tens of millions of Americans who are paying very high interest rates on their credit cards," Talwar said. "What we perhaps don't sufficiently realize is the stigma around that. If you have a back problem, you talk to friends about it, maybe more than your friends want you to. But if you have high card debt, you tend to be embarrassed. And it doesn't need to be like that."
Through new technology (provided by Infosys) and a simple online application process, Goldman hopes to take some of the pain out of converting credit card debt to fixed-rate two-to-four-year loans.
2. It's kicking it old school with direct mail.
"Who would have thought last year there would be millions of pieces of direct mail from Goldman Sachs?" Talwar said. Yet consumers are responding, he said.
3. It's borrowing culture and office design strategies from startups.
"Because we're a startup we view ourselves as a tech company," Talwar said. "Because we're a bank we view ourselves as a bank."
About a third of Marcus employees are from tech companies like Google, Facebook and Amazon. They work alongside the bankers on one floor, there's no assigned seating, and every wall is a white board. The dress code is almost anything-goes.
Almost. "We ask people not to wear flip flops," Talwar said.
So far, Marcus may sound a lot like Lending Club, SoFi and Prosper, the startups whose ups and downs have defined online lending in the last few years. But the Goldman unit is doing a few rarer things as well.
4. It's light on fees.
"Consumers are really irritated by fine print, especially when it comes to fees," Talwar said. "We take a bold stance: no fees ever. No origination fee, no prepayment fee, or late fee."
5. It's turned off automated voice response.
"Consumers have said no matter how much technology you have, we also want a human touch," Talwar said. "So when they call, they don't like machines – press 1 for this, press 2 for that. I think we're probably the first major call center that has no IVR machines."
ThIs makes call center workforce planning difficult, he said. But when customers do call, an agent picks up the phone within 10 seconds.
6. It lets people defer payments.
This isn't for everyone necessarily, but those who make 12 consecutive payments on time earn a pass. They can contact the bank to defer one payment with no fees or extra interest, so a 32 -month loan becomes a 33-month loan.