New details emerged Monday, via The New York Times, about Goldman Sachs' plans to enter the online consumer lending business.

Goldman is discussing making unsecured personal loans of $15,000 to $20,000, which might be loaded onto prepaid cards, according to the Gray Lady's anonymous sources. Small-business loans may come later, the paper reported.

The Wall Street giant is building out a staff that could have as many as 100 people by the end of 2015, the Times reported. The company hopes to make its first consumer loans in 2016, according to the Times.

[Coming this November: Marketplace Lending + Investing. Hear how participants in this fast-growth niche are using data and technology to propel lending into the 21st century.]

The paper also reported that Goldman plans to finance the consumer loans using certificates of deposit that it has been amassing, and may eventually securitize the loans. Goldman is probably going to focus on prime borrowers, according to the Times.

Other news outlets reported last month that Goldman recently hired Harit Talwar, a longtime executive at Discover Financial Services, to lead the new consumer lending business.

Here are three points to consider regarding Goldman's bet on U.S. consumer lending.

Reputation matters.
Matt Taibbi of Rolling Stone famously described Goldman in 2010 as a “vampire squid wrapped around the face of humanity.” You may disagree with that colorful metaphor, but there's no doubt that Goldman's brand has taken a hit in the wake of the financial crisis.

By contrast, a sizable part of what marketplace lenders such as Lending Club and Prosper Marketplace are selling to borrowers is the seductive sheen of the tech sector.

The Times hints at one possible way around Goldman's reputational problem.

Goldman has not decided whether to attach its name to the loans or market them under another brand.

Big validation for big data.
The Times presented the story as a man-bites-dog tale.

Goldman Sachs has spent 146 years largely as the bank of the powerful and privileged. Now the Wall Street powerhouse is working on a new business line: providing loans that can help you consolidate your credit card debt or remodel your kitchen.

It may be surprising that the investment banking titan has decided to enter a consumer-oriented business. But arguably the bigger story is that the firm widely thought to be Wall Street's smartest is putting a lot of money behind the hypothesis that technology and the use of data analytics will fundamentally reshape the lending business.

For the fast-growing marketplace lending industry, Goldman's investment represents a major validation.

It's a balance-sheet play.
There's an important caveat to that last point about Goldman giving its imprimatur to marketplace lending: Goldman plans to hold the consumer loans on its balance sheet, unlike companies such as Lending Club and Prosper.

Skeptics of marketplace lending argue that much of the hedge-fund money, and other institutional cash that has flooded into the sector in the last few years, is likely to leave just as quickly when interest rates rise, and yields on other types of investments rise.

If that happens, marketplace lenders could be vulnerable. Goldman would not be.

Some on Twitter speculated Monday that Goldman's move into consumer lending reflects a bet that interest rates will rise.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.