What’s next for Goldman Sachs’s Marcus

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Marcus, the digital-only consumer bank Goldman Sachs launched four years ago, is undergoing a leadership change.

As part of a slew of organizational moves this week, Goldman CEO David Solomon named Harit Talwar — who has led Marcus since its inception — the chairman of Goldman's consumer business, which is essentially Marcus. Talwar's protege, Omer Ismail, will become global head of the consumer business starting Jan. 1. Solomon said Talwar will continue to provide strategic advice to the company and remain a partner.

Marcus posted strong numbers under Talwar. It now has 5 million customers, which puts it a little behind the challenger bank Chime (8 million), on par with MoneyLion (also 5 million) and ahead of Varo (2.5 million) and Current (1.5 million). If you compare Marcus strictly against other bank-owned digital banks, it looks even better: JPMorgan Chase’s Finn was shut down and reabsorbed into the larger bank, and Citizens Financial Group's Citizens Access has 60,000 customers.

Harit Talwar, global head of consumer business (Marcus), Goldman Sachs
"We want to have our product manufacturing capabilities embedded in other ecosystems so that we meet the customers where they are," says Harit Talwar, who will become chairman of Goldman Sachs's consumer business in January.

Marcus has $92 billion in deposits — including $65 billion in the U.S., which it helped build by acquiring $9 million from General Electric in 2016. It has $7 billion in loan and credit card balances and $1 billion in annual revenue; Marcus launched the Apple Card with Apple last August and a business line of credit with Amazon in June. It also bought the personal finance app provider Clarity Money in 2018.

A challenge going forward for the unit, which has 2,000 employees, will be to blend the disparate products it offers into a single strategy.

In an interview, Talwar — a veteran of Discover Financial Services, Morgan Stanley and Citigroup — shared his thoughts about his new job, what Marcus has accomplished to date and what it might do in the future.

Why are you moving to this new role?

HARIT TALWAR: Because when I joined five years ago, I set a mental clock for myself that I would like to be here for five years. And the only caveat I had was would I survive five years and will the business be in a place that I would feel good about it — will we have the talent and depth in the team to weather crises? Since we can checkmark all of these, I thought, this is a great time to evolve to a more strategic role. And I feel particularly blessed that Omer, who's been by my side right from the first day and is a very talented person, is taking over. When I left Discover my No. 2 person took over for me, and when I left Citi my No. 2 person in that job took over from me. So I feel fortunate that I have been part of good succession planning.

So you’re saying this was your decision?

Yes. And I’m blessed by that.

News outlets have reported that you've been asked to join HDFC Bank in India. Can you say anything about that?

I had conversations with them. I was very flattered, very honored. I think it's a fantastic franchise and a fantastic job, but for personal reasons it didn't work for me to return back to my country of origin.

How do you see your new role? What might your day-to-day work life be like now?

The first, important thing is that I'm not going. I’m continuing in my current role, responsible for everything, until Jan. 1. I become chairman Jan. 1. I will remain a partner at the firm. This is a business I have built with a great amount of care, in making it customer-centric and technology-driven with a grip on credit risk management and reputation management. We want to make sure that this transition is smooth, and I am excited to continue to help Omer and the business and the team to develop this business to greater heights.

I'm not leaving. To me, the real story is what we have done as a firm and as a team. And I'm not counting it merely in terms of the statistics, though they are impressive. ... The real story is building a modern digital consumer bank inside a 150-year-old preeminent investment bank.

It was a new business, a new customer segment, new products, new team, a new engineering platform, and we made it happen. There were so many skeptics, not just outside the firm, but also inside the firm.

The essence and the culture we have embedded in the team is if you look after the customer and you look after the team, then everything else falls into place. Technology is important, and data is important, and [artficial intelligence] is important, and design is important, and marketing and risk management, etc. But the real magic is not in any one of them. The real magic is trying to put them together and make life easier for the customer.

We had the advantage of starting with a fresh piece of paper. We had the balance sheet and risk management and employment brand of Goldman Sachs. These things are important to be a successful disrupter in a regulated industry. And we had the audacity to think big.

What do you think might've been the key to getting [$92 billion] in deposits in a relatively short time?

On the deposit side, we bought a platform from GE in 2016 that had $9 billion of retail deposits. Today, that $9 billion has grown to $65 billion, plus we have another $27 billion in the U.K. And we have done it the old-fashioned way, which is give good value to the customer, make it simple, make it transparent. Yes, the interest rate we offer is attractive, about four times the national average. We can afford to do that because of the business model choice of not having branches, which I think are a dinosaur. More than 95% of our account opening happens without any human intervention.

One of the interesting things about Marcus is the partnerships that you have forged with tech giants like Apple and Amazon. A lot of our readers are afraid of companies like Apple and Amazon getting into financial services, taking customers away and taking market share away. How did you look at and forge those partnerships and is there anything you have learned, especially from the Apple Card partnership?

I think there is a lot to learn with some of these giant technology companies. They have customer-centricity, they have engineering sophistication, they have design simplicity. But I doubt whether any one of them wants to actually become a bank and become a regulated entity.

We also want to have our product manufacturing capabilities embedded in other ecosystems so that we meet the customers where they are.

And it is with that approach that we have been very delighted to partner with Apple, Amazon, Walmart and JetBlue, so that we can embed our product capabilities where the customer is. We want to partner with people who share our ethos of customer-centricity.

Apple’s ad campaign for the launch of the Apple Card had the tagline, “Created by Apple — not a bank.” How did you feel when they came out with that campaign?

We knew about that campaign, and we agreed to it. We think that that was aimed at the traditional banks, and we take pride in being more customer-centric than traditional banking industry is.

Can you share any technology choices that you've made over the past five years that you're especially happy about?

Right from day one, our principle was that our engineering platform needs to be robust and scalable, and yet it needs to be constantly refreshable. And we must not have a view of either outsourcing engineering or building everything in house. Those are very antiquated choices.

So we broke down our engineering platform into different components to make it very simple: front end, back end, data and middleware. And we integrated best-of-class technology solutions into our platform, using multiple vendors. And we were very clear, where is it that we want our intellectual property? And we decided we want our IP in front-end customer design. We want our IP in our data architecture. And we want our IP in a middleware where we built a microservices [application programming interface] platform.

Our strategy was to reduce the reliance on traditional back end. And therefore we would be like a symphony conductor across different modules that we purchase. And the modules that we purchase we will not customize because that's a mistake organizations, and especially large banks, make. If you've taken something from somebody and you've customized it, then when they are refreshing it, you don't get that benefit.

We built the card platform on the cloud and continue to migrate to the cloud. You have to do it thoughtfully. It is not a panacea for all ills.

In the course of the pandemic, have you made any changes to your product line or features (other than dropping savings interest rates, along with everyone else)?

We wish the pandemic wasn't there, but the pandemic has been a tailwind to our business model, which is composed of being digital and having a balance sheet. We didn't have to staff branches and put employees in harm's way. We had the engineering to roll out customer assistance programs immediately. From the time we decided to the time we rolled out our hardship program was 72 hours, and it was all digital. [Editor's note: Marcus let customers postpone making a loan payment for one month without interest and waived penalties for early certificate-of-deposit withdrawals; Apple cardholders were allowed to skip a payment without being charged interest.]

And customers didn't have to jump through hoops. Some banks roll out these programs and then make customers go through so many hoops, hoping that not many will be able to enroll.

I don't want to give an impression that everything is always ideal. But in the course of our business, we have learned our lessons. Obstacles are the best modern-day project-management tool. Because if you have new challenges and obstacles, then it means you're making progress. And if you have the same challenge and obstacle, it means you're stuck.

What do you think the digital bank of the future might look like in five years? I know that David Solomon has said that he wants Marcus to reach $125 billion in deposits by 2025. That doesn't sound too hard from where you are today, but what other goals do you have for Marcus going forward?

We want to continue to serve millions of consumers across all their financial needs. We will deliver the bank on the phone. We today have lending and savings and credit cards. And it is very much in the works to have checking and investing products, and we will continue on that journey. So the vision is more customers, more products, obsession with customer service, ease and transparency.

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