Goldman Sachs Group Inc, the Wall Street investment bank pushing into online consumer lending, expects it can make loans on more competitive terms than Silicon Valley upstarts that pioneered and dominate the business.
Using deposits to fund loans — rather than drawing on outside investors — would give the firm more leeway when setting terms and fees, Stephen Scherr, head of the company’s banking operations, told an industry conference in New York on Tuesday.
“We view this as a balance sheet activity,” he said. “That will avail us of a certain flexibility in the design of the product.”
Goldman Sachs, long focused on big clients, including corporations and investment funds, is looking to consumers to boost revenue and bolster its balance sheet after becoming a bank holding company in the wake of the financial crisis.
In April, it completed the purchase of General Electric Co’s online bank, adding US$16 billion of deposits.
The securities firm has since started a Web site where customers can open an account with as little as US$1 and it is rolling out a new consumer lending operation this year called “Marcus by Goldman Sachs,” after the company’s founder.
Scherr, 52, Goldman Sachs’ chief strategy officer, took on the additional role of CEO of banking operations in May.
Its lending platform plans to make unsecured loans online to consumers with strong credit histories for purposes such as debt consolidation, a person familiar with the matter said last month.
That is a business that was popularized by ventures such as LendingClub Corp and Prosper Marketplace Inc, which match borrowers with investors looking to earn money on interest.
The platforms grew rapidly after the financial crisis, but have struggled to draw enough funding to continue the streak this year after an uptick in write-offs spooked some loan buyers.
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