Analysis Featured

Inside Marcus: Goldman Sachs’ Online Lender

Marcus by Goldman Sachs

Almost 75% of consumers in this digital age are unaware of the fact that they can take low rate personal loans to pay off their high-interest credit card debt. The worst part is almost 1/3rd of consumers with good credit scores are carrying high-interest credit card debt. Goldman Sachs saw this as a window of opportunity in the personal consumer lending space and launched its online lending platform Marcus in October 2016.

Why the name ‘Marcus’

The platform was named after one of the founders of Goldman Sachs, Marcus Goldman. This name was chosen from a list of 2,000 names and after a lot of extensive research. The name Marcus has a uniquely “humane” feel to it. It gives a Silicon Valley vibe, and the focus is on ensuring that the customer can feel that personal touch.

Being able to add “by Goldman Sachs” (GS) offers the platform a unique opportunity to leverage the GS brand equity built over 147 years. Even in the digital age, trust is a valuable commodity, and customers are more comfortable parting with their financial details and social security numbers to a company of the stature that Goldman Sachs has obtained as compared to a Silicon Valley startup.

Tackling the Pain Points

Marcus was launched after exhaustive consumer research. Nearly 10,000 consumers were interviewed to understand the problems consumers encounter while borrowing and engaging with their lenders. Consumers prefer fixed rates as compared to variable rates and, ideally, would prefer no origination fees. These two factors were used as the yardstick in developing Marcus. Thus, Marcus offers fixed rate loans with no origination fees.

The borrower can also customize their loan tenure, which is not possible with other online lenders. All loans are on the company’s balance sheet allowing Goldman Sachs to offer customized loans as opposed to the usually fixed loan term of 3-5 years offered by current players in the market.

Product: Size, Rate, and Time

Marcus offers unsecured fixed rate personal loans ranging from $3,500 to $30,000. The APR varies from 6.99% to 23.99%, and the loan term is usually between 24 to 72 months. The average APR is around 12.99%.

As usual, only a borrower with a great FICO score and credit history qualifies for the lowest rates and longer loan tenures. For now, the product is available only to US citizens.

Goldman Sachs did beta testing for six weeks and initially only offered its product via invitations. This was done to fine tune the glitches in the product and the platform. Once everything was taken care of, the company removed the stipulation and opened the platform for everyone.

Marcus Technology

Marcus was developed with the idea of keeping it simple. It did not want any overhang from legacy systems and developed the whole technology from scratch. This allowed it to create an experience that is sophisticated yet intuitive for the prospective borrowers. Customers have always complained that financial services providers cloud their judgment and hide important details by making things complicated and jargon-heavy. Marcus was born out of these insights, and its aim is to simplify the experience of taking a loan while educating the customer of available options.

Funding

Even though it is backed by Goldman Sachs, Marcus is not entirely funded by the GS bank. It has tapped multiple other sources for funding.

Marcus is a balance sheet lender and does not sell its loans. This is Marcus’s USP as it allows the platform to offer atypical loan tenures customized to borrower demand.

Different from the Rest

Just like its technology, its vision is different from its peers. Most other banks in the market are milking their credit card holders, and credit card debt is a vital source of revenue for them. Traditional banks simply cannot afford to tinker with their credit card offerings; therefore, they never try to provide their customers a solution to the credit card debt problem.

On other hand, Marcus has no pressure to not cannibalize an existing business and, therefore, with unheralded attention has tried to address the real pain point of the consumer (i.e. high-interest credit card debt). This will ensure that the company is able to have the best of both worlds; it has the reputation of brick-and-mortar banks, yet it is competing against one of the greatest revenue sources for them.

Marcus is aiming to disrupt an $800 billion market. For now, it is sticking with personal loans but will explore other options in the future to expand its product portfolio.

Making All the Right Noises

If the start is anything to go by, Marcus is certainly on the right track. The company has made significant strides in meeting customer expectations and, as a brand, Marcus is striking the right note. To measure customer engagement, the company uses social media as the benchmark. Content shared by Marcus have received three times more interest (shares and likes, etc.) than traditional banks and 17 times more than fintech companies. That certainly augurs well for the company.

Team & Support

Marcus has its office in Salt Lake City, Utah and employs over 200 people. The office also operates as a call center. Customers complain that new age online lenders don’t always have call centers to address customer service issues. Through this call center, Marcus is addressing that pain point.

The cool thing about the Marcus call center is, there is no Interactive Voice Response (IVR). Customers interact with human beings, and all calls are answered within 10 seconds. This helps pacify borrowers, especially Baby Boomers, who are not extremely comfortable with online services. Having a person on the other end of the phone gives customers a sense of security and authenticity. The call center only acts as a support hub; the entire loan application process is completely online.

Author:

Written by Heena Dhir.

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