Goldman’s management argued over the consumer bank before returning | So Good News

Goldman Sachs’ decision this week to pull out of retail banking follows disagreements over a once-disputed strategy between chief executive David Solomon and his subordinates, people familiar with the matter said.

Solomon had high hopes for Goldman’s Marcus consumer service, which began in 2015 under his predecessor, Lloyd Blankfein. Solomon, who became chief executive in 2018, saw the venture as fintech in the making that could give the Wall Street bank the kind of stable capital that many analysts say should boost its market value.

But it failed to turn a profit and investor frustration with the project prompted Solomon to move on Tuesday to reduce Marcus’ interests and split it in two.

Solomon argued that in order to build deeper relationships with consumers Marcus should offer current accounts, or checking, in addition to backup and credit. When executives at Goldman’s consumer group argued that they had no competitive advantage in the analysis, Solomon disagreed.

Goldman announced in January 2020 that it would offer a Marcus checking account by 2021, but the service failed to reach its target date and was not yet available to retail clients.

“[Solomon’s] where was the shape. . . if we want to be the digital bank of the future and have millions of customers on the Marcus platform, how can we not have an analytical relationship with those customers? one of the people familiar with the matter said.

Goldman declined to comment.

The project became more expensive because Goldman’s technology team opted to build a new cloud platform to host the transaction, removing the consumer’s request to rely on the technology the bank used to create the Apple Card, the people said.

In doing so, kicking the wrong Marcus account has become a sign of a major shift in Goldman’s business, as the Wall Street firm poured billions of dollars into the Main Street banking business.

Marcus managed to attract more than $100bn in capital, giving Goldman a cheap investment. It also generated $1.5bn in revenue last year.

Under the restructuring announced on Tuesday, consumer banking will be used in Goldman’s wealth management business. Meanwhile, the new “platform solutions” business will include Goldman’s credit card deals with companies such as Apple and General Motors as well as an online lending business, called GreenSky, which was acquired this year.

The strategic disagreements that began during Marcus’s eight years at the business came as Goldman moved through three consumer banking heads, from experienced financial managers to its own bankers and technical engineers.

Blankfein’s first hire at Marcus was Harit Talwar, a former U.S. credit card executive at Discover who had worked with other consumer businesses. Talwar left Goldman last year and Peeyush Nahar was hired last year to run the day-to-day consumer business. Nahar comes from a tech background with previous roots at Uber and Amazon.

Nahar told Stephanie Cohen, who came from investment banking before Solomon promoted her in 2021 to head the now-defunct consumer and wealth management division.

In Solomon’s reshuffle this week, Cohen, who also led Goldman’s strategy and was a champion of the GreenSky deal, will run the new solutions business, according to people familiar with the matter. Nahar will be the chief operating officer.