Goldman Sachs is moving forward with its embedded finance strategy. Its recent deal with General Motors is the latest step.
Goldman took over issuing the General Motors’ My GM Rewards card from Capital One; it converted the 3 million GM Rewards cardholders to its consumer business, Marcus, in late February. Today, these customers use the Marcus app to manage their card online. But in the future, the bank and the car company will partner to develop a new digital environment for GM car owners to access the card and possibly other banking products.
In this and other relationships with partners including Apple, Goldman is pursuing the growing trend of embedded finance, in which a bank offers its products and services in a nonbanking environment, like a ridesharing app or e-commerce checkout process. The bank gets a new, low-cost way to distribute its products and acquire customers and it can reap fee income, while meeting the growing consumer preference for convenience.
“There are some people that don't want to go to their bank,” said Stephanie Cohen, global co-head of consumer and wealth management at Goldman Sachs. “They want their bank to come to them and they want to experience financial services in ecosystems that they love and trust.”
The embedded finance market will exceed $138 billion in 2026, from just $43 billion in 2021 according to a study Juniper Research conducted last year. This 215% growth will be driven by the increasing availability of application programming interfaces, the researchers wrote.
“The way that it's evolving is that there is an infrastructure play here for small banks, fintechs and large banks to enable a whole new generation of fintech-enabled applications, where I don't necessarily have to know your bank account, but I just need to be able to make a payment at this particular point in the journey,” said Bradley Leimer, co-founder of Unconventional Ventures. This includes buy now/pay later loans on retailers’ websites and credit checks a company like Airbnb might do, he said.
Through the relationship with Goldman, GM cardholders can track spending, make payments, view rewards and add the card to their digital wallet using the Marcus app.
“We're going to work with our partner General Motors to figure out what the right way is for their customers to experience financial services and how we can help them build loyalty with their customers, but also how we can help those customers live better financial lives and the countless ways that we think there are to do that,” Cohen said.
GM has experimented with in-car payments in its connected cars.
“As they build more digital connectivity to their customers, they'll figure out how they want to pair financial services with that, and we'll help them do that,” Cohen said.
Goldman hopes to tap into the affection owners of Cadillac, Chevrolet, Buick and GMC cars have for their vehicles.
“GM has 60 million loyal customers, and it has a product that people engage with all the time,” Cohen said. “On average, people spend about an hour a day in their car. So it's an environment and a brand that people have affinity and loyalty to, and there's an opportunity to experience financial services in that ecosystem.”
The bank has been pursuing embedded finance since 2019, when Goldman and Apple launched the virtual Apple Card, which was designed for the iPhone and lives in the iPhone wallet. In the next phase of that relationship, in 2021 Goldman created Apple Card Monthly Installments, which lets customers buying products on Apple’s website pay for them over time.
These offerings go beyond a co-branded or white-label card relationship, Cohen said.
“We're partnering with iconic brands to allow them to offer financial services to their customers, to help them better manage their financial lives and to increase the loyalty and stickiness that they have to those customers,” she said. “It just so happens that in both cases we've started with a card.”
Over time, Goldman hopes those customers will want to receive other financial products inside the partner ecosystems, Cohen said.
In another example, Goldman announced an agreement in September to buy Atlanta-based GreenSky, a fintech that makes point-of-sale loans through 10,000 home improvement merchants like Home Depot. The bank hopes to close the acquisition this quarter and bring GreenSky’s 1,200 employees over to the bank.
It would have been hard, if not impossible, for Goldman to have built that merchant network that GreenSky built over 15 years, Cohen said.
GreenSky customers will become customers of Goldman Sachs Marcus.
“We won't have to acquire customers one at a time; they will be in Goldman Sachs Marcus,” Cohen said. “We can offer them the broader suite of Goldman Sachs Marcus products and help them better manage their financial life. And it's a really attractive customer given they own a home and they're investing in their home.”
Goldman also offers MarcusPay, a fixed-rate, point-of-sale installment loan, on the JetBlue app.
“We are focused on point-of-sale lending in places where we believe we have real competitive advantage and in larger loan sizes where a balance sheet is more important,” Cohen said. “We believe that that's a place where we have more competitive advantage than where some of the buy now/pay later players are playing.”
Goldman Sachs’ next step for Marcus, which now has 13 million customers, will be to add a checking account later this year.
The launch of checking is important, Cohen said, because it will enable customers to use their Marcus account for direct deposit of their paychecks and in turn it could become their primary bank. Then Goldman will be able to embed checking accounts, cards and all other Marcus products in partners’ ecosystems.
