Stephanie Cohen, global co-head of consumer and wealth management at Goldman Sachs, is crystal clear about where the new robo adviser the bank launched this week, Invest, fits into its consumer banking ambitions.
The automated investing tool, which places customers’ money in exchange-traded funds that match their risk tolerance and investment preferences, is the latest phase of a multifaceted effort to turn its Marcus unit into a full-fledged digital bank.
In the bigger picture, the growth and development of Marcus is part of a two-pronged technology strategy for Goldman Sachs.
On one side, it wants to be consumers’ primary digital bank, providing everything they need for their financial lives through Marcus, which has already gathered $97 billion in global deposits and $8 billion in card and loan balances. The unit generated $1.21 billion in revenue in 2020.
On the other, it’s a banking-as-a-service partner to large companies like Apple, Stripe, Amazon and Walmart, letting them embed banking products and services in their offerings.
American Banker asked Cohen to share some of Goldman’s plans to use technology to compete with traditional banks, fintechs and Big Tech. Cohen, who was promoted to her current role from chief strategy officer in September, is said to be a possible successor to CEO David Solomon.
With this new robo adviser, are you taking Marcus by Goldman in a new direction? Would you say you are broadening Marcus out so that it can encompass all of customers' financial needs throughout their life? Would you say that Marcus is becoming a bigger part of Goldman overall?
STEPHANIE COHEN: If you think about what we're trying to do in the consumer business, our goal is to build a leading consumer digital-banking platform and to do that through two self-reinforcing strategies. The first strategy is our direct-to-consumer market strategy. We started out with lending, and then we did savings. We have [the money management app] Insights, and now we have Invest. Later this year we plan to have checking. The idea is that we can be your primary bank. We can be the digital bank on your phone.
The second part of our strategy is to be a platform: taking our capabilities and embedding them in the ecosystems of our partners. The first way we started doing that was with Apple — we launched the Apple Card. We have signed an agreement with General Motors to provide them a cobranded credit card as well. But the idea is much broader than that. The idea is to take our banking technology platform that we've built and embed it into other ecosystems in a multiproduct way. With Apple, for example, we have the credit card, but we also have Apple Card Monthly Installments, which allows you to buy an Apple product and pay for that over time.
We think we have real competitive advantage in what we're doing, because one, we have a clean sheet of paper from a technology perspective. We've built our technology over the last five years or so. We have a trillion-dollar balance sheet. We have 150 years of experience in risk and compliance, but we're doing everything in a new and modern way. And then we have the investment bank, where we have built long-term relationships with companies like Apple and with General Motors. This allows us to have holistic conversations with these companies about how we can provide banking products in a way that helps them with their end customer. It helps them build stickiness with their end customer and grow their base business.
Not everybody likes the idea of supporting embedded banking in others’ sites and portals and working behind the scenes. How do you feel about Goldman being almost invisible? Does it matter?
I love that other people don't love it because it's part of our strategy that other people don't love it. We think we're in a unique position because we're new. We’re excited about both strategies.
The obvious analogy for our platform strategy is what Amazon Web Services does with data and compute. But there are other examples, if you think about a Stripe or a Plaid in terms of what they're enabling in fintech and commerce. There are a couple of reasons why we really like it. One is, we think this is the future. We don't think that people want to go to banks. We think people want their banks to go to them. That's embedded in both of our strategies: being the bank on your phone and being embedded in the ecosystems where you're already operating. We have partnerships with Amazon and Walmart to provide loans to their merchants within the ecosystem the merchants are running on. The merchant is trying to sell products on either the Walmart site or an Amazon site, and we're lending to them to help them grow their business. So they don't have to make a separate trip per se, whether that's a website trip or a physical trip to a bank to get that loan; they get it right in that ecosystem.
In our transaction-banking business, with the partnership we announced with Stripe, we're taking the transaction-banking platform and allowing small businesses to use it. In our global markets business, we bought a business called Folio Financial, which has a custody platform. Across multiple businesses we are our own custodian and now we can provide custody to registered investment advisers outside of Goldman Sachs. And so you're seeing this idea of Goldman Sachs becoming a technology platform where we figure out what type of technology it makes sense for us to build in a way that we think is really differentiated, use it ourselves, and then externalize it.
Technology has gotten to a place where that's possible. Application programming interfaces are available in a way where someone can use them to embed something like a financial product into their own business.
Have you been hiring more technologists, and has the ratio of techies to bankers been going up?
The percentage of engineers to total employees has been growing over the last five years. For a long time, we’ve focused on different types of engineering talent, including the data aspect of technology.
One of the things we do, the way Amazon does, is use memos, which helps ensure that we're all aligned before we start building product. That is one of the things that [Co-Chief Information Officer] Marco Argenti brought with him from [his former employer] AWS to Goldman Sachs, instituting some of those mechanisms.
We did have a hire recently [to lead Goldman’s direct-to-consumer business], Swati Bhatia, who comes from Stripe and before that PayPal and Capital One. She’s an example of the cross-pollination of what I consider tech-forward companies with us.
When you say you use Amazon’s memo approach, do you mean you start each meeting with everyone silently reading a six-page memo, the way Jeff Bezos does?
It's not every single meeting. But we do use it.
You’re rolling out a robo adviser this week. What do you think it would take to get a lot of people interested in robo advice, which in general has not taken off? And is that even what you're seeking, or do you just want to satisfy a need that your existing customers have?
Our strategy is that this is part of a holistic solution that a consumer needs to manage their financial lives. So once we launch checking, we'll be able to be someone's primary bank. So they'll be able to have their direct deposit come to Goldman Sachs, they'll be able to do bill pay. But if you combine that capability with things like Insights, which is smarts on how you should think about budgeting and other things, and then a product like Invest and a product like savings, we think that combination makes sense. And we do think that Goldman Sachs has unique capability in this area. We've been helping people manage their wealth and invest in diversified portfolios for decades in our adviser-led wealth management businesses.
In a way, do you see Invest as a transition to getting a human adviser and becoming a full-fledged wealth management client?
We are happy for people to move between our different wealth management products. The idea is to provide holistic advice. I know everyone tries to divide this stuff by how much money people have, and that's certainly one way to do it, but sometimes it depends on what type of experience someone wants. The Marcus customer that signs up for Marcus Invest is interested in diversified portfolios and is focused on growing and maintaining their wealth over time. If over time they'd like to have access to advisers, we have those both in our personal financial management group and in our private wealth management team, and we'd be happy to talk to them.
Going back to that idea of working with Big Tech and competing with fintechs, JPMorgan Chase CEO Jamie Dimon recently said that
We think the financial industry is big and complicated and there's a lot of opportunity in a lot of ways that we can help consumers and companies small and big better manage their finances. There certainly are places where we will compete, but more often than not, we think that there are fantastic partners across all of our businesses. There are countless examples of us embedding their products in our platform and us working with them in our consumer business and other parts of the firm.
