Goldman Sachs scraps credit card idea for customers after changing strategy15 February, 2023 9:22 AM
Goldman Sachs has dropped plans to develop a Goldman-branded credit card for retail customers, another casualty of the firm’s strategic pivot.
Not long ago, CEO David Solomon told analysts that the bank was developing its own card, which would’ve made use of the platform Goldman created for its Apple Card partnership.
It was part of an ambitious vision Solomon had for serving everyday Americans by stretching beyond the core competencies of the 154-year old investment bank. A Goldman card would’ve been part of a suite of products, including a digital checking account, to help enhance the profit margins and loyalty of its retail efforts, according to people with knowledge of the matter.
That vision unraveled after Solomon bowed to pressure to stem losses from its consumer businesses as storm clouds gathered on the U.C. last year's economy. In October, the bank said it was splitting its retail business into a corporate reorganization, later closing its Marcus retail lending business and delaying plans to offer broader current accounts.
One person who declined to name his name cited a former employer as saying the meaning of the Goldman card evaporated when he abandoned plans to become a mainstream bank for the masses.
Management believed consumers would be happy to receive a card from Goldman Sachs.
This would allow banks to be more picky in selecting customers and would not require revenue sharing with partners as was the case with Apple.
However, launching your own card is much more expensive than partnering with an outside brand. This is because Goldman bears the costs of customer acquisition and compensation. Card giants including JPMorgan Chase
and Citigroup are combining their own direct cards as well as joint products with airlines and retailers.
The Goldman card concept first appeared in October.
2021 when an analyst asked Solomon about his consumer product roadmap. One idea was to use the card technology created to service Apple Card customers for its own card, he said.
“We have our own credit card platform that I think is really differentiated, and we’re onboarding both other partnerships, but also have the opportunity for a proprietary card that’s in development,” Solomon said.
Although the idea of a card offered with a suite of banking products was mentioned as recently as last summer, little had been done to actually develop it, according to people with knowledge of the situation.
The bank’s ambitions in consumer finance outstripped its ability to execute on them, Solomon acknowledged last month.
It also didn't help that existing card offerings came to the attention of regulators, including the Consumer Financial Protection Agency.
"The idea of a consumer-facing credit card from Goldman Sachs has been discussed, but has not become an important part of our strategy," said a spokesperson for the Bank of New York.