Goldman Sachs gives up on beleaguered direct-to-consumer credit card

Article by Adriana Nunez | Feb 16, 2023

The news: Goldman Sachs abandoned developing a branded credit card for retail customers powered by the same tech it built for the Apple Card, people familiar with the matter told CNBC.

Why the change? Scrapping its credit card idea—which first arose in October 2021 to increase profits and loyalty for its retail business—boiled down to a strategy change.

Fears of a potential economic downturn last year led several major banks to make more cautious expansion and customer acquisition plans—and Goldman was no different.
Facing mounting losses from Marcus, its consumer banking brand, Goldman overhauled the entire unit. The business unit housing the Apple Card and parts of the Marcus brand lost $1.2 billion in the first nine months of 2022, according to a regulatory filing.

Goldman also faced scrutiny from the Consumer Financial Protection Bureau for its credit card business, which includes the Apple and General Motors co-brands. Combined with internal missteps, continuing to invest in the retail card sector may have been futile.

Why it matters: Despite being a storied, multibillion-dollar financial institution (FI), Goldman still struggled to penetrate the consumer credit card market, which we expect to hit $3.152 trillion in volume this year, per our US Total Credit Card Transaction Value forecast.

Two factors might’ve made it hard for Goldman to be a breakout star in the card space.

High competition

Even as a reputable FI, Goldman still needed to convince customers of its co-brands’ value versus mainstream card giants like JPMorgan Chase and Bank of America.
These issuers might have an easier time acquiring cardholders because customers are likely to opt for an issuer they already have a banking relationship with—many card applicants might already use their checking accounts or other services. Marcus lacks checking accounts, a service that may appeal to the average consumer and aid cardholder acquisition.
The credit card space is already highly saturated, and Goldman might not have had a strong enough card uptake to justify its costs.

Management concerns.

Goldman moved into consumer banking in 2016 under then-CEO Lloyd Blankfein, who reportedly gave the unit considerable independence regarding technology and business decisions, per the New York Times.
When David Soloman became CEO at the end of 2018, he took a much more hands-on approach to running the business and implemented widespread operational changes.
This was reportedly an issue among senior management. Many of the original staff who helped guide Goldman’s push into consumer banking have left, former employees told the Times. These internal struggles might have further complicated Goldman’s consumer credit card ambitions.