Goldman Sachs plans consumer lending UK push

BI Intelligence

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Goldman Sachs, one of the US' biggest Wall Street banks, has confirmed that it will expand its retail banking operations to the UK by the middle of 2018.

The first phase of this expansion will see Goldman Sachs launch online deposit accounts, and the second will see the bank roll out a consumer lending offering.

This means the behemoth will be competing directly with UK consumer alt lenders like Zopa and RateSetter, not to mention a plethora of smaller players.

Besides Goldman Sachs' obvious clout, there are two reasons UK alt lenders should be worried:

• The bank has already proven itself adept at dramatic pivots. Goldman Sachs originally operated as a wealth management and investment bank, and only began serving the mass market in 2016, when it started offering high-interest savings accounts with a $1 minimum deposit requirement. The service has seen high uptake, indicating that despite its legacy, Goldman is capable of executing fundamental business model changes. As such, it should find this geographical shift relatively easy to handle, especially given its large resources to help with regulatory adjustments.
• Its consumer lending platform in the US is already seeing massive success. Goldman Sachs launched its digital consumer lending platform, Marcus, in October 2016. Just eight months later, it had achieved $1 billion in originations, and is apparently aiming to rack up another $1 billion in originations in the US by the end of 2017. Although this is still much lower than the $8 billion US alt lender Lending Club originated in 2016, it represents a rapid growth rate, and given the allure of Goldman Sachs' brand, Marcus may yet overtake its fintech competitors in the country. It's uncertain whether UK consumers will be equally drawn to the brand, but it's a strong possibility UK alt lenders should prepare for.

Goldman Sachs' move into UK consumer lending will likely act as a catalyst for consolidation in the sector. Just a few big names in the UK consumer alt lending market, such as Zopa, are scooping up significant portions of market share, putting increasing pressure on smaller players, especially as these larger peers launch more products and boost their value proposition for consumers. Entry into the space by a player as big as Goldman Sachs will probably serve to only intensify competition in the market, particularly among the UK's biggest alt lenders, as they prepare to contend with a rival whose resources and legacy are on an entirely different scale. As these lenders bolster their efforts to boost customer loyalty and siphon more market share, smaller players already under strain may be forced to drop out or contemplate a sale, resulting in a sector dominated by just a couple of large survivors.

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