The Gods of Goldman Sachs are officially descending their thrones to help out the peasants of upper-middle-class America. Traditionally the bank of the top two percent, Goldman is reinventing its image by doing down-to-earth things like providing loans for normal people looking to buy a car or install granite countertops in their bathroom.
But don’t kid yourself—Goldman isn’t doing this in the name of generosity; the investment banking firm is merely trying to make up for the business lost to strangulating regulations and stagnant markets while gaining a competitive edge. And it’s doing it in a markedly trendy way for a financial institution that’s as old as the great grandmother I never met.
In a nod to start-up culture and trying too hard, Goldman’s newest venture will be purely Internet-based. Users will spend hours trying to access their account via website or mobile app and do their banking like the cool kids—sans human interaction.
This is Goldman’s way of competing with popular consumer loan startups like Lending Club, Prosper and PayPal while also saving money on branches, tellers and general maintenance. Eliminating brick-and-mortar locations will enable them to lend money at lower interest rates while still making a profit. According to the New York Times, the company “hopes to be ready to make its first loans next year.”
Why They’re Doing It
Goldman’s reputation for being a snobby Mother F’er has risen more than a few eyebrows. Can the bank equivalent of Jordan Belfort manage the vulnerable finances of America’s normal people without exploiting them?
Driving off of Wall Street and into small town USA is anything but an aimless road trip. Equipped with a comprehensive map, experts know that what the opportunity lacks in case-by-case quality is made up for via insurmountable quantity and untapped potential. It’s similar to the advent of Silicon Valley and the disruption of the tech industry — both in terms of the speed of innovation and the number of zeros attached to the bottom line.
Really though, this is uncharted territory for Goldman Sachs. They’re simply not used to dealing with borrowers with little financial flexibility. Seeing as personal loans are often taken out to quell a financial wound, things can get ugly pretty quickly. Goldman must adapt accordingly if they want to erase past mistakes from public memory while upholding their rebuilt reputation.
“If the bank is too hard on its borrowers — suing a struggling family for unpaid debts, for example — it could revive a popular image as a bank that earns profits at the expense of ordinary people,” said the New York Times’ Michael Corkery and Nathaniel Popper.
Why You Should Care
So what can we expect from Goldman’s up-and-coming consumer loan program? Executives are still discussing the finer points, but they’re looking at loans in the $15,000 to $20,000 range. Goldman also toyed with the idea of issuing a prepaid card to distribute the money — a move in line with the gradual transition to a paperless economy.
But what does this mean for the consumer, specifically vulnerable college students and recent grads? If Goldman can uphold their promise of lowered interest rates, fair practices and a user-friendly mobile app, then we’re game. But, there’s always the risk of predatory lending, especially with a Wall Street veteran like Goldman. Considering that all of America thinks we’re financially illiterate and heavily indebted (it’s not not true), we’re basically a moving target. All I’m saying is watch your back and make sure there’s not a “exploit me” sign taped to it.
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