David Zalik, founder and CEO of GreenSky.
Chris Hamilton | GreenSky
Goldman Sachs, the 153-year-old investment bank, is now officially in the home improvement loan business as it continues to push into the finances of ordinary Americans.
The bank plans to add one million customers a year to its fledgling retail division of Marcus through the acquisition of GreenSky, announced in September at a price of $2.2 billion, Goldman executives said. in their first interview after the deal. firm Tuesday. GreenSky is an Atlanta-based buy-now-pay-later financial technology company focused on construction loans with an average size of $10,000.
“It’s a great acquisition driver as we plan to bring in a million new customers every year through this distribution that we’re adding to the Marcus ecosystem,” said Swati Bhatia, Goldman partner and former Stripe executive. Those customers will be able to use the company’s Marcus app, where they’ll be offered the bank’s other products, including savings, personal loans and a digital checking account expected later this year, she said. .
The move has broad implications for Goldman investors, as it intensifies its ambitions in the consumer finance space, offering increased opportunities and risks. Goldman will begin issuing GreenSky’s loans using its own $1.5 trillion balance sheet in the coming months, Bhatia said, replacing the banking partners GreenSky relied on when it was independent.
This will potentially add billions of dollars in new loans to its balance sheet, which should serve as an engine to generate the kind of interest income that fuels bigger retail rivals like JPMorgan Chase and Wells Fargo.
As a result, Goldman — which typically touts its ability to manage risk by adding products like the Apple Card to its portfolio — will be more exposed to the creditworthiness of ordinary Americans. While GreenSky naturally caters to homeowners, the loans are unsecured, meaning customers’ homes are not used as collateral if the borrower falls behind.
GreenSky had issued about $7 billion in loans a year before its acquisition, although Goldman may choose to securitize some of the loans, depending on market conditions, Bhatia said.
Thanks to a shortage of new home construction and remote work trends accelerated by the coronavirus pandemic, demand for home improvement loans has been robust, according to GreenSky founder David Zalik, who joins Goldman at the partner level.
“It’s amazing how resilient this company is, even with a pandemic, with supply chain challenges, rising interest rates; the demand has been huge,” Zalik said. “There were two months in the pandemic where we didn’t grow and then it exploded. People want to invest in their homes.”
Customers typically come to GreenSky through the network of 10,000 fintech merchants, which range from small businesses to some of America’s biggest home improvement brands. Users choose the duration of repayment terms that can vary from 36 to 84 months and can be prepaid “at any time”, according to Zalik.
“The consumer appreciates that if the total project is $15,000, I can buy it for $90 a month at a low single-digit interest rate,” Zalik said. “It helps the consumer pay and manage their money and helps the company sell their product, just like Toyota sells a lot more cars because financing is available.”
The integration of GreenSky systems into Goldman will last for the rest of the year and possibly into 2023, Bhatia said. This will bring the bank closer to its vision as a provider of multiple digital products, both directly to consumers and through partners.
“As we complete the integration, we will be able to offer products across the spectrum to all of our customers,” Bhatia said. “We are working to create a seamless digital experience for our customers.”