Goldman’s turn to Expand into FinTech consumer banking

By Ismail Berbache, on 15/09/21

Goldman Sachs is acquiring FinTech GreenSky for $2.24 billion.

The all-stock deal for GreenSky called the biggest FinTech platform for home improvement loans in a release announcing the transaction, is expected to close by the first quarter of 2022. Goldman Sachs will pay 0.03 share of its common stock for each share of GreenSky, which works out to about $12.11 per unit, and its CEO David Zalik will join the New York-based bank as a partner. The FinTech shares surged 53% as Goldman adds to its consumer banking platform Marcus a business that offers payment plans to customers with home improvement projects or healthcare needs.

Not a traditional FinTech Lender

Unlike SoFi or LendingClub, GreenSky does not make loans using its own capital. It provides technology to banks and merchants to make loans to consumers for home improvement, solar, healthcare, and other purposes. GreenSky currently services a $9 billion loan portfolio and about 4 million customers have financed more than $30 billion of purchases using its technology since it was founded in 2006. By connecting consumers with lending banks, the Atlanta-based company collects a transaction fee paid by the merchant of around 7%.

A not so surprising deal

In the years Goldman Sachs was considered the wolf of Wall Street, very few imagined it would end up lending to kitchen renovations and plastic surgeries. However, the acquisition of GreenSky only marks a step further into the bank CEO’s plan to reduce the group’s dependence on investment banking and trading revenue. “We have been clear in our aspiration for Marcus to become the consumer banking platform of the future”, declared Goldman chief executive David Solomon.

The new “buy now, pay later” trend has whetted the appetite of several banks, from Morgan Stanley to Barclays, and it makes sense. The benefits compete with those of credit cards which, with returns of 20%, are one of the most attractive forms of financing for big players. With more competitive interest rates, these new services are less scary for consumers and represent a serious threat to traditional banking. Less than a month ago, Square bought Afterpay and PayPal acquired Paidy for respectively $29 and $2.7 billion.

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