Alternative Finances

Ex Discover Chief To Drive Goldman’s Digital Bank

Goldman Sachs is plotting to enter the $840 billion consumer loan business by offering small loans through a website or an app as early as next year, reports The New York Times. Early reports indicated the loans may range between $15,000 to $20,000. Loans would not require collateral property, allowing Goldman Sachs to make its money through higher rates.

The move is being led by Harit Talwar, who last month joined Goldman Sachs after serving as a top executive at Discover.

According to The New York Times’ investigation, Goldman Sachs is targeting the everyday Joe – a first for the global investment-banking group, which is more used to lending to wealthy clients or high flying companies. Its objective is to stand out from traditional banking, which has to deal with costs linked to brick-and-mortar services.

Goldman is taking advantage of the difficulties traditional retail banking is facing reinventing itself digitally. Retail banks face an increasing threat of extinction because of growing tech-savvy and startup competitors – such as the FinTech alternatives, suggests a recent report by Oracle’s financial services unit.

“Retail banks are institutions. Old. Established. Global… And in danger of becoming extinct. Today’s competitive landscape in banking is far removed from what one would have seen just 10 years ago,” stated the report, which noted the rising influence of the FinTech space.

“No longer do retail banks simply vie for customers against other retail banks. Instead, we are witnessing an influx of new, tech-savvy, digital competitors – FinTechs – all eager for a piece of this lucrative financial pie,” the report said.

In 2014, in the U.S., over 60 percent of auto loans, mortgages and credit card applications were filed on an online or mobile platform. But – and this is a big but – a Javelin research report found that 69 percent of customers thought that banks have a data security edge over online transactions, while 60 percent preferred to visit a physical location for answers to their questions. So while Goldman is entering a possibly very lucrative niche, it’s too soon to tell if it can outrank traditional retail banking.

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