Dive Brief:

• Goldman Sachs is scaling back its ambitions for Marcus, the consumer-focused digital bank it launched in 2016, Bloomberg, citing unnamed sources, reported Sunday.
• The investment bank is restructuring its retail operation amid mounting losses and growing discontent over the performance of the online banking platform, sources said.
• The investment bank’s pivot could usher in a potential reorganization of Goldman’s business lines, its third in four years, and comes amid regulator scrutiny of the bank’s consumer-focused products, according to Bloomberg.

Dive Insight:

Despite surpassing $100 billion in deposit balances in September 2021, the consumer platform is burning through cash, and managers have been pressured to rein in costs, sources told Bloomberg.

Goldman’s own internal forecast estimated Marcus could post a record loss of more than $1.2 billion, Bloomberg reported last month, while analysts project profits at the investment bank will drop more than 40% from last year's record.

The bank’s Marcus unit is also in the midst of an investigation by the Federal Reserve, which is looking into the platform’s losses, according to the wire service.

A new focus

Goldman plans to fold some of its consumer products into its wealth-management business, a potential restructuring that would represent a return to what it does best, Bloomberg reported.

The bank will gear Marcus checking accounts toward select wealthy clients and employees at corporate partners, a pivot from the platform’s original mass retail market target.

Goldman’s robo-adviser, Marcus Invest, and its savings accounts will also be reserved for the bank’s wealthy clients, Bloomberg reported.

The bank’s overhaul of its business lines could lead to mass leadership exits as it consolidates asset-management and wealth management businesses under one team, according to Bloomberg. Similar restructurings in the past have led to top executive departures, the wire service reported.

Regulator scrutiny

In addition to Fed scrutiny, Goldman’s retail pivot comes as its credit card account management practices are under investigation by the Consumer Financial Protection Bureau (CFPB).

The regulator is looking into Goldman’s application of refunds, crediting of nonconforming payments, billing error resolution, advertisements and reporting to credit bureaus, the bank disclosed in a June filing with the Securities and Exchange Commission (SEC).

Goldman said it is fully cooperating with the CFPB in its investigation.

While not noted in the filing, Goldman’s card partnership with Apple, which it launched in 2019, falls under its credit card business line, and was touted by Goldman Sachs CEO David Solomon as a product that would further the firm’s consumer ambitions.

“In the decades to come, I expect us to be a leader in our consumer business, just like we are in our institutional and corporate businesses,” Solomon told staff in a memo in 2019, during the card’s official launch, according to Bloomberg.