Goldman Sachs is entering online lending! BIIA editorial comment.
Six months ago Goldman Sachs was a lead underwriter on the initial public offering of Lending Club, the biggest and brashest of a new breed of online lenders. There it got an inside view of how financial disrupters work. Now this financial powerhouse is looking to disrupt the disrupters, launching its own web-based business offering loans to consumers and small businesses.
Goldman Sachs has hired Harit Talwar, the former CMO at Discover Financial Services, as a partner. Thus Goldman Sachs is poised to offer loans online to both consumers and to small businesses as it looks to tap into a marketplace worth nearly $850 billion.
Online lending requires extreme analytics and access to alternative data. This should not be difficult for Goldman Sachs to do. It invested in TransUnion (consumer information) and in analytics by backing analytics startup Kensho.
There is much talk about small businesses having problems in obtaining access to finance. Thus under the auspices of ‘Financial Inclusion’, the G20, the World Bank and the EU Commission are all working on creating a new type open financial capital markets for small businesses and to eliminate information asymmetries.
In my humble opinion, FINTECH is already running rings around such efforts and the whole concept of ‘Financial Inclusion’ will become redundant thanks to financial technology.
But will small businesses actually need money? According to a recent survey, 50% of US SMEs say they do not need financing. 30% said they had adequate access to finance and only 4% said they had problems in finding adequate finance. Therefore where is the potential? Consumers of course, there are a lot more than small businesses. Look at the success of Alibaba who shifted its focus to consumers from being a trading platform for small businesses. Its affiliate Alipay is doing well and has now entered the consumer credit information business using financial technology rather than copying the old style credit bureau concept.
Perhaps once markets start to experience a new wave of over-indebtedness the debt collection industry will experience a new bonanza. Surely after that regulators will move in. I venture to say this may take a while. So stay tuned ….
Author: Joachim C Bartels, Managing Director and Editor-in-Chief.
Source: Financial Times