Goldman Sachs in Credit Cards: Issuers, Brace Yourselves

9. May 2018.

The buzz about Goldman Sachs’ entry into the credit card business continues. Seeking Alpha ran a story today. Bloomberg, the day before.

  • Two of the biggest. banks, Goldman Sachs Group Inc. (NYSE:GS) and Wells Fargo & Co. (NYSE:WFC), are on the brink of piling into credit-card lending, seeking a share of the $183 billion in fees and interest tied to the product.
  • Goldman Sachs is weighing the move as part of a push into consumer finance with its Marcus online lender, Chief Financial Officer Marty Chavez said during a conference call with analysts last month.

Goldman has a talent for money management but they have quite a way to go before they capture the U.S. card market. They enter a market with grand plans but will face off with strong issuers such as American Express, Bank of America, Chase, and Citi. Goldman has already started to dip into the credit card labor pool by hiring a senior executive from Discover, and being New York-based, there is plenty of talent to hire up on Park Avenue.

The entry comes at a time when the U.S. market is languishing.

New account growth in US credit cards flatlined in 2016 and Mercator Advisory Group expects to see minimal growth in 2017. With a 15% attrition rate, there will be a shift between banks, but do not expect total credit card accounts to surge beyond the current level of 440 million accounts.

What to watch for: Will rate-sensitive Goldman Sachs buy their way into the business? What will the rewards play be? Does Goldman have the juice to run up against the Chase Sapphire Reserve card or Amex Platinum?

It will not be easy, but it surely will be fun to watch.

Overview by Brian Riley, Director Credit Advisory Service at Mercator Advisory Group

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