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Goldman executives clash over consumer bank before retail pullout

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People familiar with the matter said Goldman Sachs’ decision to withdraw from retail banking this week followed disagreements over strategy, which in one case pitted CEO David Solomon against his subordinates.

Solomon had high hopes for Goldman’s Marcus-branded consumer project, which began in 2015 under his predecessor, Lloyd Blankfein. Solomon, who became CEO in 2018, saw the operation as a fintech that could provide the Wall Street bank with the kind of stable income that many analysts say should boost its stock market value.

But it failed to make a profit, and investor discomfort with the project led to Solomon’s move Tuesday to cut down and split Marcus’ ambitions in two.

Solomon argued that to build deeper relationships with consumers, Marcus should offer current or checking accounts in addition to savings products and loans. When executives in Goldman’s consumer division argued that there was no competitive advantage to control, Solomon disagreed.

Goldman announced in January 2020 that it would offer a checking account for Marcus by 2021, but the project fell behind target date and was not widely available to retail customers.

“[Solomon’s] that was the view. . . If we want to be the digital bank of the future and we have tens of millions of customers on the Marcus platform, how can we not have a primary control relationship with those customers?” said one of the people who knew the subject.

Goldman declined to comment.

The project became more costly because Goldman’s tech team chose to build a new cloud platform for its control product from the ground up, refusing the consumer division’s request to rely on the technology the bank used for its Apple Card product.

In the process, the ill-fated Marcus checking account crackdown became a symbol of one of Goldman’s biggest business setbacks, with the Wall Street firm pouring billions into its Main Street banking business.

By providing cheap funding to Goldman, Marcus was able to attract more than $100 billion in deposits. It also generated $1.5 billion in revenue last year.

Under the restructuring announced Tuesday, consumer banking will be included in Goldman’s wealth management business. Meanwhile, a new “platform solutions” business will include Goldman’s credit card partnerships with companies like Apple and General Motors, and an online loan business called GreenSky, which was acquired this year.

Disagreements over the strategic direction that arose over the eight years of the Marcus product arose as Goldman shifted between three different heads of consumer banking, moving from executives experienced in retail finance to its own bankers and technology engineers.

Blankfein’s first hire at Marcus was Harit Talwar, a former US card magnate at Discover and working with other consumer banking veterans at the business. Talwar left Goldman last year and Peeyush Nahar was hired last year to run the consumer business day-to-day. Nahar comes from a tech background with previous positions at Uber and Amazon.

Nahar reports to Stephanie Cohen, who comes from an investment banking background before Solomon promoted her to the soon-to-be-forgotten consumer and wealth management division in 2021.

In this week’s replacement for Solomon, Cohen, who also manages Goldman’s strategy and is the champion of the GreenSky deal, will run the new platform solutions business, according to people familiar with the matter. Nahar will be the co-chair operations officer.