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Goldman Sachs on its way to dominating the fintech market

2019 saw a lot of big companies getting into fintech and trying to develop their own innovations or invest in the right startups across the world. We’ve seen some companies do it right and many do it very wrong. It is a shaky industry in terms of what works and what doesn’t. 

When companies like Goldman and Sachs decide to go into something that decentralized, it could become a disaster. 

When it comes to public opinion on this matter most people would rather see small, newer startups lead the revolution than to see companies like Facebook or Google try to dominate this industry among others that they have already monopolized. Among the many partnerships that came about this year between fintechs and traditional financial institutions, the partnership with Apple and Goldman and Sachs proved to be the most successful.

While with other similar ventures like Google Pay with Citibank and Facebook libra and it many partners that decided to back out at the last minute, there is a lot to unpack as to why some brands manage to succeed while others sink.

What sets Goldman Sachs apart

Goldman and Sachs seems to be handling the situation the best among similar entities. It has managed to successfully navigate the new industry that baffles so many banks. When it comes to dynamics between fintechs and banks there are two major themes. Ones where banks want to learn and improve with fintechs and ones that want to make sure that they never get discarded because of fintechs and hence they’re apprehensive about collaborating with them. Goldmach Sachs has stood out through all of this as a company that gets it. 

They are not trying to fight fintechs and further isolate themselves by restricting their customers from using fintechs or anything of that matter. They see the potential of fintechs and want to be a part of the movement. This is the approach that so many other banks lack and what in the end result in them losing the existing customers as well. 

When it comes to traditional banks they lack the individual approach to their client that most fintechs can offer. The service, which could have become the primary characteristic in the loyalty of their customer is actually one of the things driving people away from fintechs. It has been proven that the slow, intimidating and unpleasant banking services that we encounter through all the countries in the world are one of the reasons customers feel less inclined to stay with the banks instead of moving towards fintechs. While Goldman and Sachs doest really fit the profile, its management definitely saw the trend and decided to make the best of it by working with fintechs instead of working against them.

This doesn’t only cover the partnership with Apple. Goldman and Sachs has been investing in startups as well. 

Investing in Fintech

Goldman and Sachs, similarly to other countries or companies that work with fintech investment, have taken its time to look at the statistics and knows where to invest its time and money. The most recent investment went towards an Indian fintech startup called ZestMoney and was worth $15 million. As one of America’s largest banks, it has the luxury to stay not change its ways and to stay put and be guaranteed a few decades of success either way. But the bank chose to grow and adapt to the times and it’s the main reason why it has why the bank is now that much stronger and more in tune with the customer’s need.

This latest investment will help millions of Indians who don't have credit scores to access loans and make purchases online. For some, it will be the first time in their lives where they have access to such financial services. This investment was a part of the Extended Series B, which in total has amassed to $63 million for the startup. ZestMoney has over 6 million users, who can access credit of $140 to $3000. The startup also offers an interest-free option to customers for those who can pay back in a specified amount of time.

ZestMoney has partnerships with multiple online payment processors in India, including Razorpay, BillDesk, Cashfree, CCAvenue, and PayU. According to Boston Consulting Group, digital lending in India is expected to be a $1 trillion opportunity in the next five years and ZestMoney hopes to be a big part of this industry. They plan to reach around $ billion worth of credit in the next year and a half and want to reach 300 million users one day. The startup is based in Bangalore and has other investors like Naspers Fintech, Quona Capital and Omidyar Network.

Expanding the customer base

Southeast Asia, along with Africa has become the most active market for startup and investment alike. The major driving force behind it is that the need and demand for these kinds of services are way higher there compared to the rest of the world. The banks have the chance to open up a whole new market and acquire a new group of consumers by simply delivering the services that their people have not had access to before. The overly complicated and inaccessible service provided by the banks in these regions is why the demand for these fintechs is so high and why everyone is rushing to invest in the next big thing in the industry.

In this case, the credit card penetration is so low in India that on average only 3 out of 100 people have access to credit cards. As a result of that very few people have a credit score, which is one of the defining factors banks use to decide whether or not to give out a loan. Bank has largely failed to adapt to the needs and the reality of its surroundings. That approach is what gives fintech such an advantage and a higher chance of retaining its customer’s loyalty. The banks operate within a very stiff regulatory framework that very rarely gets revised to better suit the needs of its customer.s What fintechs bring and what Goldman and Sachs managed to see is that this approach is one of the many reasons why fintechs are now threatening to put banks on the backburner.

Since the banks usually don’t give out small loans because they don’t generate lucrative returns they are less likely to give it such a loan in the first place. The Indian market and many more markets that face similar challenges have risen up to this challenge through fintechs. 

Zest Money uses other data points to build a profile for those who don’t have the traditional credit score. The startup uses AI and is in partnership with over 3000 merchants to build these profiles. While usually, the investment comes from venture capitals and private entities the banks are usually hesitant to invest in fintech. this is what sets Goldman Sachs apart and why Forbes named it as the “winner” of the 2019 fintech industry. It has done the best among similar institutions and it has managed to navigate the industry inane campout way.

While Goldman and Sachs had its share of challenges, even within this industry and within the collaboration with Apple it has managed to come on top at the end of the year and it seems to be the most promising player among its kind. 

Robo Adviser 2020

Goldman and Sachs don't plan to stop just yet. It was recently announced that the bank had plans to launch a robot adviser next year. This innovation is meant to help their customers with as little as $5000 in financial assets to invest better. According to the Financial Times, this platform will be led by Joe Duran from United Capital, the wealth management firm, which is now part of Goldman. It is part of Goldman’s plan to expand its customer base and reach the less traditional clients, as well as those with fewer assets compared to an average Goldman customer. This falls into the banks long-term strategy that was voiced back in May when Goldman first purchased United Capital.  Goldman Chair and CEO David Solomon said that the bank aims to provide solutions to clients across the wealth spectrum, purchasing United Capital was a way for Goldman to accelerate this strategy by broadening the bank's outreach, allowing more clients to access the intellectual capital and investment capabilities of Goldman Sachs, according to the CEO. The bank’s strategy stands out from the other similar banks because it is working towards expanding its outreach and customer base by first of all listening to them.

The need for the way small loans, the need for investment advice for those less wealthy than the average Wall Street customer all went into the banks long term strategy.

Another Win for the bank was their recent move to promote sustainability. The group said it would be providing $750 billion in financing, advisory services, and investment initiatives that fight climate change. They also change their internal environmental policy framework to rule out providing financing to any new projects that will drill for oil in the Arctic or the ones that contribute to creating thermal coal plants or new thermal coal mines. The change came right after the unsuccessful UN conference that failed to ramp up efforts to combat global warming.

The sustainability issue has become very popular and consumers have started demanding more eco-friendly practices from companies. This move will also grant the Goldman and Sachs Group more likeability on the market. 


While this proved to be a great year for Goldman and Sachs, they encountered a few roadblocks as well. While Apple Card was the most successful credit cards they faced issues with the way the algorithm determined the credit score of each customer. There were cases when even with joint accounts, women would get a lower credit score compared to their husbands. While the group behind Apple Card said that the algorithm didn’t have any sexist, or otherwise discriminatory metrics in place the issue was somewhat reoccurring and it tainted the launch week of the product. Besides that, Marcu which is Goldman’s online bank Marcus, which offers competitive rates on savings accounts and liquid CDs experience some setbacks as well. The reports claim that Marcus lost $1.3 billion in loan losses. But this may not be the worst-case scenario. Most mid-sized banks struggle to gather deposits and Marcus ended with 2018 roughly $35 billion in deposits and by October had grown that to about $50 billion. And with the Apple Card situation, it still proved to be a success since Goldman Sachs had extended about $10 billion in credit lines to Apple customers and new credit card customers had $736 million in loan balances. 

Goldman and Sachs has become an example of brand reinvention because it managed to transform a huge Group that was already catering to some of the wealthiest groups and to look to the future.Their approach to fintech has been a good example of staying true to the brand’s values while also assessing reality and acting accordingly.Goldman and Sachs has worked with multiple startups in India and other parts of the world where the startup culture is booming. The group invested in logistics startup Blackburn, home rental platform NextAway, online furniture store PepperFry and a news aggregator DailyHunt in just India. They have also invested in Brazil’s NuBank, a digital credit card company.

Despite minor setbacks, Goldman Sachs set the tone for the right way to conduct business with fintechs and how to become a part of the industry. It is tempting for a lot of banks to underestimate or discard fintechs because of their newness but in the end, it ends up working against them. Overall Goldman Sachs had a terrific year regarding fintech development and partnerships and has come out of the year as the winner and an example for other major companies to follow when dealing with fintech startups and innovations in their industry.


Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 22 January, 2020, 14:351 like 1 like

For all its name and fame, Goldman Sachs was not a retail bank. Its forays like Marcus, Apple Card are ways by which GS is trying to get a foothold in retail banking. Only time will tell how this goes. 

Sorry but you've misread the lending market in India. It's not that "Bank has largely failed to adapt to the needs and the reality of its surroundings". It's that banks have learned from past lessons and created this reality. Loan recovery is a huge challenge in India. Many banks and NBFCs went aggressive in consumer loans 10-20 years ago and burned their fingers - even shut down - when delinquent outstandings went through the roof, and they had little or no hope of collecting on them e.g. Citi, Barclays, Fullerton. That's why, this time, they choose to lend wholesale to fintechs. Only time will tell how Fintechs will fare when it comes to recovery. At least, if they fail, taxpayer's money won't be used for bailouts. So, by staying away from subprime loans, which form the bulk of fintech's portfolio, banks are behaving responsibly.

That said, when it comes to lending to prime borrowers, many banks match the CX of fintechs.

Konstantin Rabin

Konstantin Rabin

Head of Marketing


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18 Aug 2015



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