With entire cities shutting down due to the COVID-19 crisis, consumer preferences moved full force from physical engagement to digital alternatives. This migration to digital technologies advanced at a speed unforeseen even a few months ago, with firms like Amazon, Netflix, Zoom and Instacart leading the way. While all indications are that consumer behaviors and preferences will continue to shift, the growth in the use of digital services is clearly here to stay.
This shift to digital also changed the way consumers did their everyday banking. Financial institutions needed to immediately support digital account openings, digital loan payment deferrals, online and mobile customer care and simple transactions without the availability of branches. This resulted in exponential growth in use of remote deposit capture and other digital capabilities by consumers. This shift also exposed gaps in digital functionality at many organizations.
Because of the inability of many financial institutions to deliver delightful digital experiences, consumers may be re-evaluating their financial institution relationships coming out of the pandemic. Consumers may move to larger financial institutions that provided expanded digital capabilities, or to smaller community banks and credit unions that were more proactive in serving consumer needs on a personalized basis. Or maybe consumers have already found options from fintech firms that combined advanced technology with frictionless engagement.
Marcus Gains Customers During COVID-19
One financial institution that stands to benefit from the move to digital banking is Marcus by Goldman Sachs. At a time when many traditional fintech firms struggle to gain scale, funding, and brand recognition in an increasingly crowded banking ecosystem, Marcus has leveraged the power of digital technology, and over a century’s worth of brand expertise, to create a powerful digital banking brand that continues to grow.
Goldman Sachs entered its consumer banking platform Marcus in 2016. Through acquisition, partnerships with firms like Apple and Amazon, and significant organic growth, Marcus has grown into a multi-product platform with $80 billion in deposits across the U.S. and U.K., and $7 billion in consumer loans and credit card balances, as well as millions of customers in the U.S. and the U.K. All without the traditional brick-and-mortar branch model.
Marcus has been so successful in generating new savings accounts recently ($27 billion from 500,000 customers) that it had to shut off its Marcus savings accounts to new customers in the U.K. after less than two years to avoid regulatory restrictions there.
I was very fortunate to be granted an exclusive interview with Dustin Cohn, the head of brand and marketing over at consumer investment management for Goldman Sachs and the Marcus brand as part of the Banking Transformed podcast. I’ve been following the Marcus brand from the inception and have written about the growth of the brand in the past for The Financial Brand.
The following is an excerpt from the podcast.
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What has been the recipe for success for the Marcus brand to date?
Cohn: A couple of things are at play. One is that we started with a blank sheet. We did not have legacy technology, we didn’t have any legacy products, and really no legacy internal organization to deal with. We were able to think with a very open mind.
We also leveraged consumers to help us build it. By understanding consumer pain points in financial services and in the banking industry, and designing products, and designing an experience, and designing messaging with those pain points in mind, we could give consumers the experience and the value in products that they deserve – that’s the first piece of it.
The second key ingredient is the mix of people. We have about a third of our employees on Marcus by Goldman Sachs from Goldman Sachs itself. We have about a third of our employees from consumer finance outside of Goldman Sachs, who can bring best practices across the industry and across different organizations. And then, about a third of us, like myself, come from outside financial services completely. We can bring best practices from completely different industries.
Do you believe your broad non-financial experience helped?
Cohn: There’s no question that it helped me, because I didn’t grow up in financial services. So there really were no preconceived notions in terms of what consumers really wanted, or how to leverage an existing infrastructure. It was through the lenses of the consumer that I helped lead the build of the brand.
Complimenting it with experts who have grown up in financial services, along with experts at the firm, created a unique combination. It’s the blend … I don’t think you can go one way or the other … it’s that unique blend.
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Did your background as a brand marketer help?
Cohn: My past in consumer packaged goods helped a lot because while product obviously is king, and the efficacy and the functionality behind product is ultimately what’s most important, we also recognized how important the brand itself is. The last thing we wanted to do was to always have to compete on having the highest rate on a savings account, or the lowest rate on a personal loan.
At the same time, we understood the need to add value in other ways through our content, and our support, and our customer service experience. There is also pride in being a Goldman Sachs client, or customer, and that’s how we landed on the brand architecture of Marcus by Goldman Sachs.
“Marcus” signals something new and different for consumers, and creates relevancy, and more of a digital approach. At the same time, the “by Goldman Sachs” says this is an institution that’s been around for 150 years, and is stable, and there are financial experts. It was the best of both worlds that helped us create Marcus and grow the way we’ve been growing.
How does Marcus determine how to expand the brand?
Cohn: It first starts with understanding what the white space is in the market, and where those pain points are, and what partnerships can address those pain points. The other aspect about this is how do you combine what people love about traditional banks – which is the stability – with the customer experience that people love about the fintech firms?
When we think about our partnerships we ask, “Who can fit this unique model that we have, where we straddle both worlds of being a traditional bank, and also being a fintech, and also an early stage business?” It’s a cultural thing as well.
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How do you balance the Goldman Sachs and Marcus cultures?
Cohn: I think they’ve dovetailed, over time. I think the Marcus culture, in the very beginning, was pretty unique to the firm, just in terms of having marketers, and engineers, and consumer marketing people. It was a little bit of a different animal for the firm.
Over time, some of the things that Marcus was doing a little bit different got adopted by Goldman. Even little things like dress code. It’s hard to attract and maintain a lot of engineers and marketers if you make them wear a suit and tie. I think we influenced the fact that people wear jeans at Goldman Sachs now, and they didn’t really do that five years ago.
At the same time, I think there are processes and capabilities that Goldman had that really quickly started to get embraced and integrated into what Marcus was doing.
How does Marcus position itself as being more ‘human’?
Cohn: It started with our naming. As we explored literally 10,000 different names, we ultimately landed on Marcus for a variety of reasons. One is obviously the connection to Marcus Goldman, who founded Goldman Sachs 150 years ago. The Marcus name made us more friendly, accessible, human. It created this one-to-one personal conversation for consumers, so it did start there.
But we also did our homework to understand the needs of our consumers that would make them comfortable with not having branches. The number one need we found, early on through this research, was consumers wanted a call center where a human picked up the phone. While consumers want self-serve and a digital experience, they also want the ability to talk to a human being when they want.
We actually did not have an IVR [interactive voice response system]. So when the phone rings, we pick up saying, “Hello, Goldman Sachs.” Many people are startled initially.
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How have loan and savings products performed at Marcus?
Cohn: From a savings perspective, growth has accelerated during this crisis. As the market is extremely volatile, people are looking for things that are a bit more stable, something that’s FDIC insured. We have seen excellent growth in our no-penalty CD product, that has a 13-month maturity, but where you can take your money out early and not have any sort of fee or penalty, keeping the interest that you’ve earned up until that point.
Lending has been stable. We do a good job in terms of risk management, so our portfolio is performing as we expected. With our loan product, we again developed a product with consumers at the center of everything. You would expect people to say, “I want a loan product without fees,” but for us to truly claim no fees, ever … we could not even charge a late fee. This transparency has helped the growth of the product over time.
That’s another thing that makes us “human” at Marcus.
Is being perceived as ‘human’ more important due to the impact of COVID-19?
Cohn: I’m sure because of COVID-19, people have some insecurities about their personal finances. They may lack confidence in terms of knowing what the right thing to do is, and understanding what their options are. That’s where transparency becomes even more important … no surprises.
We took consumer feedback, and front and center spelled out how we make money – because that’s really what people question. “Well, if you don’t charge fees, how do you make money?” Well, it’s from interest, and here’s how the interest is calculated, and you can actually compare our interest rate to interest rates that you have. So transparency actually is not only an anti-competition element, it’s also something that is a marketing device. If you’re really transparent with consumers, then you earn their trust.
But, when you get into an environment like this, obviously we need to be ultra sensitive to how people are feeling, and the stresses we’re all having. It’s hard to be funny in this environment. Right now, we’ve definitely been very respectful of the environment, and how consumers are feeling.
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