Why Goldman is Really Buying GreenSky While BNPL Installment Loans Are Boosting


  • Goldman Sachs announced it would buy installment lender GreenSky for $ 2.2 billion.
  • GreenSky specializes in point-of-sale loans for home improvement projects.
  • Goldman will attract GreenSky’s 10,000+ contract and retail customers.

Goldman Sachs is now getting into the buying process, later paying in a frenzy, albeit not in the typical fast fashion segment that made the installments so popular.

Wall Street bank, steeped in tradition, made a big foray into consumer lending, launching its Marcus retail bank in 2016, and entering into a number of newer partnerships and deals. The last time came Wednesday when Goldman revealed plans to buy installment lender GreenSky in an all-stock deal valued at $ 2.2 billion.

GreenSky enables installment loans and revolving credit lines for home improvement projects such as window replacements and HVAC installations. The Atlanta-based company made its public debut in 2018, with Goldman Sachs serving as lead underwriter. This all-share deal values ​​GreenSky at around $ 12 per share, nearly half the market price of $ 23 per share.

GreenSky will join Marcus from Goldman Sachs, part of the bank’s consumer and wealth management division jointly headed by Stephanie Cohen. A 22-year-old Goldman veteran and rising star, Cohen served as chief strategy officer before becoming co-head of consumer and wealth management last September – a move that got her into the discussion as a candidate for CEO .

When the transaction is complete, GreenSky’s 10,000+ commercial customers – such as small construction companies and contractors – will become Goldman customers, along with more than $ 9.4 billion in serviced loans. As Cohen explained in an interview with Insider, it’s a deal that gives Goldman instant access to the fees that dealers Greensky pay for loans for large purchases like a kitchen renovation or orthodontic work.

GreenSky makes money by charging its merchants with transaction fees of around 6.6%.

“It would have taken us at least a decade, I think, to build the GreenSky dealer network they’ve been building since 2006,” Cohen told Insider. And traders like these loans a lot, she said, “because they know they’ll help them grow their business by improving customer conversion.”

Goldman Sachs advised itself on the transaction, while JPMorgan and Financial Technology Partners advised GreenSky, according to a press release.

GreenSky also offers financing for healthcare, including dental and cosmetic surgery, although that accounts for less than 10% of GreenSky’s total volume, CEO David Zalik said during the conference call on second quarter earnings. It offers both revolving and installment lines of credit up to $ 65,000 for consumers who apply for funding from GreenSky’s retail customers.

It’s not Marcus’ first attempt at partnering or making acquisitions to get more clients.

Last year, Goldman was awarded a contract to acquire General Motors’ credit card business for approximately $ 2.5 billion. In 2019, Goldman Sachs and Apple announced a partnership to launch the Apple Card. Goldman is also Jet Blue’s installment partner, offering travelers point-of-sale financing for flights.

So far, Goldman’s interest in loans that buy now and pay later has tended towards higher value purchases, with GreenSky being no exception. For smaller purchases, Cohen referred to Goldman as a partner bank for the Apple Card and the installment offer for Apple products. Goldmann is allegedly works with Apple on installment payments via Apple Pay, not linked to the Apple Card.

Goldman Sachs will place GreenSky loans on the bank’s balance sheet

The deal will also fundamentally change the way GreenSky does business itself.

Currently, GreenSky relies on a number of partner banks, including Fifth Third Bank and BMO Harris, according to S&P Global Market Intelligence – to finance its loan portfolio. There were challenges in keeping these bank financing partners. In 2019, for example, Regions Bank decided not to renew a funding agreement with GreenSky when it expired, and Truist cut ties with the company in August after signing a deal with a point-of-sale competitor.

According to Cohen, when GreenSky joins Goldman Sachs, those loans will be moved onto Goldman Sachs’ own balance sheet over time.

“Having scale and a record is a real competitive advantage,” said Cohen.

Now Goldman can offer a $ 1.4 trillion balance sheet as a funding base for loans.

Under the Marcus umbrella, GreenSky can diversify revenue, which is currently mostly from dealer fees. Not only will GreenSky have access to its balance sheet, but there will also be opportunities to integrate with the rest of the bank’s services, such as transaction banking, Cohen said.

With the deal, Goldman is also expanding its presence in Atlanta, where GreenSky and its 1,200 employees are based. David Zalik, Chairman and CEO of GreenSky, will join Goldman Sachs as a partner, and Cohen said the company intends to hire all of GreenSky’s employees as part of the acquisition.

As Goldman Sachs and other banks expand their fintech offerings to consumers through acquisitions, they also face new consumer protection and regulatory issues. This July, GreenSky has transacted with the Consumer Financial Protection Bureau in a case where the fintech paid a $ 2.5 million fine and refunded or canceled up to $ 9 million in credit for taking out credit without customer consent.

For Goldman Sachs, Cohen said, the bank “strives to be on the right side of the customer” and “to deliver products that are simple, valuable and transparent”.

“The culture and ethos of Marcus, Goldman Sachs and GreenSky are well matched,” said Cohen.


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