Shares of the New York-based bank are taking a hit on Tuesday as the big banks prepare for a contentious congressional hearing on Wednesday and the broader market declines.
However, the company's Marcus platform, a no-fee, no-minimum online savings account that offers above market interest rates, is a key differentiator as Goldman seeks to lure clients away from JP Morgan (JPM) , Bank of America (BAC) , and other regional banks that have kept rates persistently low.
The service, which also offers debt consolidation and fixed-rate online loans, bills itself as a way for Goldman to act on behalf of consumers and move its image away from the high net worth focus it has held for much of its existence.
"We saw an opportunity to serve consumers through consumer-centric products that are simple and transparent," CEO David Solomon explained in a letter to the House Finance Committee on Monday. "We set out to build our consumer business from a clean sheet of paper. In designing Marcus, we spoke with more than 10,000 people across the country to understand their banking needs. Value, simplicity and transparency are at the core of our consumer products, which is based on this feedback."
He noted the company currently courts more than 3 million customers across the Marcus product suite with $35 billion in deposits across the U.S. and UK.
The trend of growth is substantially different than Wells Fargo, for example, which reported a $42.6 billion reduction in average deposits earlier this year after a slew of scandals stung consumer confidence.
If the higher rates and low cost options of the platform can continue to entice consumers, the trend will be an important one to watch for banking sector speculators.
Ascending Alongside Apple
The opportunity offered from Apple's 1.4 billion person user base cannot be ignored to begin with. The ability of Goldman to get any meaningful slice of this pie would obviously accelerate its market share and allow it to contend quickly with the more established consumer banking names.
It gets even better for Goldman as the Action Alerts PLUS team noted that the partnership offers an opportunity to build the company's consumer loan book.
"Every time the card is swiped and a consumer decides to run a balance on their credit card, Goldman gets to check that off as another loan extended and charge interest on those loans," the team's white paper notes.
The team also cited a study by the National Bureau of Economic Research that revealed iPhone and iPad ownership are two of the best predictors of high net worth among consumers.
"Knowing whether someone owns an iPad in 2016 allows us to guess correctly whether the person is in the top or bottom income quartile 69 percent of the time," the study stated.
Considering Goldman's current catering to high net worth individuals, the partnership only begins to make more sense for both parties.
To be sure, if consumers are to default on credit card debt, Goldman will be on the hook. As such, it shouldn't simply be taken as a risk-free wager on the bank's part.
Further, there are good reasons that competing banks have kept rates persistently low on deposits as interest rates remain historically low. That could mean adjustments to the current market leading rates that could make account growth lumpier in the long term.
For Goldman, this may be outweighed by the fact that the agreement to back Apple's new credit card also gives it a place in peoples' wallets, a key area lacking for the Marcus initiative at this stage.
"Until now, if you were to have an account with Marcus and credit card with, say, Citigroup C, while you could link the Goldman account to the card to pay off the balance, any loan amounts left on the card and the interest associated with that card would completely bypass Goldman, going instead to the financial institution behind the card," the white paper explains. "The Apple Card solves this problem by allowing Goldman to be the supplier of the loans associated with the running balance and collect the interest fees on that balance...this can be worth potentially hundreds of millions to the bank's bottom line."
As Goldman moves forward with Marcus, it will need to become a larger part of analyst estimates which will help expand the company's multiple in coming years if successful.
"This is the partnership Goldman has needed to really jump start Marcus and we don't think that aspect is being fully appreciated in the still beaten down share price," the Action Alerts PLUS team concluded.
To read the team's full white paper on the implications for Apple, Goldman Sachs, and Mastercard, click here.