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Breakingviews - Walmart’s fintech gain hints at Goldman’s loss

A Goldman Sachs sign is displayed inside the company's post on the floor of the New York Stock Exchange (NYSE) in New York, U.S., April 18, 2017. REUTERS/Brendan McDermid

NEW YORK (Reuters Breakingviews) - Customers of consumer banks tend to choose a lender and then stay put. The same is not always true of bankers. Goldman Sachs has lost Omer Ismail, the head of its consumer business, just two months after naming him to that job and almost 20 years after he joined the firm. Ismail is going to Walmart, the $368 billion U.S. grocery chain that’s just about the opposite of Goldman in terms of brand positioning.

As with any high-level departure, the reasons are likely to include a pull and a push. Walmart has been tinkering with the idea of financial services for years. And the thinking that inspired the launch of Goldman’s retail bank back in 2016 – with Ismail as a founding member – applies to the grocer too. Goldman saw that customers were frustrated by their banking experiences and decided it had expertise, and a banking license, that could help.

Walmart doesn’t have a license, for now. But with millions of consumers visiting its 5,000-plus U.S. stores multiple times a month, the company could become a force to be reckoned with in payments, deposit services or even to buy-now-pay-later credit of the kind offered by startups like Affirm. Given Walmart’s sheer scale, and pre-tax profit almost double Goldman’s, boss Doug McMillon can afford to pay enough to make the opportunity interesting. Ismail is taking senior colleague David Stark with him. Greg Berry, the Goldman division’s systems architect, left the bank last year, according to his LinkedIn page.

And the push? Goldman’s retail business, branded Marcus, was once the company’s most exciting growth opportunity. But the prospect of rock-bottom interest rates and uncertain consumer credit has taken away some of the shine. Last year, none of the firm’s new partners came from the consumer division. The relaxed vibe at Marcus, epitomized by Berry’s nose ring, may be less of a fit than Goldman thought.

That leaves Goldman’s retail bank as a nice if small addition to its business. In good years, the returns on equity from credit-card lending and consumer banking are among the highest in finance. It makes $1 billion of annual revenue. But it’s not likely to disrupt the financial services industry. Walmart, if it ramps up its finance activities, is an altogether different beast – unhappily for Wall Street firms hoping to hang on to their top fintech talent.

Breakingviews

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