Weekly Briefing No. 26 | Can Goldman Burnish Its Brand by Going Retail?



Goldman Sachs and Generation Z lead our discussions this week. An OnDemand InsuranceTech start-up, fintech trolls, Luxembourg’s Bitcoin move and Ant Financial are also featured.


Can Goldman burnish its brand by going retail?

It’s hard to simultaneously maintain institutional mystique and curry favor with the mass market, but Goldman Sachs is attempting to pull it off. As recent articles in the Financial Times and Bloomberg indicate, Goldman Sachs’ GSBank.com is offering CD deposits and online savings accounts that can be opened for as little as $1. The move makes sense. The firm’s leaders know the environment, understand that regulators want to see more funding through deposits, and have been closely monitoring the mounting difficulties facing independent online lenders such as Lending Club. With a growing depository base fueled by GSBank.com, Goldman’s online lending unit, Mosaic, now looks poised to enter the direct online lending market from a position of strength. But there’s another benefit to GSBank.com that is getting short shrift. Goldman is well aware of the potential reputational glow that comes from paying above-average interest rates to savers and from being slightly kinder to borrowers who encounter trouble paying back loans. With members of both political parties now freely taking pot shots at Goldman by name, the firm could use its online banking initiatives to improve its stature and retire the vampire squid moniker once and for all. Direct engagement with everyday folks via GSBank.com and further digital product expansion is likely in the cards.

Here comes Generation Z.

In business, as in hockey, it’s wise not to skate to the puck, but to skate where the puck will be. Prior to the financial crisis, many consumer-oriented financial institutions ignored this insight by forgoing offerings and services that would appeal to millennials — broadly, the children of the baby boomers. Fintechs saw the opportunity and the rest is history. Today, the oldest members of the generation after the millennials, the so-called Generation Z, soon will graduate from college and enter the work world. At 26% of the US population according to several studies, Gen Z’ers are even bigger than the millennials. In some ways similar, they are distinct from millennials in that they are more: A) visual, as demonstrated by their bizarre love affair with emojis; B) entrepreneurially minded; C) pessimistic about reaching the American Dream; and D) frugal and less brand loyal. Should Gen Z’ers maintain their differences, financial incumbents and fintech firms alike will have their shot at capturing this generation with products tailored to them. However, the time to start planning isn’t when Gen Z’ers hit the ice.


If this OnDemand insurance app works as planned, it will be a big deal.

Trov is straight out of InsuranceTech’s central casting division. The app aims to offer a fully mobile insurance solution to allow individuals to insure particular objects for a precise amount of time. All the company needs is some information about the insurance purchaser and the make and model of the product to be insured. The company, which just raised $25.5 million via Oak HC/FT, Guidewire, Anthemis and others, aims to partner with insurance carriers that will manage the underwriting and regulatory processes. 

FinTech patent trolls are on the rise.

If you are running an emerging fintech company, you should take precautionary steps to minimize the possibility of being sued by a PAE (i.e. patent assertion entity), according to Mark Sole, CEO of Sipree. His prescription: A) get educated; B) set high standards for "novelty and non-obviousness" in filed patents; and C) join an industry association with big companies involved. We’d add one more to Sole’s list: hire a really strong patent lawyer as doing so can be money well spent.

The growing gap between promises and actions in mobile payments.

Kudos to PaymentSource for featuring PayPal’s Bill Ready’s opinion on the core problem with payments innovation: “‘Consumers and merchants have signaled they’re not interested in mobile payments in the strictest sense,’ Ready pointed out. ‘Instead, they want easy access to shopping and rewards, and they’re wondering why these things can’t be all in one place.’”

Luxembourg plants a shiny stake in the digital currency world.

Bitstamp, the world’s fourth-largest Bitcoin exchange, announced this week that Luxembourg has granted the company a license to become a fully regulated payment institution within the nation. By doing so, this financial center at the heart of Europe is sending a signal that it intends to become a leader in promoting the use of digital currencies. With the UK flirting with an exit from Europe, such signals may resonate a bit stronger.

Some days you’re the bug, some days you’re the windshield.

With its record setting $4.5 billion round of funding complete, Ant Financial is the latter. The $60 billion Chinese fintech giant is poised to use the new capital to expand its services — payments, SMB loans, microloans, insurance and wealth management — internationally. Our guess for the next stop: Southeast Asia.

The World Economic Forum speaks, Wharton listens.

We liked this article on Wharton’s website that uses the World Economic Forum’s recently dispensed views on fintech as the framework for its analysis. Our only issue is the source. While we’d love to join in on the Davos conversations in between jaunts down the ski runs of Parsenn, we’re not convinced that the WEF is optimally positioned to understand the disruptive power of fintech. Or to put it another way, it’s tough to accurately assess the pace of disruption while nibbling on canapés at cocktail parties. 

Institution of note

Purdue University.

Next month, the Indiana-based university is set to offer students an alternative to student loans: income share agreements (e.g. ISAs). The program, Back a Boiler, will be available to 400 students for the 2016–2017 academic year. Under the agreement, the Purdue Research Foundation will provide funding for students while they are in school in exchange for a commitment to pay a fixed percentage of future income for a pre-determined number of years. Although there are start-ups in the ISA sector, Back a Boiler represents the first major US university seeking to utilize this type of financing.

Comings and goings.

AXA Strategic Ventures continues to bolster its team with the announcement of two new general partners: Imran Akram, formerly with DN Capital, and Alex Scherbakovsky, who was formerly with New Enterprise Associates.

Quote of the week.

“You can only analyze the data you have. Be strategic about what to gather and how to store it."

~ Marie Curie