The Wall Street Journal announced last week that, after decades of focusing on large corporations and only the wealthiest investors, financial juggernaut Goldman Sachs would expand its reach, aiming to attract consumers and small businesses.
According to WSJ reporter Justin Baer, “Goldman already lends to ultra rich individuals through a network of wealth advisers. But making direct contact with retail customers would mark a leap for Goldman, given its traditional concentration on multinational companies and deep-pocketed individuals.”
Since the rapid growth of the marketplace lending industry and the success of industry pioneers Lending Club and OnDeck, Goldman and other Wall Street banks have been on their heels. Once the drivers of financial innovation, these institutions have notably lagged, especially when compared to the exponential growth seen in tech companies using online innovations to lend quickly and “outside the box.”
Getting a loan through a traditional bank can take 25 hours of paperwork, not to mention the time you wait to actually receive your funds. The same process online can be finished in only a few hours and funds can be received within 2 days, fueling the growth of the industry.
Lending continues to be ripe for disruption as we begin to see online marketplaces sprout up in a number of different sectors: student loans, pay day, purchase, auto, and real estate.
Will Goldman be able to catch up?
In just five years the marketplace lending sector has gone from virtually non-existent to a more than $9B industry.
Since our Series A round last year, Fundrise has grown its assets under management by more than 1,500% - the kind of growth you only see online. The move of a staid institution like Goldman into the consumer loan space validates the potential of this enormous industry. After all, imitation is the sincerest form of flattery.
Image Source: Kate McCully, Flickr