The deal Apple must make: acquiring Goldman Sachs' Consumer Biz would be the M&A of the century 🤯; Stripe's struggling to get fresh capital 😳; Walmart takes another step towards becoming a bank 🏦

FinTech is Eating the World, 2 March

Hey Everyone,

Good Morning! Despite a delay, today’s issue is the best one this week so far. We’re looking at why Apple should acquire Goldman Sachs' Consumer Division (why Apple needs to do it & why this would be the M&A of the century), Stripe that’s struggling to get fresh capital (yet another reminder of Stripe’s biggest mistake ever), and Walmart that takes another step towards becoming a bank (& why it could be huge). Let’s jump straight into the awesome stuff 🌶

The deal Apple needs to make: acquiring Goldman Sachs' Consumer Division would be the M&A of the century 🤯

The (hot) news🔥 Investment banking heavyweight Goldman Sachs GS 0.00%↑ is reportedly considering selling or restructuring part of its consumer business as it looks to recover from the losses incurred by its digital bank venture Marcus.

Bonus & refresher: RIP Goldman Sachs (Marcus)🪦 [deep dive]

The bank had attempted to attract main street consumers with the venture, but it did not go as planned, according to CEO David Solomon.

Maybe because he’s a part-time DJ and GS is just a nice side hustle? 😉 Let’s leave this for another time…

More on this 👉 Let’s take a look at the latest numbers. Here are the key things to know from Goldman’s latest financial fillings:

• Goldman Sachs' installment loans hit $6B in Q4, up from $5B in Q3 and $4B the previous year. Credit card loans doubled from last year to $16B in the latest period, compared to $14B in Q3. While the company's loans increased, so did its allowance for loan losses, from $4B last year to $6B now. This demonstrates the challenge of managing an expanding business.

  

• According to the company's most recent 10-K, 79% of its consumer loans were taken on by borrowers with FICO scores of 660 or higher. The remaining 21% were carried by consumers with lower FICO scores, with $619M of those loans past due by at least 30 days.

• PYMNTS reported that the average credit score for paycheck-to-paycheck consumers is 664, and they are more likely to take on credit card debt. This aligns with the FICO score noted in Goldman's statistics. It thus seems that their consumers are using savings to pay off their credit card debt. The pressure on Main Street consumers is evident, and Goldman Sachs is not immune.

While Solomon hinted at a potential reorganization or sale of the bank's consumer lending business, other executives discussed a path to profitability for the unit. When pressed for clarification, Solomon stated that the bank is looking at all strategic options available and executing what's in front of us.

Strategic options 🧠 So, what are the strategic options available to Goldman Sachs? According to industry analysts, the bank could potentially sell parts of its consumer business to major credit card companies or consumer lenders. Alternatively, the bank could bring in a majority-controlled partner to run the unit.

This is exactly where Apple could come in and change the game forever. Here’s why & how: