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Goldman Sachs' Marcus to Offer Credit Lines to Walmart Sellers

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Goldman Sachs’ GS digital consumer lending platform, Marcus, is entering a partnership with Walmart Inc. WMT. The collaboration is expected to help Walmart get into business lending.

The move will strengthen Walmart’s Marketplace business as eligible sellers at the retail giant’s Marketplace will get invited to apply for credit lines from Marcus by Goldman Sachs.

In the beginning, approved Marketplace sellers can access credit lines of $10,000-$75,000 from Marcus, while the maximum credit line amount is expected to increase in the future.

The lines of credit have a fixed annual interest rate of 6.99-20.99%, depending on the creditworthiness of the business.

The vice president of Walmart Marketplace, Jeff Clementz, stated, “Access to affordable capital is more important than ever as businesses large and small work to adapt and evolve to serve customers and grow their businesses. Lines of credit offer businesses the flexibility to access money when they need, which could help them move fast and meet during customer demand. It could also help fund innovation as we’re all working to adapt to changing customer behavior and preferences.”

Notably, amid the current scenario, where social distancing is of prime importance, Walmart does not want to leave any scope to expand its online business.

The company’s efforts to strengthen its e-commerce business are paying off all the more amid the current pandemic-led situation, wherein customers are choosing to stay indoors and shop online. In the second quarter of fiscal 2021, Walmart’s Marketplace sales jumped at a triple-digit rate and helped the company’s U.S. segment’s e-commerce sales to surge a whopping 97%, with strength across all channels.

While on one hand, the retail giant has gained popularity amid the pandemic and has become a customer favorite, Goldman Sachs on the other hand has benefited from the shift to digital banking.

Abhinav Anand, managing director for Marcus by Goldman Sachs stated, “We are very excited about this partnership with Walmart. We built our seller financing platform with flexible technology architecture to enable us to meet end consumer's needs within the ecosystem of our partner.”

Amid the coronavirus-induced economic crisis, as consumers now prefer digital banking, away from traditional banking, banks are trying to upgrade technology, and hence offer more digital products and services.

Goldman Sachs has been working on expanding its four-year-old digital-first consumer bank, Marcus. Notably, Marcus offers high-yield savings accounts, high-yield and penalty-free certificates of deposit (CDs), and no-fee personal loans.

Through a strategy called Banking-as-a-Service (“BaaS”), the Wall Street giant is trying to embed its products into large partners' ecosystems. In 2019, Marcus partnered with Apple Inc. AAPL and Mastercard Incorporated MA to release its first-ever digital and physical credit card.

Our Take

Goldman Sachs’ key source of earnings stability is its business diversification. It has been undertaking initiatives to boost the GS Bank’s business with the acquisition of the online deposit platform of GE Capital Bank in April 2016. Moreover, the company is likely to benefit from its exposure to the fast-growing exchange-traded funds (“ETF”) market.

Further, the company’s solid position in worldwide announced and completed M&As is expected to keep strengthening its business.

Shares of Goldman Sachs have gained 24.8% in the past six months compared with growth of 27.8% recorded by the industry.

Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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