Goldman loses 4 executives in 3 days as Walmart fintech poaches Marcus chief
Omer Ismail and David Stark, two top executives at Marcus by Goldman Sachs, are joining Walmart's fintech startup backed by venture capital firm Ribbit Capital, Bloomberg and The Wall Street Journal reported, citing anonymous sources.
Ismail's departure in particular may be surprising, as he only formally ascended to the role as head of Goldman's consumer bank Jan. 1 — although he reportedly took over day-to-day operations in September from Harit Talwar, who at the start of 2021 became chairman of the bank's consumer division.
"Our business has serious momentum and a deep and growing bench of talent," Andrew Williams, a Goldman Sachs spokesman, told Bloomberg in a statement. "We wish these two well."
Walmart's poaching of two longtime consumer-banking executives from one of the country's six largest banks validates the retailer's startup efforts and sends a warning shot to the industry.
"These are substantive hires that should serve as an unambiguous signal of Walmart's seriousness regarding its fintech foray," Isaac Boltansky, an analyst at Compass Point Research & Trading, told Bloomberg.
Critical, too, may be that the hires come from Marcus, a brand that built itself from the ground up to generate $1.2 billion in annual revenue — up 40% from 2019 — and hold $97 billion in deposits and $8 billion in consumer-loan balances five years after launch.
Ismail and Stark aren't the first Marcus execs to flee this year. Adam Dell, the consumer bank's head of product, stepped down in mid-January, according to a memo seen by Business Insider.
They're being followed out the door at parent company Goldman Sachs by two other executives who announced their departures on successive days.
Eric Lane, the co-head of Goldman's asset-management business, is leaving to become president and chief operating officer of investment firm Tiger Global Management later this year, that company said in a letter seen by Bloomberg.
Karen Seymour, Goldman Sachs's general counsel, is also leaving the bank, Bloomberg reported, citing anonymous sources.
Ismail and Stark have experience laying the groundwork to roll out a startup. The former joined Goldman in 2002 and was among a group of executives who devised the strategy to expand into digital banking in 2014. Stark joined Goldman in 2015 and played crucial roles in sealing and maintaining the bank's credit-card partnerships with Apple and General Motors. The bank promoted him in February to head of large partnerships, according to a memo seen by Reuters.
Two of the "deep bench" players Goldman might tap to fill the void left by Ismail and Stark are Talwar — Ismail's predecessor — and Marcus's new direct-to-consumer business chief, Swati Bhatia, who previously served as digital payment company Stripe's chief payments risk officer.
While Goldman might have a deep bench, Walmart's backer has deep pockets. Ribbit Capital has invested millions of dollars in companies such as Affirm and Credit Karma and, notably, the Financial Times reported, gave Robinhood more than $500 million in convertible debt financing in January, when it needed to boost its capital buffers amid the GameStop trading splurge.
Details of Walmart's fintech startup have been scarce. The company hasn't disclosed the new entity's name, specific services it intends to provide or a launch date. A spokesperson for Walmart did, however, tell Bloomberg it isn't planning to apply for an industrial loan company (ILC) charter.
That pathway to providing banking services has drawn consistent blowback from lawmakers and trade groups who argue it lets commerce companies sidestep Federal Reserve oversight.
The Federal Deposit Insurance Corp. (FDIC) released a final rule in December requiring ILC parent companies to enter into a written agreement with the agency on capital and liquidity levels, and pledge to maintain "the industrial bank's capital and liquidity at levels that the FDIC deems necessary for the safe and sound operation of the industrial bank."
The Bank Policy Institute, Center for Responsible Lending and the Independent Community Bankers of America warned the rule would spur an uptick in ILC charter applications.
The FDIC has received more than a dozen deposit insurance applications from proposed ILCs since 2012. Two companies — Brex and Thrivent Financial for Lutherans — filed applications in February. When the FDIC in March 2020 approved applications from payments company Square and student loan servicer Nelnet, it marked the first new ILC charters in more than a decade, a development that spurred Sen. Sherrod Brown, D-OH, of the Senate Banking Committee to invoke Walmart's name.
"Just before the last crisis, regulators gutted financial rules and even considered letting megacorporations like Walmart own banks — and here we go again," he said in a statement.
Walmart applied for an ILC charter in 2005 — though it has said it had hoped to use the charter not to open bank branches but to save about $30 million a year by processing credit and debit card transactions internally, according to Bloomberg. The retailer withdrew its application two years later.
Fighting Walmart's charter efforts, however, may be short-sighted, Ed Mills, a policy analyst at Raymond James, told the Financial Times.
"Banks have spent the last 15 years fighting against Walmart getting a bank charter, but what has changed is that Walmart is no longer the biggest threat to the banking industry — tech and fintech is."
This time around, the company is being a bit more vague. "Our customers have been clear that they want more from us in terms of financial services," Walmart CEO Doug McMillon said in February at an investor event, according to The Wall Street Journal. "This new approach will help us deliver for them in a differentiated way more quickly."
Walmart's goal is to "monetize their most valuable asset — the frequency and relationship they have with customers across the globe," John Tomlinson, an analyst at M Science, told Bloomberg. The average person goes to Walmart's stores or website about 30 times a year, M Science estimated.
In any case, the mere mention of Walmart in the banking sphere may serve as a trigger word, banking consultant Bert Ely told Bloomberg.
"The minute you start talking about Walmart and banking, the alarm bells go off," he said.
Article top image credit: :Weatherman1126. (2007). "Logo of The Goldman Sachs Group, Inc." [Image]. Retrieved from Wikipedia Commons.