GS Goldman Sachs Group Inc

By Liz Hoffman and Peter Rudegeair 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 16, 2018).

Goldman Sachs Group Inc. bought personal-finance app Clarity Money, acquiring a mobile storefront for its growing consumer bank.

The deal closed on Friday for Clarity Money, whose backers include Soros Capital and Citigroup Inc.'s venture-capital arm. Adam Dell -- brother of Michael Dell, the personal-computer pioneer -- founded Clarity Money and will join Goldman as a partner, a title rarely given to outsiders.

The Wall Street firm has been intensifying its push into retail banking, a decade after its conversion from a broker-dealer into a bank that can take consumer deposits. Under the brand name Marcus, Goldman began making personal loans online in 2016 and has originated more than $2.5 billion so far. It also offers high-interest savings accounts and has about 350,000 customers across both products.

As previously reported, Goldman is paying a high eight-figure sum for Clarity Money -- a rich valuation for a two-year-old startup that has yet to turn a profit.

But Clarity Money's roughly one million users will quadruple Goldman's customer base. In addition to Mr. Dell, about two dozen other Clarity Money employees will join the bank.

Lacking a branch network, Goldman has partnered with tax-preparation software firm Intuit Inc. and Fidelity and has sent hundreds of millions of pieces of direct mail in an effort to draw customers.

Clarity Money's app is expected to serve as the smartphone storefront for Goldman's growing suite of retail products, which the Journal has reported could include wealth-management tools, home mortgages, point-of-sale loans and insurance policies. Marcus doesn't yet have a mobile app.

Clarity Money uses algorithms and artificial intelligence to help consumers cancel or lower their bills, find a better credit card, and set savings goals. It aggregates information about their bank accounts and spending habits, and collects fees for referring them to credit-card and other financial companies.

"Consumers are too often overwhelmed by or don't have a good handle on their finances," Omer Ismail, chief operating officer of Goldman's Marcus said in an interview. "We think we can simplify that."

Still, Goldman will have to strike a balance between keeping Clarity Money as a neutral platform -- recommending the products best-suited for its users, even if they come from a Goldman competitor -- and using it to push its own offerings.

That challenge will only grow as Marcus does. Mr. Ismail said last week Goldman might look to launch its own credit card, which could prove awkward as Clarity Money currently recommends rival cards from JPMorgan Chase & Co., Citigroup Inc. and American Express Inc.

Other personal-finance apps have failed to catch on, especially when housed inside lenders. Capital One Financial Corp. bought budgeting app Level Money Inc. in 2015 but shut it down 18 months later. Online lender Prosper Marketlace Inc. killed off Billguard Inc. in 2017 after buying it for $30 million two years earlier.

What's more, personal-finance apps can be a tough sell because their prompts nag or stress out users, said Schwark Satyavolu, who founded personal-finance tracker Yodlee Inc. "You don't want that thing pinging you every time you go into a Starbucks saying, 'Hey, don't drink a coffee today because you can't afford it," said Mr. Satyavolu, now a general partner at venture-capital firm Trinity Ventures.

Goldman's deal for Clarity Money began with a sales call from Mr. Dell, who is the beau of supermodel and "Top Chef" host Padma Lakshmi. Mr. Dell last spring pitched Goldman executives on offering Marcus loans and savings accounts through the app. Mr. Ismail had a different idea: "Would you be willing to sell?" he asked.

Goldman had been working on a personal-finance and budgeting app of its own, internally dubbed FiDi, after Financial District, the lower Manhattan neighborhood. Buying Clarity Money would be faster, and Goldman liked the app's jargon-free style and user prompts, Mr. Ismail said.

"Anything you'd like to cancel?" it asks, showing recurring payments like Netflix Inc. subscriptions and gym memberships. Goldman CEO Lloyd Blankfein joked during a demonstration that it could help him cancel his cable bill, Mr. Ismail said.

Write to Liz Hoffman at liz.hoffman@wsj.com and Peter Rudegeair at Peter.Rudegeair@wsj.com

(END) Dow Jones Newswires

April 16, 2018 02:47 ET (06:47 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.