Goldman Sachs’ fintech partnership and acquisition playbook

Bank seeks to “look outside” more as it builds consumer finance business

LendIt Fintech kicked off today with a session with Goldman Sachs’ Chief Strategy Officer Stephanie Cohen, who also just happened to be promoted to co-run the bank’s consumer banking and wealth management division as part of a broader reshuffling.

According to the Wall Street Journal, the move marks the first time a woman will run a major division at Goldman Sachs “in years.” Cohen had been the firm’s chief strategy officer since 2017. Tucker York, an executive in Goldman’s private bank, will co-run the division with Cohen as of Jan. 1, 2021.

The 150-year-old investment bank, which as the conference organizers noted, has embraced fintech over the last five years. (For specifics on just how much it’s been investing in fintechs in recent years, check out my article here).

In an interview with Jane Gladstone, president of Promontory Interfinancial Network, Cohen discussed a range of topics including the importance of diversity, the firm’s M&A strategy and its plans for investing in new partnerships. For obvious reasons, we’re focusing on all things fintech that came up.

Last year, Goldman announced it was acquiring United Capital for $750 million as part of its efforts to boost its wealth management business. According to the Wall Street Journal, the deal marked the company’s largest acquisition in nearly two decades.

“When we think about M&A, I’ll give you an example in the consumer [finance] business, Marcus,” Cohen said. “A lot of people when they talk about it, talk about it as an organic build, but the reality is that it’s a complete mix” of building by partnership or investment.  

For example, Goldman originally bought the GE deposit platform and then built a credit card platform before acquiring Final, an Oakland-based credit card startup, in an effort to fuel the bank’s expanding consumer efforts. Final, founded in 2014, offered consumers a credit card with digital features designed to protect against fraud and theft. Goldman then partnered with Apple on the Apple Card offering.

“And so if you think about how we’ve been building out the consumer platform at the highest level, there wasn’t some really large M&A deal that brought that business into Goldman Sachs,” Cohen said.

When it came to the subject of partnering, Cohen acknowledged that Goldman has some work to do.

“I think it’s fair to admit that we haven’t always been the easiest to deal with as it relates to partnering,” she said, “and I know we’re not alone in that. But it’s my job for us to be the partner of choice so I want to be at the top, in terms of people to deal with. And some of that has been that we’ve historically built a lot of things totally on our own…and that’s not particularly inviting for people who want to partner with you.”

Moving forward, she said Goldman is seeking to “look outside” more.

Sounds like good news for other companies, especially fintechs.

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