Banks are waking up to the idea that helping customers requires more than just giving them a free checking account or a higher yield on their savings.
On Sunday, Goldman Sachs announced that it has acquired Clarity Money, a fintech startup that helps its users track their finances by aggregating data from all of their accounts. The purchase price was not disclosed. The free service will be incorporated into Marcus By Goldman Sachs, the firm’s consumer banking arm.
In a call to discuss the deal, Marcus executives said the rationale driving the deal was “customer centricity.”
“There was good alignment between how we view the world, view the consumer pain points and view how consumers want control of their finances,” said Omer Ismail, chief commercial officer for Marcus. Ismail added that both companies focus on delivering value to consumers via transparency and simplicity.
Marcus has built its reputation over the last few years by offering simple and personalized banking services. For instance, its loan terms are set by customers telling the bank how much they can afford to pay each month. Now, the bank is betting that Clarity Money will help it further strengthen its reputation for its keeping its customers’ needs front and center.
Customers are the core
Historically, banks have built their businesses around products like checking accounts, savings accounts and credit cards. This model makes plenty of sense; the idea that banks offer checking accounts isn’t controversial. The weakness of this model, however, is that the products are built to fit the bank’s needs first of all, not necessarily those of the customers. People alter their banking behavior to fit products, not the other way around.
Today customer behavior across all retail channels is changing rapidly, thanks to things like recommendations on Amazon for products you never knew you needed, or the ability to effortlessly summon an Uber to your front door. Consumers are choosing products and services that feel like they were built with their needs in mind first of all.
In that regard, Goldman’s acquisition of Clarity is strikingly similar to Citibank’s roll-out of budgeting tools and account aggregation to everybody. At their core, these financial institutions are attempting to redefine how relationships are built with consumers. They believe that offering people the ability to see all of their financial life in one place and get meaningful insights will build stronger relationships than merely offering a free checking account.
“They are betting that they can build value in helping you find that extra $100 to invest or to pay toward your student loans,” says Bradley Leimer, managing director and head of fintech strategy for Explorer Advisory & Capital. “When they start giving that kind of help on accounts that exist outside of their bank, that’s when things get really interesting.”
Indeed, Harit Talwar, head of Marcus, said during the call that he anticipates the Clarity Money acquisition will “make our relationships stickier.”
Data rules the world
Acquiring Clarity Money could help Marcus build value with customers by helping them understand their finances, but it serves a much larger purpose for the bank. More than anything, it helps them better understand consumers and their needs.
People tend to have relationships with several banks. Perhaps they have a Chase checking account because they like having quick access to a lot of branches. But they have savings account with an online bank that pays a higher yield. Their mortgage is at another institution, and they have credit cards from several issuers.
As a result, banks struggle to really know customers and their needs because they don’t have a full grasp of their financial life.
“It is so much harder today to say ‘I know my customer’ because in order to say that you have to have the whole picture,” Leimer says.
Aggregation tools that help you get a better sense of your money also give the aggregator incredible insights into who you are. Buying an aggregator like Clarity Money is therefore “a competitive advantage,” Talwar said in the call.
Having access to consumer data gives Marcus “the ability to manufacture more products for the customer,” he says. Currently, Marcus offers personal loans, savings accounts and CDs. Additional products could include credit cards, wealth management and retirement planning.
Will this change Clarity Money?
For now, it doesn’t seem like Clarity Money will change much. The company has a page on its website to explain the acquisition to its customers, but essentially the company claims that becoming part of Marcus will help it offer additional features to its customers.
One important thing to mention is advertisements. Companies like Clarity Money make money via advertising that is targeted to your specific behaviors. For instance, if you’re carrying a balance on a credit card with a high interest rate, you might see ads for debt consolidation loans, like those offered by Marcus. Given its commitment to transparency and customer centricity, the company says this model won’t change. None of Clarity’s current partnerships, like those with micro-investing platform Acorns, will change, either.
“We want users to decide what makes sense for them,” Ismail says. “Just because we own it doesn’t mean we’re only going to be pushing our own products.”