Barclays confirmed that it bought the credit-card portfolio of General Motors, succeeding where Goldman Sachs last year failed to navigate a partnership with the car maker. The bank immediately acquires a coveted credit-card portfolio, which will then be integrated into its existing consumer business.
Months since upheaval inside Goldman Sachs’ consumer bank operation had taken hold, the bank agreed to sell a portfolio of credit-card loans to Barclays, as the consumer banking unit that had in 2020 held onto the GM credit-card business found itself in turmoil. Goldman at first saw the GM partnership as a strategic play to extend its reach into consumers but really didn’t get off the ground. According to Reuters, it was due to some issues in servicing and customer satisfaction along with operational expenses being more than expected that made it too expensive for GM.
Indeed, an appropriate candidate emerged from that struggle – Barclay, an already long-existing player in the credit-card market. As of today, in fact, Barclays boasts a remarkable track record of co-branded credit-card partnerships with American Airlines, Wyndham Hotels, and many others. In acquiring the GM credit-card book, Barclays will thus strengthen its position in the U.S. credit-card industry and gain access to a significant consumer base.
Marcus is the consumer banking arm of Goldman Sachs and already shows signs of growing pains since its launch. Goldman had keenly sought to stretch beyond its core business in investment banking and wealth management. However, taking a foothold in competitive space in consumer banking proved rather challenging. Entering the GM deal, widely believed to be one of the growth drivers for the company, proved to be a costly mistake.
According to sources, the alliance that Goldman created with GM was marred by problems almost from day one. Some of the problems that touched the very facets of this relationship included customer complaints relating to problems during service and technical ones, while the credit-card unit did not match expectations in terms of profitability. Additionally, Goldman had spent much on technology and infrastructures meant for facilitating GM portfolio, with the costs rather overshadowing return. These issues compelled both Goldman and GM to search for other alternatives.
The sale of Goldman Sachs Group Inc.’s credit-card portfolio to Barclays Plc marks the end of a tricky period for the investment bank, which is now readjusting its approach to consumer banking. “We will be pickier about the kind of consumer opportunities we pursue,” Chief Executive Officer David Solomon said, underlining that the bank will focus on areas in which it can use its core strengths rather than try to overextend itself into unknown territory.
One of the high growth opportunities for Barclays arises from acquiring GM’s credit-card portfolio: millions of cardholders earning reward points that can be redeemed toward vehicle purchases, parts, and services. Through this partnership, Barclays can access this highly engaged customer base and strengthen its position in a competitive U.S. credit-card sector.
Barclays can boast of experience in managing co-branded credit-card portfolios, thus providing an edge in terms of handling the transition from Goldman Sachs. The bank has already shown confidence about how well the GM portfolio will integrate itself into the existing credit-card operations, and assured customers that the transition is without issues and more importantly customers can look forward to greater services and rewards as offered by Barclays.
The shift to Barclays indicates a fresh start for General Motors’ credit-card business. In that regard, GM will benefit from the experience of Barclays in the management of loyalty programs and ensuring a seamless customer experience. On their part, cardholders will enjoy better services and continued rewards toward GM vehicles and services.
As the deal progresses, GM and Barclays have both assured customers that there would be no immediate changes in their existing credit-card accounts and they can continue to use cards as usual. The whole process is expected to be completed over the next few months, during which time the portfolio will come completely under Barclays control.
In short, the deal by Barclays to acquire GM’s credit-card book marked a significant landmark in the credit-card landscape. Having Goldman Sachs backed away from the partnership, Barclays hardly had any choice but to seize this opportunity to move on and expand its U.S. base while providing better services to GM’s loyal cardholders.
