Three years after expanding into credit cards, Goldman Sachs Group Inc. has quietly signed up a third partner, T-Mobile US Inc.
The agreement to collaborate, under discussion since at least last year, was reached in recent months, according to people familiar with the matter, asking not to be identified discussing private talks. So far, neither company has discussed the project publicly, and spokespeople for T-Mobile and Goldman declined to comment.
The accord was struck just as pressure began mounting on the Wall Street giant to stem the cost of a yearslong effort to build a consumer business, dubbed Marcus, that has yet to become profitable. Goldman’s management has been wrestling with how to choke off losses in its consumer business and follow through with aspirations for expansion.
After card deals with Apple Inc. and General Motors Co., Goldman will have to navigate new types of risks signing up T-Mobile customers. The carrier offers a wide variety of phones and plans, designed to provide service to people with low incomes or spotty credit histories. But the company has been investing in its network, and that is helping attract more prime customers than ever before, T-Mobile Chief Executive Officer Mike Sievert has said.
Signage for a T-Mobile store in San Francisco, California, U.S., on Monday Jan. 31, 2022. T-Mobile US Inc. is scheduled to release earnings figures on Feb. 2.
“Our prime percentage is up several points from year-ago, and we’re getting more and more,” he told analysts on a call last year.
It can take years for banks to make money on new card offerings. There are up-front costs for marketing and rewards programs. Lenders also need time to cultivate a large portfolio of customers who reliably pay their debts.
Even JPMorgan Chase & Co.’s wildly popular Sapphire Reserve card took awhile to pay off. When that card debuted in 2016, analysts estimated it would be 5.5 years before the bank would break even.
Not all card partnerships successfully launch a card. A few years ago, Lyft Inc. selected a bank partner -- Synchrony Financial -- and spent months trying to cobble together a card program before it ultimately decided to shutter the effort.
Goldman’s consumer unit has also recently became the focus of a review by the Federal Reserve. Officials at the regulator have been asking the Wall Street giant questions about the business’s practices and development.
If they succeed in developing a new card, it would give the second-biggest US wireless carrier a financial product to pitch to 88 million regular monthly subscribers, competing with a card already offered by Verizon Communications Inc.
The agreement with T-Mobile sets the stage for the companies to design a rewards program and other features that can turn customers into longtime, dedicated users of their services. Persuading T-Mobile customers to automatically pay their wireless bills with their cards, for example, can strengthen relationships with both companies.
Verizon launched its credit card with Synchrony in 2020. That card’s perks include 4% back on grocery and gas purchases in the form of “Verizon Dollars” that can be redeemed for future Verizon purchases. Executives at Synchrony, the country’s largest store-card provider, have said the Verizon card may grow into one of its top-10 programs.
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