Marcus will have to wait

$Goldman Sachs(GS.US)$ is apparently reconsidering allocating more capital to its money-losing retail banking unit Marcus, which now has cumulative losses of USD4bn. The management wants to focus on its wealth management business, which has seen better growth.

I have always wondered if a fintech inside an established bank can create more value than a standalone fintech. I continue to lean towards the former, given how game-changing a strong balance sheet can be for a growth business in the context of cost synergies and lowering the cost of capital.

However, the spending spree on CAC (one of the largest spend categories for a fintech) has not normalised. The space is competitive as ever, and is well-funded with standalone fintechs ready to battle it out till the last dollar.

It seems normal to rethink capital allocation in this environment where ROICs and cash flows have meaning again. Marcus will have to wait, for now.