The remaining GE is breaking into three companies.
It marks the end of an era, but the beginning of a new one.
𝐎𝐧𝐜𝐞 𝐀𝐜𝐭𝐢𝐯𝐞 𝐢𝐧 𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐅𝐢𝐧𝐚𝐧𝐜𝐞
GE started to participate in consumer finance in the 1990s.
That is when Jack Welch found the general management approach can be effectively applied to every industry.
With GE’s AAA ratings, it was easy to access funding. Then all GE needed to do is to hire some smart people and apply a rigorous management framework.
It worked. It worked so well. At one time, consumer finance and commercial finance accounted for more than 50% of GE’s profit.
That caused concerns from investors during the 2008 Great Financial Crisis. Jeff Immelt, the successor of Jack Welch, eventually made a strategic shift back to GE’s industrial roots.
GE has provided many great leaders in financial services and other industries. The spin-out consumer finance division is today’s Synchrony, the largest private label credit provider.
Synchrony is essentially a lending-as-a-service provider - a predecessor of today’s banking-as-a-service and embedded finance providers.
The conglomerate GE does not exist any more - but the individual GE business continues to live.
𝐍𝐞𝐰 𝐃𝐞𝐜𝐚𝐝𝐞, 𝐍𝐞𝐰 𝐏𝐥𝐚𝐲𝐞𝐫𝐬
While global heavyweights like GE, Citi, and HSBC retreat from the “being everything everywhere” model, new entrants carry on the ambitions.
𝐁𝐢𝐠 𝐓𝐞𝐜𝐡𝐬, with ample funds and cutting-edge technology, are eyeing consumer finance. Growing up successfully in the web 2.0 era, expanding into the finance area is a natural move - to maximize their knowledge of consumer behaviors and capture more value from the huge user base.
Then you have 𝐟𝐢𝐧𝐭𝐞𝐜𝐡𝐬, like Klarna and Revolut, which bring new products to every geographic market at a speed unseen before. They are not shy away from aspiring to be the next global superbanks.
Let’s not forget the up-rising 𝘌𝘮𝘣𝘦𝘥𝘥𝘦𝘥 𝘍𝘪𝘯𝘢𝘯𝘤𝘦, where 𝐧𝐨𝐧-𝐟𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐩𝐥𝐚𝐲𝐞𝐫𝐬 have much easier access to infrastructure to enter the financial arena. Do they stay to their core non-financial businesses and be satisfied with their cuts for distribution, or do they want to become lenders themselves? The choices are theirs to make.
What will happen at the end of this decade?
Would we see a new generation of financial superstores - who provides every financial service everywhere?
Would we see any new non-financial brand, like GE once was, that will build a meaningful business in consumer finance, outside its core business?
Only time will tell.