Soon, Goldman will offer loans online to both consumers and to small businesses as it looks to tap into a marketplace worth nearly $850 billion. The new unit will offer the loans through a website or an app — functioning like a virtual bank in one of the oldest companies on Wall Street. Without the costs of bank branches and tellers, Goldman can lend the money at lower interest rates while still making a profit. The company hopes to be ready to make its first loans next year.

It’s a big change for Goldman’s business model — before, the only people who could obtain a loan from the bank were its high-net-worth clients.

Goldman can establish a consumer lending business now because it converted from being an investment bank into a bank holding company during the financial crisis.  It also allowed Goldman the opportunity to interact more directly with consumers.

Goldman Sachs did not comment when asked about their business plan explored by this New York Times’ story. 

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Alibaba has dominated the IPO headlines since the Chinese e-commerce and digital marketplace behemoth filed for a U.S. initial public offering in May. But it’s the coming share sale of another online marketplace that likely has greater relevance to Americans.

LendingClub, the largest U.S. provider of peer-to-peer loans announced plans Wednesday to raise $500 million in an IPO. Located in San Francisco, clear across the country from the nation’s money hub of Wall Street, Lending Club has gained popularity by focusing on a piece of the financial universe that the banking industry has long neglected: consumer loans.

Families wanting to remodel their homes, take overseas vacations or relocate have been forced to rack up credit card debt at high interest rates, because banks stopped putting forth the resources into underwriting those relatively low dollar loans.

LendingClub and smaller rival Prosper Marketplace invite borrowers looking for loans of up to to $35,000, with more than three-quarters of customers using the funds to consolidate existing debt. For LendingClub’s lowest-risk borrowers, rates on three-year loans start at below 7 percent.

As of the end of June, LendingClub had issued more than $5 billion in loans since its launch in 2007, including over $1 billion just in the latest quarter. If the stock market behaves, LendingClub plans to go public before the Thanksgiving holiday in late November, said a person close to the company. Morgan Stanley and Goldman Sachs are leading the offering.

Here’s what makes it a marketplace. Rather than acting like a bank, which makes money on fees to consumers as well as the spread between its borrowing costs and interest rates charged to customers, LendingClublets outside investors—retail and institutional—buy loans from its website.

After a prospective borrower applies for a loan, LendingClub uses software and lots of data to underwrite the customer and determine if the loan can be issued. If the application makes it through the screening, it’s made available for the investing public.

A retail investor can open an account with a few hundred or few thousand dollars and build a portfolio of diversified loans by putting as little as $25 into each. When a loan gets fully funded, it gets issued to the borrower and LendingClub gets paid an origination fee. LendingClub’s net revenue more than doubled in the second quarter to $48.2 million, though operating expenses surged, leaving the company with a $9.2 million net loss.

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