“Disrupter”, “challenger” and “retail” are not terms usually associated with Goldman Sachs.
Other terms, including the Rolling Stone journalist Matt Taibbi’s infamous vampire squid (as in “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells of money”), come more readily to mind.
But perceptions may have to change, however.
Back in October 2016 Goldman launched Marcus, an online digital bank, in the United States, that targeted retail customers by offering high yielding deposit products and competitively priced loans.
It is no secret, given all the media reports that have appeared subsequently, that Goldman intends to launch Marcus in the UK possibly before the end of 2018.
Named after Marcus Goldman, one of the New York-based bank’s founders Marcus had attracted around $20 billion in deposits and made $3 billion of loans by the end of the first quarter of 2018.
Paying 1.70 percent on deposits (as at 22 May 2018) Marcus claims to pay more than four times the US national average. Furthermore there is no minimum deposit and customers can withdraw up to $125,000 online in a single transaction.
So is the UK arrival of Marcus likely to cause wealth managers or private banks sleepless nights?
Probably not: Marcus doesn’t appear to have any ambitions to move into mainstream wealth management by offering investment management and other services. Nor does its service offer extend beyond deposit taking and basic loan products.
But high yielding deposits could still attract the attention of the rich and/or advisers acting on their behalf.
For the rich do like to keep a portion of their liquid wealth in cash. And whatever its other virtues cash offers very low returns.
According to Cambridge-based Insignis Cash*, a finalist in the 2018 PAM Awards, which offers a cash management service to customers with at least £50,000 to deposit, there is currently around £1.5 trillion of inert cash sitting in UK deposits.
Pay a rate of just one percent and this could boost aggregate returns to £15 billion, something which Insignis aims to facilitate through its cash management service.
Unlike Insignis, however, Marcus doesn’t demand a minimum deposit. As such it has greater potential to disrupt the UK deposit market.
Of course an initial high rate of interest could be transitory. After all, as Insignis point out, UK deposit takes have been no slouches in offering premium rates to attract new deposits. The problem is that six months later these rates revert to the mean.
But in the US Marcus still offers premium rates eighteen months after its launch.
So it might retain the interest of depositors, rich and retail alike if it does - as seems almost certain - open for business in the UK.
*Disclosure Note. The author is a customer of Insignis Cash