The reason for greater levels of concern should be that the US behemoth isn’t just coming to challenge banks as lenders, but is reported to want to replicate its high online savings account model from the US, challenging UK banks for their deposits —their traditional bread and butter business.
According to reports, originally in the FT, Goldman will be likely rolling out its Marcus platform in mid-2018— it was launched in October last year.
The report noted that this would look to replicate the easy to use high interest savings accounts, which the bank operates in the US.
In the US, GS Bank offers an online saving interest rate of 1.19% on an account of over $1, although the rate is variable. There is a limit of six withdrawals per statement cycle.
An equivalent easy-to-use offering in the UK would give consumers a real choice with which bank to deposit their savings.
The US giant has also moved to access the UK consumer lending market, buying a minority stake in start-up Neyber, which lends to consumers and then recoups through salary payments.
Both of these basic banking functions — deposits which pay worthwhile interest, and cost-effective consumer lending — are areas where the dominant UK high street back have been accused of failing their customers.
While challenger companies and online consumer lenders such as Zopa and Ratesetter have attempted to fill the gap on cheaper lending and offering attractive returns to investors, they are nowhere close to the potential scale of the Goldman operation, and present a far higher risk than a traditional bank savings account.
Savings rates have long been a contentious issue in the UK, with high street banks often spurning deposits given the availability of cheap funding from central banks.
Central bank money gives them little reason to compete to attract savings by offering attractive rates. Deposit rates have therefore remained minimal, helping bring the overall UK household savings ratio to a historic low, as many consumers turn away from saving and to cheap borrowing.
But the Bank of England’s term funding scheme is ending in February and while the scheme’s four year tenor means banks are in no need of urgent funding, they will, once again, have to consider how to tempt deposit funding through the door.
Goldman, however, may have stolen a march on the main UK banks if it brings a product offering higher savings rate accounts from mid-2018. That means the UK banks will need to think fast — a real heavyweight challenger is now stepping in to the ring with them.