Goldman Sachs is planning to launch its fledgling cash management operations in the UK by September and across Europe by the end of the year, as the bank presses ahead with investment in the division in spite of the coronavirus crisis.
The timetable is detailed in a presentation shown to prospective clients in recent weeks. Goldman has also offered to pay significantly more than rivals for some deposits, people familiar with the pitch said, mirroring its strategy for winning deposits at its Marcus consumer arm.
Cash management — which includes holding deposits for corporates, receiving cash on their behalf and making payments — is the biggest part of the transaction banking business Goldman is getting into as chief executive David Solomon tries to diversify the bank’s revenues beyond its trading and advisory roots.
While Goldman lacks the huge global footprint of companies such as Citigroup, JPMorgan Chase, Deutsche Bank and HSBC in cash management, the bank believes it can woo clients with a new technology platform that is more customer-friendly than the legacy players’ efforts.
The 10 largest cash management players in the world shared revenues of almost $26bn last year, according to research from industry monitor Coalition. Executives argue that Goldman, which began managing its own cash last year, needs to win only a small share of the market to make the foray worthwhile. By the end of the first quarter, Goldman’s new division had $9bn in deposits across more than 80 clients, a drop in the ocean relative to Goldman’s $1.09tn balance sheet but a result that “exceeded expectations”, according to Mr Solomon.
Goldman has spent the past few weeks courting the US corporates that it hopes will become the platform’s mainstay. One person familiar with discussions said Goldman had promised to pay as much as 200 basis points more than rivals on some deposits.
A second person said that Goldman’s pricing strategy was to be in the “70th percentile”, implying that it would offer better pricing than 70 per cent of the market, but would not be the most aggressive.
A Goldman spokesman said it was paying an interest rate of 10 to 35 basis points on demand deposits. He would not disclose the rates the bank pays for deposits of longer maturity, which are typically far higher. There is no reference rate for demand deposits because they are negotiated privately between banks and their clients. An industry figure said that many banks were paying zero, but that some are paying as much as 100bp.
Goldman’s international strategy revolves around “virtual accounts” that allow clients to split their main US bank account into a collection of digital accounts that manage deposits and cash flow across countries and currencies.
JPMorgan Chase, one of the world’s biggest cash management players, offers virtual accounts across 11 countries and 35 currencies.
A spokesman for Goldman said the bank would not comment on the details of its cash management plans until the platform’s official launch next month. “We believe our intuitive, transparent technology will be our significant differentiator,” he added.
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