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Goldman Sachs extends tentacles into mass market

Goldman Sachs’ decision to launch a mass market savings account with market-leading rates will play well with price-sensitive savers, but will struggle to appeal to more traditional consumers who still favor familiarity and branch access.

Goldman Sachs has launched an online bank targeting the US mainstream savings market. GS Bank, a rebranding of the online deposits platform recently acquired from GE Capital Bank, is offering a market-leading rate of 1.05% on balances of just $1. This is well above the market-wide average of 0.06%, and will prove very attractive to online consumers who prioritize rates above all other factors.

However, our survey findings show that most consumers choose savings providers for other reasons, above all branch presence, personal recommendation, and locality. Hence its appeal will be limited.

Nevertheless, Goldman Sachs’ move into the retail market will allow it to meet several objectives. Banks are under regulatory pressure to diversify their funding sources, and an inflow of retail deposits will satisfy this demand. These deposits will also help Goldman Sachs to spearhead a move into unsecured lending to consumers and small businesses later in 2016.

Finally, the bank once dubbed a giant vampire squid is in need of positive PR to help improve its reputation for perceived arrogance: allowing consumers to buy into its brand for just $1 will give it a more human face.

Goldman Sachs has the scale to become a significant player in the retail market, and the prospects of it carving out a niche over the next few years are good.

By Daoud Fakhri, Principal Retail Banking Analyst

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