Goldman Sachs will start offering transaction banking services in the UK this week, as it continues to expand in Britain as part of a drive to diversify beyond its dominant trading and advisory businesses.
It is the first international expansion of the division after it opened last year in the US. Goldman says the transaction bank, which offers services such as cash management and treasury to businesses, has already won 250 clients and $35bn in deposits, putting it ahead of schedule on a five-year plan to attract $50bn of client money and win $1bn of new revenue.
It is Goldman’s second non-investment banking foray in the UK, following the launch of its retail bank, Marcus, in 2018.
“Goldman Sachs enjoys some of the best corporate relationships on the planet,” said Jim Esposito, global co-head of investment banking at Goldman Sachs.
“Over the years we have generated zero revenues in transaction banking,” he added. “The size of that wallet in the US and globally is bigger than for our traditional investment banking products. In the next decades there is a revenue opportunity measured in multiple billions for the firm, if we get this right.”
In addition to retail banking, chief executive David Solomon has made it a priority to generate more stable and predictable revenues from commercial banking, to offset the volatility of the trading businesses.
However, Goldman faces a tough challenge to break into a crowded sector. It lacks the huge global reach of top-10 incumbents such as Citigroup, JPMorgan Chase, Deutsche Bank and HSBC, which share roughly $26bn in annual revenue from global cash management.
However, Goldman believes it can poach clients with a new technology platform — “TxB” — which can open accounts in minutes rather than months, the bank said, and has a sleek, easy to use customer interface.
“When we scoped the opportunity, what you hear loudly from clients is that it is a very fragmented market, relying on dated and legacy stacks of tech,” Esposito said.
Goldman also hopes to distinguish itself from rivals by running an open technology platform and partnering with fintechs, such as its treasury services deal with Stripe in the US.
Another strategy could be buying market share: when Goldman opened Marcus in the UK it offered consumers the highest savings rate available at the time. The Financial Times has previously reported that the lender was also offering to pay significantly more than rivals for some deposits, but the bank has disputed this.
Hari Moorthy, Goldman’s global head of transaction banking, said that the UK was an attractive market because of the number of companies based there with international payment needs.
“The UK has a transaction banking wallet of $20bn to $30bn and with our new tech and existing relationships, we can make a significant penetration into this market over time,” he said.
Moorthy said Goldman has signed up some pilot clients and was in discussions with partners, but declined to say which companies they were. The transaction bank employs almost 100 people in the UK and is hiring, with around 500 staff globally.
It is planning to open in several EU countries by the end of this year.