By Elizabeth Dilts and Sumeet Chatterjee
<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "NEW YORK / HONG KONG (More Bank) – Goldman Sachs Group Inc.
The power of global investment banks and the fifth largest US bank, six months after the start of the construction of the required technology, aims to launch service in the first half of 2020, according to two people familiar with the plan. They agreed to discuss the internal strategy on the condition that they are not named.
The bank, which will earn fees and will be a captive client for its foreign exchange activities, could offer more to existing client companies on deposits if they subscribed to Goldman's cash management services, a person familiar with the plan told More Bank .
Long regarded as a low-margin utility-type service, the wholesale payments and cash management industry generated approximately $ 250 billion in global revenue in 2017 for the big banks, according to management consulting firm Oliver Wyman .
The steady flow of income has become more attractive for banks that have shifted away from unstable areas such as the brokerage bank and investment banks in the wake of the financial crisis ten years ago.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Citigroup Inc.
As Goldman seeks to increase its stable revenue by adding a cash management service to its existing hedge and strategic advisory clients, the investment bank is also evolving to align with the spectrum. activities of rival universal banks.
Goldman Sachs is about halfway to a management goal set in 2017 to generate an additional annual business figure of $ 5 billion by next year, mainly by reinforcing reliable billed activities. (Graph: https://tmsnrt.rs/2H81K9a)
However, rivals are privately offended that Goldman can gain a significant market share in a company where contracts often last five years, customers tend to stay loyal to their banks and where a global network of Banking licenses can grease the wheels.
"The regulatory and operational costs associated with setting up a global cash management platform will be very high and it will take several years to reach the scale that will justify these costs," said a senior manager. experienced commercial banker from a large European bank.
"Large multinational companies are consolidating the number of banks they deal with, and they tend not to change service providers frequently for day-to-day tasks, such as facilitating supplier payments and managing payroll. "
Nevertheless, Goldman thinks he can make progress.
Its investment bankers have heard from treasurers of major US multinationals complaining about the cumbersome and antiquated systems of other banks, according to someone familiar with Goldman's projects. Goldman will try to seduce these accounts with a user-friendly interface and other improvements, and hopes to eventually become the third or fourth bank used by corporate clients, alongside other banks, for cash management.
Later this year, Goldman will become its own first customer by transferring its deposits from other banks to its own cash management platform. Goldman hopes to earn money through cash management in three ways: fund processing fee, conversion fee of a client 's funds in other currencies during a certain period of time. transaction, and use of deposits as operational account balances, a less expensive alternative to wholesale financing.
Oliver Wyman predicts that wholesale payments and cash management revenues will increase by 5% per year over the next five years. Volume growth and rising interest rates will more than offset the contraction in profit margins caused by increased competition, the consulting firm said.
Paying customers more for deposits and introducing new technologies is a strategy used by Goldman in launching Marcus, its online retail bank, in 2016.
This has paid off. Marcus had $ 30 billion in deposits in the United States and the United Kingdom and $ 4 billion in loans in November, and contributes about $ 200 million to Goldman's revenue, according to a presentation. of November.
The story continues
In recent months, Goldman has announced that it is hiring cash, technology and legal compliance compliance professionals.
In a publication on LinkedIn looking for chief architects in commercial banking engineering, Goldman said he's looking for "innovative solutions to traditional banking activities" by combining "the legacy of a financial institution." 148 years old with agility and the spirit of enterprise ". the spirit of a technological start-up. "
(Report by Elizabeth Dilts in New York and Sumeet Chatterjee in Hong Kong, edited by Lauren Tara LaCapra and Tomasz Janowski)