Goldman Sachs, known for financing mega-deals and servicing the ultra-wealthy, is now open to the general public. And its interest in the average American appears to be mutual as thousands of consumers have flocked to its new retail banking service.
The company bought GE Capital Bank’s online deposit platform in a deal that closed in April.
GS Bank, as it is now known, remains fairly simple with an online-only format for establishing savings accounts and investing in CDs. But its rates are competitive — offering above 1 per cent for online savings accounts when many others pay less.
Despite no marketing since the deal’s signing, GS Bank has added $1 billion in new deposits. And it plans to expand its offerings with personal loans soon.
“We see an opportunity to serve a different customer set than we typically have served,” said Stephen Scherr, CEO of GS Bank. “And we do it at a time when there is a lot of change in how banking is done with and for consumers.”
Goldman is hoping to establish a new revenue source with this foray into retail banking as some of its more traditional streams have struggled amid volatile markets and increasing regulation. At the height of the financial crisis, Goldman Sachs converted itself into a bank holding company in part to access types of funding that were previously off limits to it.
Scherr said that the company sees itself as a competitor both to traditional consumer banks and to online startups. It benefits from the name recognition and business acumen of an established financial brand that most startups lack, without the cost of running a network of brick and mortar banks that some of its more established competitors face.
It’s not the first time a major financial firm has expanded into online banking service, said Greg McBride, chief financial analyst at Bankrate.com, pointing to offerings from ING and American Express. Banks are just responding to consumers’ preference to look online to find the best of anything, McBride said.
“Consumers aren’t exclusively banking with whoever is located in their neighbourhood,” he said. “There’s a tangible advantage to shopping around.”