Want to boast about having an account with Goldman Sachs but don't have the $10 million required for the minimum deposit? Well, now mere mortals can enjoy the American Dream, too. Wall Street's infamous financial firm just introduced GS Bank, an online service that includes a savings account with no minimum deposit, no transaction fees, and a 1.05 percent interest rate that is currently almost one full percentage point above every other big bank.
The new strategy follows Goldman's acquisition of online bank GE Capital, and comes as part of the banking behemoth's restructuring in the face of stricter federal regulations, falling profits, and calls for more diversified — and reliable — revenue sources.
Unlike other top five banks such as JPMorgan Chase and Wells Fargo, Goldman Sachs has never had a consumer base. Long associated with private banking for the rich and privileged — and thought to have one of the wealthiest client bases — Goldman Sachs stands most at risk from one catastrophic incident, said regulators, who are keen to prevent a repeat of 2008's government bailout.
Online banks are the only banking category to have seen sustained growth over the past 10 years, according to a TNS Global study — likely the result not only of consumers leaning more towards convenience and technology, but also a loss of confidence in more mainstream banks. With GS Bank, Goldman is pushing "on-the-go" services that are "simple and secure," touting itself as "a banking partner you can rely on."
"This isn't going to change the banking landscape," said Greg McBride, chief financial analyst at Bankrate, in an email. "But it is an effective way [for Goldman Sachs] to bring in low cost deposits and diversify their funding sources."
"Top-yielding, nationally available, online-only account offerings have been around for 20 years, so there's no new trail being blazed here, and there are plenty of other household names that are and have been in this space (formerly ING Direct now Capital One 360, Discover Bank, MetLife Bank, Barclays, Ally Bank, Sallie Mae Bank, and more)," said McBride.
The firm's net earnings for the first quarter was down 59.9 percent year on year, at $1.14 billion.