Goldman Sachs on course to launch cash management
Aims to start the service in the first half of 2020
Goldman Sachs Group Inc. is considering paying big multinational corporations more for their deposits than other banks, as it paves the way for its entry into a mundane but prized business: managing cash.
The global investment banking powerhouse and fifth-largest U.S. bank, which is six months into building the required technology, aims to start the service in the first half of 2020, according to two people familiar with the plan.
The bank, which will earn fees and gain a captive client base for its foreign exchange business, could offer existing corporate clients more on deposits if they sign up for Goldman’s cash management services, a person familiar with the plan told Reuters.
Long considered a low-margin, utility-like service, the wholesale payments and cash management business generated about $250 billion in global revenue in 2017 for big banks, according to management consulting firm Oliver Wyman.
As Goldman seeks to grow stable revenue by adding a cash management service for clients whom it already offers hedging and strategic advice, the investment bank further evolves to match rival universal banks’ range of businesses.
Goldman Sachs is about half way to a goal management set in 2017 to generate $5 billion more in annual revenue by next year, largely by boosting reliable, fee-based businesses.
However, rivals privately scoff at the idea Goldman can gain significant market share in a business where contracts often last five years, clients tend to stick with their banks and a global network of banking licenses greases the wheels.
“The regulatory and operational costs of building a global cash management platform will be very steep and will take many years to achieve the scale that will justify the costs,” said a senior commercial banker at a large European bank.
Nonetheless, Goldman believes it can make inroads.
Its investment bankers have heard corporate treasurers at big U.S. multinational corporations complain that other banks’ systems are clunky and outdated, one person familiar with Goldman’s plans said. Goldman will try to woo those accounts with a user-friendly interface and other improvements, and eventually hopes to be the third or fourth bank corporate clients use, in addition to other banks, for cash management.
Later this year, Goldman will become its own first client by moving its deposits from other banks onto its own cash management platform.
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