Goldman Sachs’ digital bank struggling to make an impact in the UK 

Britain’s top retail banks have been scarcely impacted by the arrival of Marcus, Goldman Sachs' digital bank 
Britain’s top retail banks have been little impacted by the arrival of Marcus, Goldman Sachs' digital bank  Credit: Richard Drew/PA

It is just more than 13 months since Goldman Sachs, the archetype of Wall Street high finance, embarked on its surprise courtship of ordinary British households.

The debut of its online bank Marcus sparked a flurry of interest from savers deprived of easy-access interest-bearing accounts in the decade since the financial crisis.

More than 50,000 Britons signed up in the first two weeks, tempted by Marcus’s 1.5pc rate and perhaps even by its association with Goldman.

“People like names they know,” says Martin Lewis of MoneySavingExpert. Marcus’ association with Goldman Sachs has made it more attractive than some other small providers offering similar rates, he says.

Launched two years earlier in the US and named after Marcus Goldman, one of the bank’s founders, the venture has generated plenty of noise on both sides of the Atlantic.

Its effect on the retail banking market and on Goldman’s own financial performance has been less discernable, however.

Last month David Solomon, Goldman chief executive, asked investors to stand by the bank after Marcus, together with other innovations such as its Apple credit card, cost Goldman $450m (£351m) in the first nine months of the year. Solomon told investors he is willing to sacrifice short-term returns to strengthen its business in the long run.

“Over the last three years we’ve built a digital bank with $55bn [£43bn]in digital deposits, with $5bn of loans; four to five million customers; a brand-new credit card platform and have launched a card with Apple,” said Solomon.

“I feel like that’s pretty good progress over a short period of time.”

Britain’s top retail banks have nevertheless felt little effect from the arrival of a Wall Street titan, suggests Ian Gordon, an analyst at Investec.

“Clearly it’s generated lots of headlines... but in truth the impact on existing players has been muted,” he says.

While higher interest rates on customer deposits caught the eye of a group of savers frustrated by the lack of returns available elsewhere, there has been no major stampede toward Marcus.

It has opened 300,000 accounts in the UK, giving it access to £11bn in deposits. Its UK savers have earned more than £100m in interest. A small number of banks raised their interest rates in response but most of Britain’s big names have not felt the need to compete. The likes of Barclays and HSBC already have plenty of deposits and with loan growth anaemic, they have no need to splash out on attention-grabbing savings account rates to boost their coffers, Gordon says.

Des McDaid, Marcus’s boss in the UK, has previously admitted as much, saying that most of the existing high street banks are “awash with liquidity”.

Goldman’s plans to deliver the growth that Marcus needs to make money are not clear. It is yet to begin offering loans in the UK but its $5bn loan book in the US may offer a hint of what is to come.

McDaid has also signalled a possible foray into continental Europe, describing Germany, with its strong culture of personal saving, as a “phenomenal next-step opportunity”. France, Spain and Italy could be attractive.

And how long can generous interest rates last? “Goldman Sachs can probably afford to play a longer game than most others,” says Lewis.