New Banking-as-a-Service Player: Goldman Sachs
Earlier in the week, one of the most well-known firms on Wall Street, Goldman Sachs, announced (per CNBC) software access to clients interested in delivering banking services on their platforms . This move into the Banking-as-a-Service (or BaaS) segment helps the industry giant capture part of a $30B market share of cash management for enterprise companies. Goldman Sachs’ global Head of Transaction Banking, Hari Moorthy, is spearheading the initiative.
By providing extensive corporate banking and payments options to clients, Goldman is looking to gain lost ground to competitors (such as Citigroup and JPMorgan Chase) who are leaders in treasury services and cash management. Similar to fintech companies that delivered BaaS over the last decade, Goldman Sachs built a new cloud-based infrastructure for accounts and payments, and released access via APIs for developers to easily integrate new products on top of the platform.
Overall, BaaS providers aim to operate similar to Amazon’s cloud services in providing a banking ecosystem that can be customized and quickly operational in market (without lag time in bank approvals or implementation). Customers create profiles, open accounts, link external accounts for funding, and perform money transfers both in the US and abroad seamlessly. Previous attempts from other large institutions are not developer-friendly and difficult to implement and automate.
For Goldman, diving into transactional banking adds an additional revenue stream and opens the door to both consumer and corporate clients. BaaS fits well with CEO David Solomon’s vision of expanding offerings, growing their user base, and diversifying away from investment banking and trading. The first client on this new platform is Goldman itself.
What does this mean for the banking industry in 2020? Corporate banking becomes a completely digital and agile product offering from financial institutions. JPMorgan, Bank of America, and other large banks can also enter the space with a similar offering. The availability of FinTech solutions from digital banking architecture providers delivers speed and flexibility in launching these services. Banking giants now have a path into the fintech sector using their deep industry expertise, business models, and the latest technology.