Banking

Goldman Sachs Gearing Up To Enter Commercial Banking Market

Goldman Sachs has hired a senior engineer at JPMorgan to develop cash management tools as it eyes an entrance into the commercial banking market.

The Wall Street Journal, citing people familiar with the plans, reported the senior engineer and JPMorgan partner Hari Moorthy was hired to develop cash management tools, account deposit tools and other financial products geared at large companies.  At JPMorgan, Moorthy was focused on technology for the commercial banking market. At Goldman Sachs, he will be creating similar tools, noted the report.

For Goldman Sachs, the push into commercial banking is somewhat of a departure for the Wall Street firm. It is more known for advising on mergers and helping companies raise capital — helping businesses manage and move money is the domain of JPMorgan and Citigroup. But with a need to find new avenues of growth, Goldman Sachs is going into new markets. In addition to bringing a new source of revenue to Goldman Sachs, a move into commercial banking can give it a new source of deposits. Since the financial crisis of 2008, it has been looking for ways to diversify its funding sources, reported The Wall Street Journal.  Its push into the market will be modest at the beginning, with Goldman focused more on technology than opening up branch offices. It also wants to partner to offer some of the products.

Goldman Sachs will be facing tough competition in the commercial banking market where JPMorgan, Citigroup, Bank of America and Wells Fargo have been the leading players. They have the know-how and infrastructure to help businesses with their cash management. What’s more, the big lending books at the banks have built loyalty among the customers that seek their help on a regular basis. The paper noted that around half of JPMorgan’s $1.2 trillion in deposits are from businesses. It made $4.1 billion in revenue from commercial loans in 2017 and $3.4 billion from cash management and treasury services, noted the WSJ.

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