The consumer finance branch of Goldman Sachs will pay online savings account customers a 2.25 percent rate starting on Friday (Jan. 4), which is an increase of 20 basis points. Also, the rate on a one-year certificate of deposit is up 10 basis points, rising to 2.75 percent.
Banks like deposits because they’re an easy and inexpensive way to get capital for loans. As the Federal Reserve continues to increase rates, competition between online banking entities and smaller institutions has increased, leading to concerns about the profitability of the sector.
Bankrate.com Chief Financial Analyst Greg McBride said that if the Fed stays on its path of increased rates, some accounts could yield up to 3 percent by the end of the year. That number was 1.5 percent only one year ago.
“There’s definitely a price war among the most competitive banks,” McBride said. “Banks are leapfrogging each other to be at the top of the heap. If it gets more people saving, that’s a good thing.”
Marcus rates are much higher than the national average, however, because other lenders like JPMorgan Chase and Bank of America rely on sign-on bonuses to attract deposits.
The strategy has been working for Goldman Sachs, which has lured more than two million users with its rates and received $27 billion in deposits.
In November of 2018, Marcus saw a strong international debut that the company said “exceeded every expectation.”
Des McDaid, a managing director at Goldman Sachs, said Marcus’ customer base was at 100,000 since its September launch.
“U.K. savers have been waiting for something for a long time,” McDaid said during the LendIt FinTech conference in London, which was covered by CNBC. “We said we’d put the interest back into savings. We did that by creating a bit of a buzz, a bit of a noise around our launch, and it’s just taken off.”