Gold­man Sachs wants your piggy bank

The Malta Business Weekly - - INTERNATIONAL -

A new sav­ings bank hits the UK this week, but it's far from be­ing a new com­pany.

Mar­cus is part of the mighty Gold­man Sachs - the US in­vest­ment bank once dubbed the "vam­pire squid".

Its move into the UK comes as no sur­prise. Its US sav­ings bank, which was set up two years ago, has been a big suc­cess, at­tract­ing $20bn of sav­ings.

But will the bank's launch be a damp squib, or mark a sea-change for the UK sav­ings mar­ket?

Mar­cus is named af­ter Mar­cus Gold­man who founded Gold­man Sachs in 1869.

The com­pany has promised it will "of­fer savers an easy-ac­cess on­line sav­ings ac­count that pays a com­pet­i­tive rate of in­ter­est on bal­ances from £1 to £250,000."

It says cus­tomers will be able to make as many with­drawals as they like - "free of charge and with no penalty".

The bank also says it is "aim­ing to of­fer UK savers a con­sis­tently com­pet­i­tive in­ter­est rate".

But all that is just pre-pro­mo­tion. When the bank's first sav­ings ac­count launches this week it will suc­ceed or fail purely on the in­ter­est rate it of­fers.

When a pi­lot ac­count was launched to staff last month, the rate of­fered was 1.5%.

If the same rate is of­fered to the pub­lic, that will be enough to cat­a­pult it to the top of the best-buy ta­bles, en­sur­ing in­stant de­mand from savers.

That is a long-estab­lished route for over­seas banks: they ef­fec­tively buy mar­ket-share by of­fer­ing the best sav­ings rate.

But what hap­pens next is the in­ter­est­ing bit - will the bank still be around af­ter build­ing up a big mar­ket-share?

That hasn't al­ways been the case in the past. Where are Dutchowned ING Di­rect or Ice­save from Ice­landic-owned Lands­banki?

The for­mer at­tracted mil­lions of savers be­fore slip­ping out of the best-buy ta­bles and into ob­scu­rity. It was even­tu­ally bought by Bar­clays a few years ago.

The lat­ter col­lapsed in the fi­nan­cial cri­sis, leav­ing the British gov­ern­ment to bail out the bil­lions of pounds that UK savers had stashed in it (although that was later re­paid by Ice­land's gov­ern­ment).

The warn­ing is clear. But savers eager for bet­ter re­turns are likely to ig­nore it.

If they do, that could leave Mar­cus mov­ing ahead with plans to launch a credit card and even a tra­di­tional cur­rent ac­count in the fu­ture, even­tu­ally be­com­ing a UK bank­ing force.

There have been al­most 40 new en­trants to the sav­ings mar­ket in the decade since the fi­nan­cial cri- sis, ac­cord­ing to James Blower, founder of The Sav­ings Guru.

"Ev­ery sin­gle one has estab­lished it­self by of­fer­ing 'best buy' in­ter­est rates. I see no rea­son why Mar­cus will be dif­fer­ent," he says.

"If it launches with 1.5% it will pro­vide a huge jolt to the mar­ket, given that the best rate in the mar- ket is cur­rently the 1.37% from Kent Re­liance."

That could force ri­vals such as Vir­gin, Re­nault-backed RCI, Ford Money and Shaw­brook - all stal­warts of the best buy ta­bles - to re­spond by in­creas­ing their own rates, which would be good news for savers.

One of the bar­ri­ers to suc­cess is trust, warns Anna Bowes, co­founder of Sav­ings Cham­pion.

"The is­sue that many chal­lenger banks have on launch is that as un­recog­nised names, it can take quite some time for savers to trust that they are le­git­i­mate. And it's ex­pen­sive for them to gain trac­tion," she says.

But the fact that Mar­cus comes from the pow­er­ful in­vest­ment bank Gold­man Sachs should give it an ad­van­tage, she adds.

Sarah Coles, per­sonal fi­nance an­a­lyst at Har­g­reaves Lans­down agrees.

"With the clout of Gold­man Sachs, Mar­cus should keep the rest of the chal­lengers on their toes, which is ex­cel­lent news for savers," she says.

She says that many com­pet­i­tive easy ac­cess sav­ings ac­counts come with strings at­tached - such as a lim­ited num­ber of with­drawals or a bonus for the first year.

"A com­pet­i­tive easy ac­cess ac­count with­out these caveats would be very wel­come among savers," she says.

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