Does Goldman Sachs retail bank Marcus really warrant all the hype?

Katherine Denham
Competition from a behemoth like Goldman Sachs will be enough to spur the other big banks to follow suit

Marcus sounds worlds apart from the financial beast that is Goldman Sachs. But that’s the point – Marcus is meant to sound approachable, a bank for normal people.

Named after one of the company’s founders, Marcus Goldman, this new challenger bank has proved popular since it first launched in the US back in 2016. It’s also gone down a treat in the UK, with 50,000 British customers signing up to its savings account since it came to market on 27 September.

Read more: Goldman Sachs' retail bank attracts 50,000 customers in first two weeks

While Marcus managing director Des McDaid said the account was launched to tackle the “disillusionment” about savings, its popularity has still exceeded the company’s expectations.

It’s easy to see why, when the 1.5 per cent rate comfortably beats the rest of the market. In fact, the average rate for easy access savings accounts is currently 0.63 per cent, according to Moneyfacts.

With such pitiful rewards on offer elsewhere in the market (some accounts offer as little as 0.05 per cent), it’s no surprise that savers are lapping up this new offering.

If you look at what this 1.5 per cent translates to over a 10-year period, a £5,000 deposit would have made you an extra £808. By comparison, a 0.63 per cent rate would have made £325 over the same period, and a 0.05 per cent rate would have garnered a disgraceful £25.

The fintech book

But it’s not just the interest rate that makes Marcus appealing – it’s that it strips away some of the complexities which have made the banking industry so frustrating for customers.

While most high street banks still insist that new customers trek to a local branch to open a savings account, Goldman Sachs is taking a leaf out of the fintech book by allowing customers to open accounts online.

Customers can manage their money through the online platform, with no fees or limits to withdrawals.

It’s a shame that Goldman Sachs didn’t opt for a one-rate system – that would have taken Marcus’s disruption of the savings market to another level

It all sounds good – particularly for younger savers who want the ease of doing everything quickly online.

And while Marcus might resemble a fintech newcomer, it has the backing of an investment giant with a 149-year history, which might add to its appeal for customers who are wary of trusting young startup companies with their savings.

But there are some reservations about the account.

Losing interest

High street banks are often criticised for offering initial teaser rates to get customers through the door, only to dramatically reduce the reward after a certain period of time – effectively punishing loyal customers, and relying on their inertia not to switch.

Unfortunately, Marcus seems to be continuing this trend, luring customers in with a 1.5 per cent introductory bonus rate, which falls to 1.35 per cent after the first 12 months.

Admittedly, a basic rate of 1.35 per cent is still far better than the vast majority of savings accounts in the market, but it makes Marcus look less appealing, with several other providers offering rates between 1.36 and 1.41 per cent.

Competition from a behemoth like Goldman Sachs could spur the other big banks to follow suit

Offering the highest interest rate in the market serves as a tactic to get people talking, so it will be interesting to see whether Marcus will maintain this rate once enough savers have signed up.

It’s also curious that Goldman Sachs has opted for an interest rate that is divided into two parts (a 0.15 per cent introductory bonus and a 1.35 per cent basic), because this seems to contradict the account’s ambition to simplify a complicated market.

While the website makes it clear that the 1.5 per cent rate is only a 12-month deal, a single rate savings account would create less room for confusion. It’s a shame that Goldman Sachs didn’t opt for a one-rate system – that would have taken Marcus’s disruption of the savings market to another level.

Marcus might be offering a market-beating rate, but savers also need to be aware that 1.5 per cent interest is still lower than inflation’s 2.7 per cent. This means that your money is actually losing value in real terms.

So while it’s easy to get excited about this offering, putting hundreds of thousands of pounds into the account (the maximum deposit is £250,000) does not make financial sense – you’d be better off investing in the stock markets to get an inflation-beating return.

Vampire squid

While some savers will be assured by the long-standing experience of Goldman Sachs, others will be reluctant to trust a bank that had an integral role in the 2008 financial crisis. As Rolling Stone famously put it: “The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

The nickname Vampire Squid is one which the bank has struggled to shake off. While Goldman Sachs has worked hard over the years to redeem its reputation, it’s still a work in progress.

With all that said, Goldman Sachs should be applauded for bringing relief to savers who have been starved of a return for the best part of a decade.

Perhaps some competition from a behemoth like Goldman Sachs will be enough to spur the other big banks to follow suit. Savers should certainly keep their eyes peeled for other offerings with market-beating rates – Marcus could be just the beginning.

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