Goldman has been the one to watch for having the courage to reinvent its business and culture in all adversities. From the subprime crisis days, that Goldman chose to become a commercial bank and later returning the $10Billion bailout money; to offering free access to its analytical tools SecDB to all its clients;  to its infamous `You Can Marcus` ad for its consumer banking business launch, and on and on.
I won’t mention at all its Fintech global strategic investments and its partnerships with Fintechs and with BigTech; because I want to focus on Goldman`s latest move into Transaction Banking. I first have to thank Simon Taylor, who highlighted this in his Fintech Brain Food weekly.
McKinsey says that Global Transaction banking is a $1trillion revenue business that remains behind the scenes and hasn’t been creating as much excitement. This includes not only a variety of Cash Management services for corporates but also trade finance and securities management.
It seems that Goldman Sachs new cloud-native transaction banking platform is (at least for now) more focused on cash management for corporates. Most sources report that this business generates approximately $26billion per year. The top three established players in this part of Transaction banking are Citibank, BoFa, and JP Morgan. Citi generated $10+ billion in 2019, BoFa increased its revenues to $8.6billion, and JP Morgan dropped to third position with $8.5billion.
Goldman Sachs has worked with Volante Tech to design a cloud-native technology offering to its corporate clients first and then, of course, open it up to others. GS is using its Baas Transaction banking platform offering internally already (with 200 clients and $28 billion in deposits since June). Volante`s VolPay (payment as a service) allows for virtual account opening for corporate clients, unified end-to-end processing of domestic and international payments for any kind of rail.
Goldman and Volante, claim that the offering works wonders with API capabilities and rich analytics around liquidity management and risk management.
Innovation is the only survival mode. Anybody that thinks their company is in survival mode and can’t afford to innovate, has it wrong.
Transaction Banking will be disrupted like all financial services that can`t adapt to the new normal.
While GS, a new player in Transaction banking, launched its cloud-native Baas offering, let’s look at what else is happening.
JP Morgan, the 3rd established player by market share, is innovating with its newly launched JPM coin for cross border settlement for its corporate clients. It has been working on it for a while and just recently announced that it's live. We need to be patient to obtain some data on what percentage of the $6trillion it moves cross-border across more than 100 countries, will use the JPM coin.
Swift, the messaging inter-banking enabler with 11,000 member banks, has announced a two-year plan to improve its new transaction banking capabilities. See here.
Ripple, the seasoned settlement token that aimed to make moving money between financial institutions cheaper, nearly real-time, and more secure and transparent than the current banking and payment networks, is not seeing the adoption it thought. See here.
There is no doubt that Goldman Sachs continues to innovate. Its business transformation strategies underway makes it difficult to clearly categorize it. It used to be an investment bank but now it is in consumer banking & wealth management and lately stepping in transaction banking. Its market cap is just shy of $70Billion and JPMorgan`s is over $310B, and Morgan Stanley`s is $94B. Some analysts think GS is undervalued.
One thing is clear, GS is closer to becoming a platform business than JP Morgan and Morgan Stanley.
One indication of this is, the market capitalization per employee: for GS it is $1.8M and rising, whereas for JPM and MS it is $1.5M!
In one year, it will also be valuable to look at the API calls from each of these companies.
 As explained in my article in the 2018 WealthTech Book `Empowering Asset Owners and the Buy Side`
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