Goldman Sachs published a thought piece yesterday in the shape of a video on the future of retail banking called The Bank of the Future and it includes cryptocurrency accounts. That’s more good news for bitcoin hodlers.
What does the banking future according to Goldman look like? Keen followers of the firm may already have the outlines of its vision as they’ve watch the bank go on the hunt for revenues beyond the world of investment banking.
There’s the move into consumer loans with the launch of its Marcus brand in the US and more recently in Europe too. It has proved a hit with upscale consumers.
Then there’s the tie-up with Apple’s Apple Pay to launch a joint credit card, which we’ve just learned a lot more about from a Wall Street Journal report today. The new card will be differentiated from the competition with innovative features to help customers manage their money.
Goldman is sinking hundreds of millions of dollars into the effort as it seeks to coral a chunk of Apple’s well-heeled customer base, attracting them with useful features tightly integrated into their device rather than with the rewards and giveaways that is the dominant form competition among the current incumbents takes. The credit card is a first for Goldman.
Presumably then, the bank of the future will include the credit card in the mix. Actually it doesn’t. Sure they’ll still be around, but Goldman sees other cutting-edge products leading the way.
New products lead the way – with crypto right in there
In Goldman Sach’s much more exciting vision a new breed of products are coming into view, and cryptocurrency is right in among them.
In the 2m 15s video, Brandon Watkins, the firm’s vice president, head of emerging internet finance investment banking, sets out a vision in which “The bank of the future will be much different than the bank of the past, creating a big impact on the banking industry and dealmaking”, as the introductory titles proclaim.
he tells the story of how, once upon a time, consumers went to local bank branches where they could access a bundled set of financial products such as credit card, personal loan, student loan and their mortgage.
Offline to online, digital-first and personalisation
Now that’s all changing as branches close and mobile devices proliferate. Watkins breaks the phenomenon down into three overarching trends that threaten to up-end the industry: the shift from offline to online; consumers’ growing trust in digital-first platforms; and thirdly the popularity of personalisation and tailored product experiences.
Watkins says “80% of consumers are more likely to do business with a company that offers personalised experiences and are more willing to trust digital platforms than ever before.”
And where are these trends most pronounced? In developing markets. “We’ve see this massive trend in China in India in Latin America,” Watkins notes.
“In China, which is probably the best example – most consumers use technology companies for all their financial needs… AliPay , TenPay – developing at a faster pace than any other region throughout the world.”
Banks are taking notice he says and are now looking to grab some of the action for themselves.
“Platforms and other emerging fintech players scale rapidly, competing with traditional banks, so banks are going after some of these tech platforms to add to their product capabilities and to add to the experiences they are delivering to their customers today,” Watkins explains.
Watkins has intimate knowledge of the fintech space as can be seen by many of the transactions he has been involved in, some of which he lists on his LinkedIn profile: Square IPO, GreenSky IPO, Funding Circle IPO, sale ofWePay to JPMorgan Chase, eBay / PayPal spin-off, Lending Club IPO.
And so what are the examples of these new-fangled tailored products of the near future that will start to reshape retail banking?
Just so we don’t miss it, the video titles brandish five product areas and crypto is right up there with free brokerage accounts. Here are the products in the order presented by Goldman:
- Free credit scores
- High-yield savings accounts
- Free brokerage accounts
- Cryptocurrency accounts
- P2P payments
Goldman crypto products coming this year?
Goldman, if the rumours were to be believed, was planning to set up a crypto trading desk last year but then nixed the plans, so it might surprise some that crypto gets a look in Goldman’s world view.
But as you would expect, the bank has done its homework and knows that among the younger generation who will be the revenue streams of its future, crypto is for many is more trusted than stocks as far as assets classes go.
That was underlined by a survey conducted by eToro among US millennials, results of which were released this week. It found that 43% said they had more faith in cryptoassets than they did stocks.
Even if crypto business turnover may not be particular significant compared to the overall financial marketplace as things stand now, the more far-sighted in the financial community know that it is at minimum a way of attracting a new cohort of customers, some of whom will go on to trade not just in crypto but stocks and shares as well.
71% would be crypto from traditional financial firms… like Goldman Sachs
Goldman obviously wants to stay relevant and be a part of the future to be reckoned with, and presumably at the leading edge of developments. Far from crypto overthrowing the banks, from the perspective of Watkins crypto looks to be ripe for bringing into the Wall Street fold.
Going back to that eToro survey, 71% of millennials said they would invest in crypto if it was offered by traditional financial firms. That must be music to the ears of Watkins and his colleagues at Goldman.
None of this will please the anarcho-capitalists of the crypto community but it might just be another string to the pleasing mood music that has been building in recent days.
Tim Draper for one thinks fiat will be obsolete in five years as reported here today. That sounds like hopium hyperbole, but the smarter bankers such as Goldman are not about to be left holding the garbage.
So when does Goldman launch its first crypto product? And let’s not forget Apple.