Starting with a Clean Slate to Reinvigorate Liquidity Solutions
By Sascha Petrusev—VP, Liquidity & Investment Solutions, Transaction Banking
When I heard about Goldman Sachs’ initiative to establish a new, nimble and easy-to-use global transaction banking platform, I was immediately interested. I was working at another bank at the time, but I thought to myself how great it would be to join the effort—starting with a clean slate to build a dynamic, flexible, client-centric platform.
In fact, exactly one year ago, I joined Goldman’s transaction banking team as one of the first product managers, responsible for deposit, liquidity and investment solutions. The journey since then has been exciting. I am working with a cross-regional, diverse team that is highly engaged, always curious to understand the why, and constantly providing new ideas about more effective approaches.
The hybrid deposit account
When we developed our roadmap, the obvious place to start was deposit solutions. But we didn’t want to emulate what already existed. We set out to create something with distinct, new advantages for the client.
The most common deposit products in the market are: non-interest bearing accounts with earnings credits; and interest-bearing accounts. Most clients in the U.S. use the former, the earnings credit option. This reduces banking fees by maintaining balances on the account and receiving an earnings credit (rebate) on account charges. The downside is that when all the fees are offset, the excess account balance that was not needed to help with the fees earns nothing.
The interest-bearing account, on the other hand, is used as a daily operating account or higher yielding savings account. This solution provides value to the entire account balance but doesn’t provide the account holder the option of offsetting or reducing bank fees.
Our answer? We’ve made a combination of the earnings credit and interest-bearing options our default solution. Our hybrid deposit account first applies an earnings credit to offset all bank fees and then pays a competitive interest rate on excess balances.
Cash concentration
Next, we introduced a suite of liquidity management solutions to automatically manage this important task. Our solutions are designed to ensure that clients have the right amount of liquidity, in the right currency, at the right time, and in the right place to optimize the use of their funds.
We determined that our solution needed to do all of the following:
- Allow third party bank accounts to be part of the structure;
- Provide flexible execution times throughout the day;
- Have highly customizable features and functionality;
- Support multiple legal entity structures;
- Be easily configured by the client.
Our Cash Concentration solution does all these things. In addition to concentrating funds that are within the Goldman Sachs network, the solution allows the client’s accounts with external banks to be connected to the structure. This means clients don’t have to move their entire business to Goldman Sachs. Rather, clients can choose which services to use with which banks while having our Cash Concentration system manage and optimize liquidity throughout the day.
Our journey continues
Soon we intend to complement our transaction banking deposit account and cash concentration offerings with access to a full suite of investment solutions by Goldman Sachs Asset Management. We aim for these to be seamlessly integrated and available through our transaction banking user interface and APIs.
As we expand internationally, we plan to address the complexities of global treasury. Using the same clean-slate mindset, we will bring innovations to cross border and cross currency pooling, including physical, notional and virtual solutions.
The excitement I felt when Goldman was just beginning to shape its transaction banking plans persists to this day. Our team continues to explore what we can do to make new ideas into better solutions. We hope you will follow our progress and keep sharing your input as we bring new innovations to market. We certainly will keep listening to better understand client needs.