5 things Goldman Sachs’ new online consumer bank is not

Goldman Sachs launches online consumer bank

Goldman Sachs announcement that the investment bank would begin offering low-cost, interest-bearing online savings accounts was met with excitement around the financial sector. It isn’t every day, after all, that a major Wall Street firm with a multi-million dollar minimum opening balance requirement opens its services to the masses.

The online offering, GS Bank, will expand the bank’s purview by offering FDIC-insured accounts with no minimum balance and an annual yield of 1.05 percent, significantly higher than the average of 0.6 percent APY that is currently the U.S. average. But for ordinary individuals looking for a taste of exclusive Wall Street banking, GS Bank will likely disappoint.

Here are five things that GS Bank is not:

GS Bank is not a full-service bank.

Apart from a one dollar minimum balance to earn interest, there is little to attract everyday customers to the online bank. The offering lacks some basic 21st century banking services, like online bill pay or mobile check deposits. Checks can only be deposited by putting them in an envelope and mailing them, and there are no check writing options or ATM cards available.

GS Bank is not easy to use

Furthermore, Forbes’ contributor Rob Berger said the Goldman offering’s customer service “gets the lowest mark possible,” based on a telephone call to the bank that resulted in a useless IVR system that eventually hung up on him rather than transfer the call to a human operator. WSJ’s John Carney had it even worse, calling the experience “very much a throwback to the worst days of bank customer service. I was put on hold for over 20 minutes, something that hasn’t happened to me in dealing with a bank in over a decade. The very polite, very apologetic woman on the other end of the line told me that she couldn’t help me at all. The best I could hope for was to try again on the website.”

GS Bank is not Goldman’s first foray into consumer banking for the masses

During the 2008 financial crisis, Goldman Sachs restructured itself to become the fourth largest Bank Holding Company in the U.S. and by doing so, gained access to permanent liquidity and funding in the form of consumer deposits. “But as we see revenues going down for trading, (and) other restrictions on banks, this is another really good source of revenue and they are really following the money here,”said Nicole Sinclair, Markets Correspondent for Yahoo! Finance. “I mean, Goldman is a smart business, this isn’t them being benevolent and philanthropic to the masses and opening their doors. They see this as an important investment.”

GS Bank is not about making money from lending cash to individual savings accounts holders

Goldman Sachs grows its deposits

GS Bank doesn’t appear to be geared to become a big lender. It could be down the line, though — the team behind GS Bank is also working on launching an online lending platform. “[But right now], the move was timed to reflect upcoming U.S. rules governing bank liquidity,” said Bloomberg’s Yalman Onaran. “The model for that is to get institutional lenders to back the loans, but this way you could collect savings from online and use those as well.”

Onaran added that liquidity rules expected to be released soon are going to force banks to retain extremely liquid assets. “So going into deposits more and more helps them become more like their big brothers, looking at JP Morgan and Wells Fargo — Those guys have trillions of dollars in deposits. And those have gone up a lot, too — before the 2008 crisis they were half the size.”

GS Bank is not available outside the United States

Site regulations specify that account holders must maintain a US physical address and social security number.