In the wake of the financial crisis, the low interest rate environment gave consumers little incentive to put their money into savings accounts. That's changing in the UK, says Goldman Sachs' Des McDaid, with savings rates "back on the agenda." In this episode, McDaid, who oversaw the launch of Marcus by Goldman Sachs in the UK, explains the factors driving the renewed demand for savings accounts and compares savings habits in the region to those around the world.
This podcast was recorded on March 5, 2019.
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This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
This is exchanged. The Goldman Sachs will be discussed, developments totally shaping markets. Industries in the global economy objects,
global out of copper communications here, the firm
today, one London and we're talking about savings and the consumer finance business. We'll talk a little.
The cultural differences and savings habits in the UK and other regions of the world
differences amongst generations, millennials, Genovese, baby boomers and how they view the shift to mobile banking and much much more joining
his death MC date emerging Directorate Goldman Sachs Consumer Finance division, whose overseeing the launch of markets by Goldman Sachs in the UK, does welcomes the programme thanks Jake
So, let's start with some broad context around the savings market in the UK. As this
but we ve been a region of savers and how has people
view of savings changed since the financial crisis, the UK deafening
nation of savers. Before we launch Marcus, we in future a thousand different consumers to ask how they saved what they thought about savings, and we found that eighty five percent,
it will put some money aside every month just to favour that for a rainy day for a holiday,
for purchase that nature,
good, but what we also found is actually people are very good at saving, so
trying to save twenty five so that he will didn't have safe,
scared at all ages, either left their money in their current account right. You lots of people
left at home, lying on a little pockets, and we find even more so the people that you literally left under the mattress.
is quite scary, that a decade of low interest rates, poster financial crisis had just seeing that people try to save them
just not good at it. Yeah why
there wasn't much reward for saving in the wake of the financial crisis, wondering
the obvious when we launched Marcus here in the? U K versus do you
there's a much more active debate around getting a fair rate of return on near deposits. Why things are debate so much more robust here than it is elsewhere? Ten
of low interest rates. Savings was almost like a forgotten category within banking, Nelson from consumers, and what we saw was that
banks in some way has lost interest in savings and savers. They weren't talking about it. It was light. When was the last time you saw a savings product advertised and customers. It lost interest in savings that apathy about
they would get is not worth their while. Switching. Why not leave my money was my current account an account paying virtually no interest at all the apathy really
kicked him after TAT long years of low interest
so what we saw when we came in and when the reasons Marcus was a success. If we put savings back on the agenda- and our starting point was that she wanted to put the interest backing to
savings that wasn't just about paying a great Rachel. Our customers, with that she's put savings back on the agenda,
Does you talk a little bit about the
awareness of the savings issues in the rates? Savers are paid
policy makers wing in this space, because there's not a big debate in the United States around the rates savers are paid for deposits sum has been a lot of debate, and
It is in the UK market from the government and the regulators to try to help people safe. So, if I think of some, the changes have been made. In the last few years, the personal savings allowance was introduced which actually made all savings tax free for the first thousand pounds for normal right taxpayers and five in the pounds for higher at taxpayers that was due to incentivize people's I've also
introduce individual savings accounts and schemes to help people in the house him out. If I say the deposits first deafening incentive within the governments to put say
back in the genuine as a realisation that low interest rates haven't help. Savings are trying to do anything from a government point of view which drives savings, behaviour or put Satan's back on the agenda, gets people onto savings habits has that we worked.
Whether that's really driven behaviour is yet to be seen in some ways, because in some ways that sounded more complexity to the market, people don't mess. You understand. Should I have this tax free sales count all that taxpayers savings cats? I think there's a dry for simplicity of policy has been in.
good way, but I still more that can be done. Monetary policy are very different in different countries. In the wake of the financial crisis, there are emerging from zero interest rates at different paces. What role does monitor
He played the differences and savings habits in different countries for look at the UK. First, very much quantities
ring fencing the retail banks of awash with liquidity, so data
savings, if you take talk about Europe is,
similar has been low interest rates for a long time? So again, people need to cite, but do it
Anthony incentives that banks gives them is much lower in that part threat that spread our into all over the great wealth post, a financial crisis,
so the bank's didn't really want anymore. Deposits of they were willing to pay for more deposits. Are there other
draw psychological factors play in some of the differences run savings if you look round about its difficulty, cultural or psychological factor in itself
Our people, savers or spain- does have a young person,
we spend, though you know my needs a more and, as I got older, I became a safer because I still think that long term it say more than natural
still. You accumulate more wealth, but I'm not sure this.
Cultural difference. I know in Germany a fascinating country, because eighty percent of their gdp is that she saved every year that need to.
is distressing grained into that culture. I don't think,
so having the Anglo Saxon. Well, though, in different cultures, you see that as much, it fills me more,
individual thing. I think what you education, what you bought up. What your needs are, one
they knew about gold, men and Marcus is that we have seen
have customer service, real life, people who answer the phone. What have we learned about customer service as an institution and housing
from here in the UK when we
launching markets? In the UK? We spent quite Alot Tom thinking about what did we want the Marcus experience to be another women on loan bank. What we found was people still need to phone is up. Sometimes some people still have questions. People still have concerns, and that's a moment of truth for us when the customer phones, there was something that we thought were very
when one was that we wouldn't hide or telephone number on our website idea, was so many companies by trying to find them, and I spent the next hour trying to find their phone numbers. Ironically, that's mobile telephone companies about what
we also have an ivy. Are we didn't want customers to guys through press one pressed to press three? You now have a whole new.
Of options underneath it we just want to be able to achieve some wants, a famous they can talk, was quickly screw invested a lot of time in a tea to recruiting agents who were used to dealing with customer service. They came from retailers. There were people who have read
good customer attitude and we spend an old my time till training them spending weeks, actually working up to make sure that the service I gave was great. We now have something like fifty agents who look after our customers. We took you, try to answer the phone within seconds people to have to wait to hold onto the phone with us and I'll call center initially was decided in London. It will stay in London, but whirls open when you call sentiment Milton gains. That centre will have up to two hundred and fifty agents over Thomas. We grow the business out and we really excited because inopportune should not just be a digital bank, but we're direct bank
when customers choose to frame a state can actually do with us on the telephone as well as online MAC gives people a choice when you across the rest of the continent of Europe. Where do you see commercial opportunities for Digital bank? That's offering higher interest rates the world
move in mortgage still time. People used our phones, all contracts, you're afraid disliking just go
and generally Germany for us is a
No more next step opportunity because of the size of the market, the nature of the german savour who want stretching grow and the left.
Competition that there was fully the largest single market for us, but also pay for France, ITALY, Spain, they all of opportunities for us over time, but for us
infrastructure people around the scale of the opportunity, the appetite for those customers, the low right so often level competition, and we think we Germany's on next lots
we'll step. You mentioned, that savings habits evolve as you get older age and we all age. What do you think might help incentivize better savings among younger demographics like Genji or maybe not so young anymore, but the millennials? What we see is that, if you look at her
millennials consumer information- I am they use social media, they use, advises a use. I trusted circled, tell them more so well,
he found out from. Maybe your parents from advertising from TB, AIDS Millennials, you, social media, treachery, inform them when we see that twice as many of our followers or millennials on our social pages there. The people who look are advertising in that space.
so they want advice. They one easy to do the work
chase millennials, also one instant gratification. They used to technology there, much more able to get
things done. Gateway
They go in the phone despite their from across the phone, and it happens. They used to the instant gratification and that's it
What we need to do, we need to deploy technology for them. We need to make it easy for them. We need to explain it in a way that they exist somewhat. Thanks have done historically, if they ve created for them
and saw allies that help the banks or frightened
but now we need to turn into a customer. Centric operation was actually talks about what customers needs and what their fulfilling this and no one at sea
has a savings account to save money? They say forego lay save for a purpose we
The change of language a little bit for millennia, also that the understand what they aiming for and if we can do that, I think we can help them manage
Money earlier, then, maybe we did it in our ages and progressed further in life.
what are some of the barriers you mentioned.
Up alluded to a couple of ways to
Savings are gathered deposits. What are some of them?
his barriers that consumers faced today to save more and how is the industry trying to innovate, to break down some of those barriers or do some of that friction? One of the heart
things in terms of barriers to save his habit. You have to get into the habit of saving I'm having a
the access and easy way to make money. So what we find is that an awful lot for acknowledges, riddled with catches,
conditions about why you have to do something. We have products,
UK, where you know- and I was so excited my little- thereby you can put your money in and then you can any withdrawal money on the third Wednesday of a month if it's a full moon and those touch conditions just complicate things: how in its people,
trade offs in order to get great returns, they have to make sacrifices and compromises all the time,
and I dont know wise and industry. Sometimes we think this is a good thing that we always have
he's with great right and then all these conditions behind it? We shall see just put people off, so we just need simpler products at him, ass, a cool thing that many so simple, straightforward products that give customers value and transparent. Other things. That's? U, what market stands for and its heart is accustomed sent it simple transport
offered its value to our customers. Myth we do that as an industry, our consumers, we better off, still save more damage than money, better NL, White Bank, small as well.
One group sets out to get the banks, the fin tech start. Ups,
the start of your turn to disrupt the way that business is done in this basin and the way they have a lot of other industries with lotta great success.
What are the new entrants in the fin tax base? Would they
stand about the consumers that the incumbents, the bigger banks, haven't understood and processed. The fin tax have a great advantage coming into the market.
have more like a sea, so they're, not let the old banks of more with their decades old
systems, all profit fools. They come in with a freshly a paper.
The challenges that, unless you have a balance sheet of the capital of scales, to really permit
the sum of the Mai, crazy handle flop, noise around customer experience and want to have tapped into is a certain knowledge about
how to make things easy for customers at two percent information
in such a way and how much you pick one programme and solve it really well, there's lots of them
but we can learn from the fin tax and if you look at you,
experience have in fact she ground. Some have had no marketing at all in terms of its being word of mouth and I've got to see they would
Captain the millennium, the earlier doktor segment, and maybe
that social media to grow their business, but what they already do is solving a customer problem and that's where banks can learn if they solve customer problems, and I made at the first goal as successful come behind them.
The challenge for the fin taxis whether they have enough balance sheet was scaled, really solve more than one customer problem.
Lot of incumbents in large banks have tried to acquire that fanatics sensibility inside their firm and build up their own fanatic. Arms Gorman has done this with Mark S. Brother
eggs have done something similar talk, a bit
the dynamic of operating a start up within a large financial
detention? What are the trade off? If I think of the positives? First of all,
you have all the fun of start up with the backing of, in our case, a hundred and fifty year old company behind you. So you have enough lost
purity, have investment behind you and you will have a lot of governance behind you see, have the rigour
and challenge and the risk control that makes you
that little bit safe for him a little bit more round. Didn't answer you off right. The naked
sometimes is that can slow you down a little bit in the smaller intact
Three more nimble. Do they get involved in more faster it you don't mess. We have as many people in the conversations that has positive signs. In times your speed
Caesar Rico of some of those conversations I always have the best of both worlds. In terms of how I afraid I run a fact, we start up business with
lots of energy, great culture, great people, but I've got the backing of this
firm behind based. I've got like a big brother were begun. Call he's as their arms,
That's me. They want me to succeed. I may put an awful lot of time and effort behind the company, so we agree
position, given the trans you describe, what is the future of consumer backing? Look like? Will we be doing every
in the future on our phones in some countries they moved further ahead and that than others, notably China, or what
still be some of the things
We grew up with certainly retail
Banks with actual stores on street or checkbooks unlike or is this can be completely mobile experience. I think it's very hard to predict the future with any accuracy up here. Why would say is the industry's change matters
the over time, and it feels today like the mobile phone, will be everything. So I looked Diana, maybe in ten years time, on the back and think
Why would anyone looking at their mobile phone and it's a different world, but why
I do see is that people want things to be faster. People want things to be Asia, its not mess you about.
Technology per se, is about the experience that they have and if we can deliver things quicker.
I would think, about Amazon and the uniqueness of Amazon
says today. Their opening branches on high street structure get things so given to you. I wish
that unregulated wireless Baptist, written products faster to people. So I don't think it's necessarily about.
Are we can we are mobile. I think it's just about that will consume products faster and whether that,
mobile, whether its and fast way to get to the high street. It doesn't matter, but why do know is that there is a whole generation.
People who don't use mobiles, who uncomfortable online that still need to be served by branches,
generational would use over time by making it easier
a mobile because more of your life more be done over that ensure
This will be a great example. If you look at the We chats of the world who are doing,
everything on the phone there's a part for that, but I don't think the branch he's dead yet
took a little bit about the security risks for consumer banking in the digital age,
just like Goldman thinking about the risks to mobile banking and how governments responding as
We have an inherent responsibility to look after our customers money. They information that data and that doesn't change with you, a physical bond
with digital fonts, it's the same inherent responsibility. The Tec
energy that people can use to play.
Came to online things
this tends to landscape, but it hasn't changed a problem,
in terms of where we are so we're in a constant fight to actually take security and to keep ahead of protecting that your customers, data and money. We invested
full of time and effort to make sure we're ahead of the curve, but something that I think will never stop for us in terms of there will always be people who don't want to do good. Things
be such protect monies and thank started hundreds of years ago, with thousands of years go looking after people's money. That's what we do now
Do it in a different landscape younger
since the beginning, a banking begin in the industry like that it feels like a sea yet along tenure, space. Take us a quick tore through your career. How you ended up here, ECHO Man, leading the charge on Marcus. I fell into banking, really
the necessary my ambition in life to be become a bank about. It took us some job in that west
Once in the mid eighties- and I never left- I started off in branches- I moved into the head offices- I went on a management proof
which gave me good general management training. Then I moved into private banking, so I went for coots and hope for a while and then moved into direct banking. So I help launch ninety direct in the UK, which was one of the early start up. Direct banks spent
and use their farming may marketing, and I think the cool
I probably like the most was marketing and products communication with our customers developing products. Developing
of a suicide customers really wanted and understanding what their needs. Wasn't she delivering that am, I being forced me to run a number of products.
Savings lanes, business banking across a few banks now that I've mainly be naive, hey banking sector in that area,
so we think back to the early job, not west in the summer and
you're doing then how you're, interacting with the customer today what's changed the most of hunting back first wanting it really grounded me in terms of what we do such we look off. The customer
When we look at the gospels money and their lives, we help them thrive and that, as always,.
it was made in terms of that coal grounding in terms of what we do, what
in some ways in terms of how we deliver that everything is fast and now here when I first started banking, it was a much more
personal service. We knew the people it with local bank,
it was on a high street. You knew the custom
he came in every week. There was left me combat
Nations and relationships merits much more in person,
but you're still doing the same thing for people say you transact was much more people. Much faster is efficient.
See now, rather than the actual personal service, but I still think if you think back to what they are trying to achieve, and you think there's a customer at the end of it.
It's not about ten pounds moving it. Some was wages, it someone's paying for something if you always think about what they need for their money and what they're doing with the euro.
A better price going again back to the early days. What surprised you the most in terms of
the landscape has changed. I think just this.
Of change. The number branches of disappear
It atm arrived telephone banking, arrived mobile, apps arrived contactless payment survive every
please as new innovation in the world. We Jesse
don't change nothing. Banks have been fantastic, adapting and at the same time, over that
very slowly to that's hard to say
not things they found very well that the whole thing is looking after customers you
urging you started a branch of not West back then talk a little about your family. Were they savers? How did you learn to save? How did you get interested backing in the first place? I'm recharge her
to say my family would be nervous immigrants who came out in the fifties and literally by look
but who is probably a fantastic, save ass. She saves all her life. She always tell me when she came to his country. She was
enough money saved for the boat and see needs to go home. That was her main so starting point, but they said
they bought house, they strive. They took their kids for education and OPEC
and was very much around working
managing a money. Looking after our money, I mean growing
helping. I think that many immigrant families it was that starting a life and then Bill
from there and creating a platform for future. I have teeth
now ass, what my values,
in terms of how can I get them the best start in life with theirs. Thank you,
but for joining us today. Thank you very much Jake that can cause
this episode of exchanges common sacks thanks for listening, and we hope you join again next time. This part,
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