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When Goldman launched its direct-to-customer retail bank, Marcus, in the UK in 2018 and JPMorgan followed suit with Chase last year, they both offered market-beating benefits around savings rates and cashback on everyday spending to lure customers.
But now, US banks are facing pressure from shareholders over the costs of their overseas operations, and they want to justify their ventures as the recession bites.
After seeing off smaller challenger lenders in recent years, will Britain’s incumbents once again come out on top in a battle with new generation?
The stranglehold that Barclays, Lloyds, NatWest, HSBC and Standard Chartered hold on Britain’s banking market has left little room for upstarts – most who have tried to challenge their dominance have failed.
In 1998, Prudential launched Egg, an online lender that offered generous interest rates and claimed it would revolutionize banking by operating accounts only online or over the phone. But the business flopped and eventually it was slowly sold.
This time, at least, ministers are eager to help new challengers. The government has proposed relaxing rules for small banks that require them to separate their retail banking services from investment and international banking activities.
It will do so by raising the threshold at which the ring-fencing regime applies from £25bn to £35bn. Banks that exceed the limit cannot use the funds in their riskier investment bank and trading arms.
Goldman’s online bank Marcus stopped taking new deposits in the UK in 2020 as it approached the limit, and although Chase UK only launched last year, Somani says it has already secured more than £10bn of deposits. is The rule change will give both lenders more room to look after Britain’s savings in the coming years.
But the ring-fencing reforms are likely to cause tension with Britain’s high street lenders. In a meeting with then-chancellor Kwasi Kwarteng in October, chief executives of some of Britain’s biggest banks complained that the ring-fencing regime was already putting local officials at a competitive disadvantage to their Wall Street rivals. The latest ring-fencing overhaul will also have no impact on the UK’s five biggest banks.
They will also be worried about Marcus and Chase’s rapid growth. Goldman’s venture has 750,000 UK customers and £23bn in savings since its launch in 2018, while Chase has amassed more than one million UK users in just one year.
Money saving expert Martin Lewis declared in May that Chase was the “best bank account” in the UK and that it had “smashed the competition with its benefits”, according to Somani, who had been inundated with requests to set up a Chase account.
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