Goldman Sachs is leaning into embedded finance: other banks should take note

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Simon Taylor Co-founder 11:FS & CPO 11:FS Foundry
5min read

Goldman Sachs broke the fintechnet this week when it launched its developer portal, intentionally allowing companies to ‘embed finance’ within their organisation using their Banking as a Service (BaaS) offering. Hari Moorthy, Goldman’s Global Head of Transaction Banking, referred to it as “the financial cloud for corporates.”

Cue a flurry of emails inside every large bank from CEOs wondering how seriously they should take this.

Take it seriously. Take it very seriously.

The past decade has seen several companies enabling the beginnings of BaaS. Bond, Galileo, Marqeta,, Synapse and Wise have all made building a neobank or embedding finance within an offering better, faster and cheaper. This has led to the birth of accounts from Chime, Credit Karma, Doordash and countless others.

And it’s an incredibly lucrative opportunity. Matt Harris thinks this market could create $3.6 trillion of new market cap by 2030. The Cornerstone Advisors estimate that it will create $230 billion in revenue by 2025. (These are both USA stats, but extrapolate them to Europe and Asia and you can really see the potential.)

We need to take a closer look at Goldman's strategy here.

This is them entering the transaction banking space, which, historically, has fallen behind consumer banking when it comes to ease of use. As we showcased in our ‘1% finished’ video, we've seen fintech do consumer, SMB and wealth, to name a few. But so far, it's not really solved problems for mid-cap and large corporates.

This is an area the big banks still rule, but the experiences corporate companies receive are poor. It’s no exaggeration to say that most corporate banking portals look like they're stuck in the 90s.

We've seen fintech do consumer, SMB and wealth. But it's not really solved problems for mid-cap and large corporates.

At this level, banking is still relationship-driven; it involves senior bankers talking with CFOs and Chief Treasury Officers over dinners and at conferences. We know that corporate Treasuries worry about two things:

  1. Cash
  2. Risk

When it comes to cash, businesses wonder “Is it working hard enough?”; “Am I collecting it fast enough?”; “Can I fund all of my operations?”

And secondly, risk is everything - from FX and market volatility, to hedging and much more.

Banks convince themselves that this is what their clients want (and to a degree, they're right), but digital clients have broader expectations.

In our recent BaaS report, we split brands into four different quadrants:

  • Traditional
  • Digital
  • Non-finance
  • Finance

Digital non-finance businesses need greater control of payment engines. Imagine you’re Spotify: you need to collect payments globally, in countless currencies, via numerous banks. The complexity of banks’ offerings makes simple things like refunds far too hard in the current system.

I spoke to one corporate treasury team who runs an app store (of sorts), who found that in some countries, they're having to pay SWIFT fees of $40 to receive $0.99 of revenue. Then, if the customer wants a refund, they're paying $40 to send the $0.99 back.

Banks have sensible ways to manage this, and SWIFT GPI helps. But the experience of digital businesses is still dealing with complex bank systems that are too difficult and manual - especially compared to their own internal IT infrastructure.

Digital businesses operate globally, in real-time, 24/7. Yet the banks are still offering digital businesses batch uploads as a primary channel. When banks do offer APIs, those APIs are sub-standard, and it’s all packaged up with no sandbox and horrible documentation, plus onboarding takes at least 6 months. Banks view "having APIs" as the goal, not "being an API-first business." It’s chalk and cheese.

“If the future of finance is embedded, the future of banking has to be more of an "intel inside" model.” I’ve heard this a few times this week. It’s a great metaphor, but it's also broken. With APIs, much of the quality comes from the service wrapper. Banks need outstanding APIs and a comprehensive service model wrapped around that.

Banks need outstanding APIs and a comprehensive service model wrapped around that.

Enter Goldman.

Goldman has opened many of the tools it uses to manage complex, global market products as APIs in its developer portal. It's focusing on documentation, developer experience and an operating model designed to be API-first.

So banks: if you’re taking this seriously, we hope you’re making notes.