Marcus - the bank of no return

Ash_Pole

I don't know about Marcus specifically, but generally bank accounts can happily have zero balances. I've had loads.

Chino

Still_Dave wrote: »

To help with their liquidity metrics they need deposits to be over a certain term which they can satisfy one of two ways; they can pay higher rates for term money and they can “behaviouralise” instant access accounts by modeling turnover, and how “sticky” overnight money is in practice under various stress scenarios that they feel represent what may be coming.

Would you care to re-write this gibberish in English?

sal_III

Still_Dave wrote: »

On the point above about it being a loss leader, it’s possible, but it’s also the case that Marcus is a way for Goldman to diversify their funding base, which is helpful with their credit rating, and also a good source of additional funding for their business.

To help with their liquidity metrics they need deposits to be over a certain term which they can satisfy one of two ways; they can pay higher rates for term money and they can “behaviouralise” instant access accounts by modeling turnover, and how “sticky” overnight money is in practice under various stress scenarios that they feel represent what may be coming.

Even if what you wrote made any sense, it doesn't explain why they would refuse a returning customer. If anything the need to additional cash you mentioned should welcome anyone who wants to put back cash.

It's most likely a combination of A) Dissuade people from closing the account so they can boast how many active accounts they have. and IT system/internal processes limitation, to avoid messing up with returning customers and matching their existing data to a new account.

polymaff

crumpetman wrote: »

you can still have a nationwide flex direct even if you closed one in the past, you just won't get the introductory 5% interest.

As covered by my post.

bowlhead99

Chino wrote: »

Still_Dave wrote: »

On the point above about it being a loss leader, it’s possible, but it’s also the case that Marcus is a way for Goldman to diversify their funding base, which is helpful with their credit rating, and also a good source of additional funding for their business.

To help with their liquidity metrics they need deposits to be over a certain term which they can satisfy one of two ways; they can pay higher rates for term money and they can “behaviouralise” instant access accounts by modeling turnover, and how “sticky” overnight money is in practice under various stress scenarios that they feel represent what may be coming.

Would you care to re-write this gibberish in English?

I'll try to break it down for you:

To help with their liquidity metrics

A liquid flows freely from one place to another quite quickly and moves around obstacles, while a solid is harder to break down and tends to sit in one place. Members of the business/financial sector coined the phrase 'liquidity' to refer to the degree to which assets are 'liquid' (held in cash / easily converted to cash) or not (may take time to get the money back by selling or waiting out the term of a contract).

Financial institutions have practical issues with liquidity because much of the money available for their business operations (such as lending and investing for profit) comes from money which they have borrowed from lenders and depositors which will need to be paid back at some point. At the time when they need to make a payment to return the loan or deposit or make an interest payment on it, they will need to have liquid assets to do that - otherwise they'll be in trouble.

Unfortunately, the overnight returns that banks make on cash in their vaults - or on money that has been lent to a fellow financial institution one day at a time - are very small compared to the potential returns from committing the money for the longer term into investment projects, financial products which require ongoing finance, or lending with longer maturities than 'overnight'.

It is therefore key for such financial institutions to monitor 'metrics' (noun: a set of figures or statistics that measure results) in relation to 'liquidity' (defined above) and use that information to efficiently generate returns within their business operations, without exposing themselves to excessive risk of being unable to meet a commitment or falling foul of a regulatory limit.

So, "To help with their liquidity metrics" is a reference to something being likely to improve the results implied by the statistics being reported (e.g. ratio of liquid assets to immediate liabilities seen to increase) or improve the reliability of the data (is it even giving us the correct figures for what our immediate and short term liabilities are, in practice, likely to be).

they need deposits to be over a certain term

This means that the deposits which are most useful to the liquidity metrics are those with certainty of term (i.e. the bank has an idea of how long the deposit will be available to the bank).

which they can satisfy one of two ways

This means there are two main ways they can get these 'useful' deposits which help their liquidity figures or the reliability of the figures.

they can pay higher rates for term money and

One of the ways they can get hold of reliable deposits for greater than one night at a time is by taking them for an unbreakable fixed term, or a fixed term which can be broken but with a discouragement from doing so, e.g. an interest penalty. In exchange for the greater certainty, they would need to pay higher rates.

they can “behaviouralise” instant access accounts by modeling turnover, and how “sticky” overnight money is in practice under various stress scenarios

As an alternative to acquiring the deposits on a fixed term basis, they can perform behavioural analyses on the instant access accounts held by groups of customers. This includes looking at the amount of money coming in and going out of the accounts, patterns of low and high balances, rates of new depositors opening accounts and existing depositors closing accounts, etc. While all such accounts can be accessed instantly, it is unlikely that everyone wants their money back at once, so Goldmans don't need to have their money on hand, and can deploy it elsewhere in the Goldmans business.

Tracking the level of deposits and withdrawals across a cohort of customers can provide useful data for managing liquidity levels.

Perhaps the accounts appeal to a certain demographic (internet-literate, high salaried employees) who have a high level of deposits at the end of the month when it's payday, allowing the bank to feel that outflows (deposit withdrawals) will be more easily funded at that time of the month. Or perhaps the accounts are raided in December and January as the customers indulge in Christmas excess and need to top up their incomes.

Perhaps the accounts lose a lot of customers once the bonus period runs out or due to major competitor promotional activity because their customers are fickle; perhaps the customers are loyal and maintain their balances even in the face of interest rate rises across the industry because they like the website functionality and the non-highstreet 'big brand' backing, as long as the rate is generally competitive. What happens in an economic downturn, will customers depart in their droves? Will customers keep their accounts open with a token £1 and avoid it going dormant or closed for good because they would prefer to be able to jump back in if their personal circumstances (or competitive environment) goes through some change?

All of this stuff will get reviewed and assessed with the intended outcome being that a portion of the deposits which represent an 'instant access, overnight' liability can instead be 'behaviouralised' into a pattern of semi-permanent funding which would support the bank's longer term needs.

They will also create models and perform 'stress tests' to see what might happen to the depositor behaviour given different actual or theoretical conditions. Is the money from depositors "sticky" (will hang around semi-permanently due to laziness or indolence of the depositors; once you've got it, you've got it) or is it flighty - depositors happy to jump ship as soon as a credible competitor offers 0.05% more?

that they feel represent what may be coming.

The banks will use such factors in their stress tests, models and analyses that they feel will represent potential actual conditions that they and their customer base will need to endure over time.

Part of building up a good model to get a handle on your customers activities is evaluating the patterns of deposits from a known group of customers. If a customer closes their account and comes back with a brand new account number as an apparently-different customer in the future (with coincidentally the same gender, location, dob, current account provider), this may not be helpful to the analysis. And they may have determined that if they should want to implement an 'introductory rates' system in the future, they won't want to offer a second bite of the cherry to customers who close their account and then want to open a 'new account'. So for various reasons they have made the choice for withdrawing customers to be: You are welcome to either stick around with an account on the database, or leave, but if you leave, our system may not want you back.

Hopefully Chino, this has helped you understand the 'gibberish' and why it may be relevant to the thread.

sal_III wrote: »

Even if what you wrote made any sense, it doesn't explain why they would refuse a returning customer. If anything the need to additional cash you mentioned should welcome anyone who wants to put back cash.

If you don't have a problem hitting your fundraising targets easily, you might prefer not to take a customer that previously gave you money but then flew off like a magpie to the next shiny new account to grab, as soon as there was another simple internet account from a rival offering an extra 0.01%.

The reason for this is that a 'sticky' customer with an instant access account which is generally not emptied, is more valuable than a flighty one whose 'instant access' properties do literally result in the account being instantly closed and abandoned on a whim - the latter is less useful in providing medium term finance to a bank, because they need to have money held in cash or near-cash assets to support it.

It's most likely a combination of A) Dissuade people from closing the account so they can boast how many active accounts they have.

Customer volumes are useful for marketing although the best 'active' accounts are 'active' in the sense of having meaningful balances and deposits within the last x months.

From the perspective of a bank raising new funds from time to time it is cheaper and easier to reset the password of an existing customer account held for a person you already know, than go through the full account opening process for a non-customer.

The latter represents an onboarding cost to the company and a practical or mental barrier for the customer, having to engage with the bank with more form filling and/or paperwork required before the deposit can be taken. So, the bank would prefer that the customer kept the account open because then they have an advantage when taking the customer's money in the future, compared to a rival with whom the customer does not already have an account. So, makes sense to 'dissuade people from closing the account'.

and IT system/internal processes limitation, to avoid messing up with returning customers and matching their existing data to a new account.

Yes I agree that's quite possible, as mentioned elsewhere in my comments.

webjaved

crumpetman wrote: »

you can still have a nationwide flex direct even if you closed one in the past, you just won't get the introductory 5% interest.

What's the rate now? 3%?

bowlhead99

webjaved wrote: »

crumpetman wrote: »

you can still have a nationwide flex direct even if you closed one in the past, you just won't get the introductory 5% interest.

What's the rate now? 3%?

The rate is 5% [on balances up to £2500, subject to the regular pay-in conditions].

Or 1% if you no longer qualify for the 5%.

polymaff

Curiouser and curiouser.


First the bank of no return.

Now a tie-up with Saga.

How do you Marcus strategy pundits explain that...:)

https://www.yourmoney.com/saving-banking/over-50s-provider-saga-launches-two-new-savings-deals/

colsten

Anyone going with either or both of the SAGA accounts has thoroughly deserved their rates.:p

veryintrigued

Anyone else noticed their faster payments outwards are far swifter now?