Goldman eyes financial cloud as new revenue stream

Written by Ruby Hinchliffe
6th February 2020

Goldman Sachs is understood to be weighing up whether to build an external cloud platform for other financial institutions as part of a wider delivery on the bank’s promise to investors in January that it would find new sources of revenue.

According to an internal memo obtained by Yahoo Finance, Goldman’s co-chief information officer Marco Argenti – who is also an alum of AWS – has outlined the product’s potential to the bank’s engineers.

“In the same way Amazon Web Services (AWS) was conceived, both as an internal product to streamline Amazon.com’s operations and as an external product to offer the same benefits to any company facing similar issues, our core technology services can be externalised to other financial institutions,” Argenti wrote.

Goldman Sachs is also in “advanced talks” with Amazon to offer small loans to US businesses

Amazon’s earnings report for the fourth quarter of 2019 showed that AWS sales were up 34% year-over-year, making its cloud services a main driver for the Big Tech’s jump to a market capitalisation of more than $1 trillion.

Goldman’s MD Heath Terry wrote on Amazon’s earnings: “Our partner checks continue to reflect the relative strength in the AWS platform, though a slower pace in enterprise migrations broadly, high profile competitive wins at both [Google Cloud Platform] and [Microsoft’s] Azure, reports of increasing channel conflict, and management turnover have investors concerned that the magnitude of decelerating growth at AWS could continue into 2020.”

In the memo, Argenti acknowledges that cloud computing has become more mainstream, and that “a new kind of cloud” could emerge specifically for financial firms. “We believe that there is an opportunity to externalize some of our services in the form of a financial cloud and turn engineering investments from costs into revenue streams,” he adds.

The memo also recognises the importance of developers, attributing them buying power as “key driver[s]” and concludes that “the ease of use of developer products determines the velocity at which applications are developed and can drive consumption”.

In a report by Financial Times, it was revealed that Goldman is also in “advanced talks” with Amazon to offer small loans to US businesses over the Big Tech’s lending platform. Another component of its new revenue stream push, it is understood that the eventual deal close will likely involve attaching Goldman’s brand to Amazon’s lending product in some way.