A partnership between Goldman Sachs Group Inc. and capital markets technology company Derivative Path will allow thousands of smaller banks and credit unions in the United States to use its foreign exchange services.
The alliance is Goldman’s most recent effort to increase its market position in the crowded and fiercely competitive transaction banking business, which it joined in 2019.
Clients of Derivative Path will be permitted to use Goldman for all foreign exchange transactions and rate pricing under the terms of the agreement. While the majority of Goldman’s current clients are governments and large enterprises, Derivative Path is intended for 4,700 regional and community banks in the US, according to Goldman.
The agreement’s financial terms were not made public, and representatives of Goldman declined to comment on how much money the company would make from the collaboration.
Transaction banking is the management of money for governments and international organizations, including the processing of employee payroll, customer collection, and security of currency rates for payments made abroad.
Rival banks including Citigroup Inc. and Bank of America are aiming to expand this $300 billion industry as the COVID-19 pandemic increased consumer use of electronic payments.
Goldman developed the technology for its transaction banking division in-house, just like it did for its online bank Marcus.
According to Eduardo Vergara global head of transaction banking products and sales “think of (Goldman’s technologies), as a FedEx tracker for payments”. You are aware of the location, value, and timeliness of the payment.
In 2021, Goldman and Fiserv Inc. entered into a similar partnership, allowing the Wall Street bank to promote its transaction banking and FX services to Fiserv’s 12,000 banking, brokerage, and government clients.
