EQUITY RESEARCH | May 22, 2018 | 12:35AM EDT The following is a redacted version of the original report. See inside for details. Americas Banks Americas Banks Banking on technology The shareholder benefits of a digital future The benefits of innovation in the banking industry have largely either accrued to customers in the form of lower prices or added to the cost base of the banking industry with limited revenue benefits. We see the current wave of digitization, which is centered on electronic payments, straight through processing and AI, generating real scale and efficiency benefits for the largest US banks. The decreasing importance of a physical distribution network also appears to be driving market share concentration with the largest banks taking 6pp of deposit market share since 2008. We see these trends accelerating over the next five years and estimate that the largest banks could see 350bps of efficiency improvement increasing to 800bps if revenue growth is factored in. Tech companies continue to seek opportunities to expand into financial services given their brand and broad customer base. However, we see their focus on eliminating frictions in payments and expanding their offerings to the under-banked, which are likely to be better achieved through partnerships and JVs with incumbent players. Richard Ramsden James Yaro Sal Saroni Heath P. Terry, CFA James Schneider, Ph.D. +1(212)357-9981 | +1(212)902-1913 | +1(917)343-5320 | +1(212)357-1849 | +1(917)343-3149 | [email protected] [email protected] [email protected] [email protected] [email protected] Goldman Sachs & Co. LLC Goldman Sachs & Co. LLC Goldman Sachs & Co. LLC Goldman Sachs & Co. LLC Goldman Sachs & Co. LLC Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S. The Goldman Sachs Group, Inc. Goldman Sachs Americas Banks Table of Contents PM Summary 4 Low-cost tech improving efficiency 10 Scale matters - Tech looks to concentrate the US banking market 17 Large tech company (i.e., Amazon) and venture capital ambitions in the banking space 21 Appendix A: Sensitizing benefits from digital vs. third-party providers 24 Disclosure Appendix 25 Other contributing authors Willis Palermo Mohammed Moawalla Melissa Kuang, CFA Vishal Agarwal +44 20 7552-8394 +44 20 7774-1726 +65 6889-2869 +1(212)934-8377 [email protected] [email protected] [email protected] [email protected] Goldman Sachs International Goldman Sachs International Goldman Sachs (Singapore) Pte Goldman Sachs India SPL Note: The following is a redacted version of “Americas Banks: Banking on technology: The shareholder benefits of a digital future" originally published May 22, 2018 [39pgs]. 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