Barclays to Start U.S. Online Bank


Barclays Plc (BCS) is launching online retail banking operations for its U.S. customers. The main aim behind the commencement of this operation is to get stable and low cost funds for the growth of the company’s international credit card unit.

Barclays, through its online-only division, will start the sale of high-yield savings accounts and certificates of deposit (CDs) to the U.S. customers. The company would offer its consumers with 1% interest on deposits with no minimum balance or monthly fees on high-yield savings account. Additionally, longer-term deposits (3 months to 5 years) will have interest varying between 0.35% and 1.75%.

Though the customers will have to provide a link of another bank account as part of the sign-up procedure, they will be able to transfer funds to their Barclays’ online account with the help of the remote-deposit capture technology. Through this technology, the customers will be able to make deposits just by clicking a picture of their checks on smartphones.

The company’s move to start the online banking division can be seen as part of its strategy to finance its U.S. credit card operations from the local deposits due to the regulatory pressure. The U.S. regulators want the foreign based banks, such as Barclays, to finance their local operations with the help of the money raised from local operations.

Currently, Barclays’ U.S. credit card business is primarily funded through volatile capital markets and money from the parent company. The company, through its card division – Barclaycard – sells its co-branded credit cards with partners that include Barnes & Noble Inc. (BKS) and Virgin America Airlines.


Raising funds through online banking is a cost effective method as the institutions are not required to open retail branches. Earlier this year, Barclays had launched a similar online deposit unit for its customers in Germany and has already accumulated about €1 billion ($1.3 billion) of deposits.

In the U.S., Barclays will face competition for online deposits from CIT Group Inc. (CIT), ING Direct – a unit of Capital One Financial Corp. (COF), and Ally Financial Inc. However, we believe that the company will be able to improve its market share in this segment as this is totally a new area of growth for many financial companies.

Barclays currently retains a Zacks #1 Rank, which translates into a short-term ‘Strong Buy’ rating.

Read the Full Research Report on COF

Read the Full Research Report on CIT

Read the Full Research Report on BCS

Read the Full Research Report on BKS

Zacks Investment Research

More From
View Comments (0)