While the dust settles around yesterday’s Apple Card announcement, it’s becoming increasingly clear that this isn’t a simple product.
For a year, we’ve speculated on what the Apple-Goldman card would mean for mobile payments. Now, Apple has revealed the specs in theatrics only Apple can produce.
Rewards are good, not great
On its own, compared apples-to-apples to other credit cards and rewards programs, the Apple Card doesn’t appear to offer anything earth shattering.
Of course, there as some small devils in the fine print. The card offers 3 percent cash back on Apple purchases, 2 percent on all purchases made via Apple Pay and 1 percent cash back on physical card purchases. You can definitely find cards with equal and more generous rewards.
Instead of competing on outright rewards levels, Apple intends to change the rewards experience. Most cash-back cards provide cash or miles after the statement closes. Apple Card introduces Daily Cash — holders of the card will receive daily installments of their awards in the form of Apple Cash.
Apple has also appears to have done a solid job with its spending tracking and categorization of spending types, a tricky functionality that hampers banks, personal finance managers, and data aggregators.
Apple Card as the hub of Apple’s payment ecosystem
Apple has its eyes on a bigger prize. Its establishing a content and technology ecosystem and Apple Card will take its place at the center of this hub with Apple Pay.
Apple Card holders can also find discounts to Apple’s new subscription magazine , content, and gaming products that, when used with Apple Card, will provide a steady flow of monthly payments into the digital card account.
It’s also a beautiful card and takes its rightful place alongside many of the well-designed, frequently metallic, cards offered by leading mobile payments providers.
Pushing cash rewards to Apple Cash card w/in Apple wallet is a clever move to spur peer-to-peer payments (think Venmo-killer) & keep $$$ inside Apple ecosystem.
Apple’s cost of funds is near zero if Apple Cash gets recycled to iTunes or P2P (vs card fees today).
— Peter Berg (@peter) 26 March 2019
But mostly, the card provides the connective tissue between Apple Pay and Apple Cash, which holders will accrue daily. This cash can be earned, spent and re-spent entirely within Apple’s ecosystem. This could provide way more of an impetus to use Apple Pay for P2P payments than currently exists today.
As more cash is captured inside the Apple ecosystem, some interesting things can happen. Play this scenario out, and although the card runs on Mastercard rails, this could be Apple’s end-around of the credit card companies. Apple Card waters Apple’s walled garden with money.
Goldman Sachs, banking role in Apple Card
As the issuing bank behind the new Apple Card, Goldman Sachs’ collaboration on this new product speaks to the changing direction the bank is taking to reach new accountholders.
This ethos of increasing simplicity and transparency underscores much of the marketing effort behind the firm’s new consumer finance division. Marcus by Goldman Sachs has more than 3 million customers, $45 billion in deposits and $5 billion in consumer loan balances.
“Apple Card completely changes the credit card experience and is built to help customers lead a healthier financial life,” Goldman Sachs CEO David Solomon said in a memo to employees.
“We’re excited to partner with Apple on this card, which is designed to be truly on the side of the customer.”
With Apple Card, the global tech firm emerges as a legitimate player in fintech.
“The prophecy is slowly coming true,” said David Murphy, EMEA and APAC Banking Lead at Publicis Sapient. “For the past five years, banks have been told repeatedly that that the fintechs will disintermediate them and relegate banks to infrastructure. The fintechs have better customer experience and can operate way more efficiently. Because the fintechs were always small though, they felt like ankle biters. They put pressure on pricing but weren’t big enough to steal market share,” he said.
Apple has the resources and ambition to put pressure on the existing financial system.
“Apple is not a small Fintech. They appear to have come up with a very compelling customer experience and differentiated financial offer that integrates into their phone. They can put pressure on pricing and steal significant share. It’s not surprising that Goldman is backing up the card,” Murphy said.
Goal isn’t direct profit. Yet.
As the center of a payments and content hub, Apple Card isn’t intended to massively move the Apple profit needle — at least at the start.
Goldman analysts on the Apple card: “Apple Card interesting but small earnings impact for Apple” pic.twitter.com/WcWOY1FmxI
— Julie VerHage (@julieverhage) 26 March 2019
Focusing on the new card itself is a bit of a distraction. Apple Card is a beachhead, beyond Apple Pay and beyond its content products, for Apple to embed itself further in its users’ consumption of content and media.