The March 2019 launch event at Apple Inc.’s (AAPL) Cupertino, Calif., headquarters was supposed to be all about the hardware maker’s deeper push into film and entertainment, and it was. Apple unveiled a new gaming subscription platform called Apple Arcade, a more comprehensive streaming video platform called Apple TV+, and a new premium subscription platform called Apple News+. The Apple Card, a Mastercard that Apple will issue in collaboration with Goldman Sachs Group Inc., was the unexpected news (GS).This immerses the hardware manufacturer in financial services while permanently enslaving its 1.4 billion consumers in its ecosystem. “They’re in a billion pockets, y’all!” remarked Oprah Winfrey during the occasion.
- Apple introduced a new credit card, the Apple Card, in March 2019.
- The Apple Card is compatible with all of the cardholder’s Apple devices and offers the best rewards for purchases of Apple items and services.
- Marcus by Goldman Sachs is the bank behind the Apple Card.
The Details on the New Apple Card
On August 6, 2019, Apple made the card available to a restricted number of customers, with a broader distribution following later in the month. The Apple Card will be stored in your Wallet App and accessible from all of your Apple devices. It will keep track of your expenditures, including vendor names, payment due dates, and monthly spending. If you are late with your payments, there are no late penalties, yearly fees, foreign costs, over-balance fees, or additional interest rates. The APR was not mentioned at the news conference, but if you read the tiny print, it is anywhere between 13.24% and 24.24%, depending on creditworthiness. While the low end is modest, consumers with that kind of credit may be difficult to come by. The upper end is conventional and comparable to other reward cards.
Apple claims that the benefits for using the Apple Card are quite competitive: “Customers will get 2% Daily Cash every time they use their Apple Card with Apple Pay. Customers will also get 3% Daily Cash on all direct Apple purchases, including those made in Apple Stores, on the App Store, and for Apple services.” 1 Get it? 2% on all purchases, but 3% for additional Apple services. That’s a problem. Why wouldn’t you use your Daily Cash to buy additional games on Apple Arcade or to pay off your Apple TV+ charges? The cash incentives are issued everyday and are accessible on your Apple Cash card balance fairly soon.
However, Apple does not want you to get engulfed in a tornado of credit card debt. Remember that Apple will not charge late fees? However, it will utilize machine learning to watch your spending and provide recommendations on how to manage your debt. Apple wants you to be aware of your habits, much as the iPhone use tracker consumers get every week, as long as those behaviors are linked to its products.
Jennifer Bailey, Apple Pay’s vice president, expressed it much better during the event:
“Apple Card is designed to help customers lead a healthier financial life, beginning with a better understanding of their spending so they can make smarter financial decisions, transparency to help them understand how much it will cost if they want to pay over time, and ways to help them pay down their balance.”
Apple’s Services division, which includes iTunes, the App Store, and Apple Pay, is one of the company’s fastest expanding divisions, although it is still swamped by hardware sales. In the fourth quarter of 2019, services generated $10.9 billion in revenue, while goods generated $73.4 billion. Apple no longer breaks out iPhone sales, although they were down 15%, according to the firm. Some observers believe that Services will soon be a $100 billion company, and that the Apple Card will be the golden ticket to get there.
Moving Big Tech into Financial Services is nothing new. Amazon.com Inc. (AMZN) provides the Amazon Prime Card with Visa and makes it difficult for Prime members to accomplish anything outside of the Prime jungle. Apple Wallet and Apple Pay were the Cupertino company’s entry into the multi-trillion dollar market of digital wallets and payments. However, it lacked a more adaptable payment solution with a larger variety of possibilities, giving its subscribers little incentive to pay with anything else. Although Apple Pay is not yet widely accepted, Mastercard is.
Why Goldman Sachs?
Forget that Goldman Sachs bankers may be among the few who can afford the latest iPhones. For long years, the historic financial institution has been attempting to break into retail banking. In 2016, it launched Marcus, a commercial bank, with a purpose similar to the Apple Card:
“Marcus personal loans and online savings accounts assist customers in making better financial decisions. We are committed to assisting clients in making better decisions today and in the future.”
Marcus, like Apple, provides no-fee personal loans to consumers and offers competitive checking and savings accounts. Marcus, on the other hand, has struggled to create its identity outside of the Goldman Sachs history. It is just now beginning to do so with some big marketing campaigns in large cities, but the partnership with Apple, the ultimate marketer and brand name, might help a little.
In Apple’s news statement, David M. Solomon, chair and CEO of Goldman Sachs, said, “Simplicity, transparency, and privacy are at the foundation of our consumer product development philosophy.” “We’re excited to collaborate with Apple on Apple Card, which allows people to take charge of their financial life.”
There’s that word “control” again. Several Apple officials said at the March media event in Cupertino that people do not want to bounce from app to app and device to device to enjoy their experiences. They want convenience, and they want it now. Over the last decade, Apple has transformed the way we use our hands. The iPhone is the most sticky of goods, with the typical user touching their phone hundreds of times each day and spending up to four hours staring at it. The new Apple Card has only added to this.
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