The Apple Card Cometh

Apple card

A bank in the making? (Computer image courtesy of Wikipedia, licensed under the Creative Commons Attribution-Share Alike 2.0 Generic license. Chip image and type added.)

Innovation doesn’t always move forward. Sometimes it circles back.  

For instance, Amazon saved you from having to travel to physical stores, and then circled back and opened physical stores.

Starbucks made it so you’d never again have to brew supermarket coffee at home, and then circled back and placed its products in supermarkets so you can brew coffee at home.

The cellphone industry all but obviated wristwatches with its time-displaying phones, and then circled back with smart wristwatches.

And now, after creating Apple Pay so you wouldn’t have to carry around plastic cards, Apple has circled back and joined forces with Goldman Sachs to offer a plastic card.

The Wall Street Journal broke the story on February 21, reporting:

Apple Inc. and Goldman Sachs Group Inc. are preparing to launch a new joint credit card, a move that would deepen the technology giant’s push into its customers’ wallets and mark the Wall Street firm’s first foray into plastic.

Neither Apple nor Goldman Sachs made themselves available for comment, so other news media reported on the WSJ story. According to NPR, Apple and Goldman hope to introduce more than just another credit card.

… the card will be integrated with the iPhone and offer features to track spending and points …Rather than competing with other credit cards offering lots of points, the Apple and Goldman Sachs card may try to attract users with features that emphasize budget management.

Finextra points out that Apple is positioned to bring to the party features beyond the reach of competing cards:

The new Apple-branded card will offer cashback rewards for spending and will be complemented by new iPhone features designed to help users to track rewards, set spending goals and manage their account balances.

The Apple credit card will rely on the Mastercard network, so card users will likely earn cash rewards of around two percent for general purchases with the possibility of more for purchases of Apple products. “Beyond the bonuses,” CNBC reports, citing the WSJ article, 

… Apple and Goldman Sachs hope to attract users with extra features in the technology company’s Wallet application, such as tracking rewards and spending, as well as managing account balances.

It doesn’t take much imagination to see why Apple would want to venture into new profit areas. iPhone sales declined 15 percent in the last year. Perhaps the plastic card and smartphone combination will boost sales of both in an upward spiral. 

From the same CNBC report:

Apple is trying to up its take of iPhone credit card purchases, as the company currently gets a small cut when users make purchases through Apple Pay. Additionally, Apple is looking to boost revenue from things other than gadgets, and the payments space is in the midst of intense competition from banks and tech startups.

Finextra adds that the move is …

… part of a push by Apple to focus on fee-generating services and it continues Goldman’s campaign to appeal to rank-and-file consumers.As for Goldman Sachs, the NPR story says “… the card appears to be part of its effort to capture new customers: the middle class.” PYMNTS.comsheds more light on what’s in the deal for Goldman:

… as securities trading wanes as a business, the company [Goldman Sachs] has pushed into online lending, notably through Marcus—and reports Thursday said the company would offer Marcus and wealth management products to Apple users.

As for Goldman Sachs, the company has committed no small investment to the venture and, in fact, has begun spending. According to Reuters

Goldman Sachs has already started adding customer-support call centers, and building an internal system to handle payments, a project that could cost the bank $200 million, WSJ said, a time when banks are focused on reigning in expenses to boost their bottom lines.

As I wrote last week, adaptation is the paramount business tool for surviving a changing environment, which today’s digital world is. There is no better example of adaptation than Apple Inc. Since its 1975 launch, Apple went from fledgling circuit board maker, to personal computer company, to smartphone maker, to tablet company, to music purveyor, to movie streamer, to applications marketer, to smart-watch maker. 

Apple stuck a toe into the waters of financial services with Apple Pay. Evidently it found the water temperature agreeable. The introduction of a credit card could be a serious step toward Apple’s adapting into a increasingly bank-like entity.

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