The #Apple Card launched (2019) more than 50 years since the inauguration of the first credit card

"When in 2019 Tim Cook unveiled the Apple Card, many questioned the model. In fact, Citigroup pulled out from the negotiations, amid doubts that it could be a profitable deal.

Fast forward to today and (after some initial hiccups) the Apple Card has been redefining the industry via a model with several novelties:

— A focus on customer experience and simplicity

— No fees

— A move away from minimum #payments (which is how banks make money) to active encouragement to avoid debt

— Daily cash back that rewards Apple and selected merchant purchases and the use of Apple Pay

— Seamless integration of daily cash back to a savings account

— Apple Card Family features for users’ immediate or extended family

— Advanced security and privacy features

Apple Card in numbers:

— 12 mn users

— $1 bn + in Daily Cash (from spending on Apple Card)

— $10 bn in deposits (connected savings account)

— 1 mn+ holders using the family program

But is it successful?

It really depends on the party.

Beyond the headlines, these are the numbers that matter for Apple:

— Apple Pay US penetration is 22% (12 mn out of 55.8mn users – source Forbes)

— US iPhone penetration is 8% (12 mn out of 150mn users – source Forbes)

— Annual spend about $5,500 per user vs$33,000 per user for Delta’s American Express (source: Better Tomorrow Ventures, Forbes)

What do these mean?

For Apple it’s all about their ecosystem play. Whereas the numbers are not insignificant the big driver has been from the beginning how to monetize iPhone users, strengthen their ecosystem and incentivize usage of offerings around it: Apple Card driving more Apple Pay transactions and increased spend on Apple products.

Which is exactly why some of the core focus features (i.e. no fees, transparency, repayments vs minimum amounts) go against building a typical credit card #business case.

In turn, from a #banking partner’s perspective, all these mean that the Citi concerns were valid. The Apple Card has been writing multibillion losses for Goldman Sachs.

For reasons that go beyond the Apple Card (and this note), the partnership between Apple and Goldman Sachs (as widely known) is being ended. But the Apple Card model will not be discontinued. In fact, quite the opposite. Apple will continue building functionality and features, feeding directly into the ecosystem.

At the same time more players will be going down this path. Robinhood’s recently announced Gold Card offers a cash back with additional rewards for Robinhood offerings (i.e. travel portal), invests it back to brokerage accounts and has a family option. Apple has not only redefined consumers’ relationship with cards, but also, to a large extent, the consumer banking ecosystem around them."

Author

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