Battle of the banks: Who will grab the Apple Card?

Apple is a hot property, and the big banks all want a chance to grab a piece of the action now that Goldman Sachs has decided to leave retail banking behind. 

We’ve entered the “breaking it down for parts” stage of deal-making now, with banks bidding for both financial network access provision and to be the partner of note for the card.

Apple Card was the future of banking when it launched six years ago. It immediately generated noteworthy public interest, people liked the software that supported it, and the interest rates (which have changed over time) were seen as super-attractive. Apple’s Daily Cash loyalty scheme became popular, too, as did the Apple Card Savings account the company created a little later. The card was supported by Goldman Sachs as the credit partner and used Mastercard as the payment processor.

Following some costly service failures, Apple has been working to leave the first partner, while the deal with the second has expired. And that’s where the action is.

The Apple Card yard sale

Mastercard wants to keep Apple’s business, but is facing fairly aggressive competition from both Visa and American Express. There is clearly value in the business — Visa has offered a hefty $100 million to take over from Mastercard, while American Express is vying to take a partnership position in replacing both Mastercard and Goldman Sachs. Barclays, Synchrony Financia, and JP Morgan Chase have also discussed taking over the credit side of the Apple Card business.

What’s in it for them, of course, is access to Apple’s high-value market of relatively affluent and very loyal consumers. There are more than 12 million Apple Card users in the US with north of $20 billion in balances. These are (mostly, possibly except me) creditworthy people who spend, save, and borrow money. A 2020 survey told us that a third of Apple Card customers had annual incomes above $100,000.

Customers in demand

In an unpredictable economy, customers like these are gold dust — and Apple has them. The opportunity to expand the service into other up-and-coming economies won’t be lost on the banks, either. Banks usually want to follow the money, so once all these deals are done, it will be interesting to see where Apple Card gets introduced.

But that’s not all that Apple brings to the table: Challenger banks — newer, tech-driven services that aren’t weighed down by tradition — have proliferated and improved since 2008 when bankers seemingly siphoned all the cash from the global economy.

Banks responded by improving customer service and developing better B2C and B2B applications and software services. But challengers — including Revolut — have sought and gained banking licenses and pose more competition now than they did then. What’s limiting all these efforts, of course, is software design; the best services offer the best software.

That’s where Apple comes in.

Follow the money

Banks know that Apple is really, really good at software (most of the time). They know that when it comes to usability and platform support, the company is second to none. They read the same research that shows Apple’s products rapidly replacing Windows, and they also recognize that Apple’s commitment to security and privacy is vital — essential, even — to secure and stable financial exchange.

 (This is why the UK really should announce whether it has chosen to sacrifice its financial services sector by breaking end-to-end encryption, because financial firms will be furious when they find their trading system security undermined without any warning.)

Apple has a lot to offer. But for more traditional financial entities such as those talking with the company about Apple Card, the biggest thing it can offer is that it is more than capable of building software and services to compete with challenger banks.

And while many of us might rejoice if those challengers defeat the established order of financial things, incumbent entities will not fold without a fight — hence, the interest in Apple Card. They think Apple could help them thrive in the New World Fiscal Order. They are probably right. 

Deal, or no deal?

This is what’s at stake in Apple’s talks around the Apple Card. Banks want a direct line to the world’s most affluent customers, want to surprise and delight those customers, retain and profit from them, and they believe Apple can help them do it. The only snag is going to be whether Apple gets the deal right, or prices itself out of the market — after all, Apple was a challenger once, and some other service could conceivably replace it.

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