I'm assuming it will be just like any other time a card portfolio is sold or transferred (Costco Card: Amex -> Citi, REI Card: US Bank -> Capital One, GM Card: Capital One -> Marcus (which is Goldman, ironically I think they want to get rid of this card too), etc...). Unless Apple discontinues the card completely, they will choose a new bank, that bank will take on the existing portfolio, everyone will get new cards (maybe numbers depending on how they did the BINs)...but with the physical card not having a visible number, the apple pay card being able to be automatically updated, and the virtual card's number being right there in the app it should be pretty painless.
Since Apple manages the whole thing through their own app and not a Goldman Sachs app, it should be fairly seamless as everything should look the same and you won't need to make a new login or worry about how to start paying a new bank. If there's new cards to be issued it's likely it will just show up in the Wallet app and they'll mail you a new physical one. Last year Apple moved the Apple Cash card from Discover to Visa and most people didn't even know that happened. There was even a button to switch it over sooner if you wanted to.
With the Savings Account I expect it will be similar as long as they can find a bank willing to offer a similar APY. Especially for people who just use it with the Apple Card and don't deposit directly to it using the routing/account number, you probably won't really notice.
source: all speculation, but I have worked extensively in payments for years and have launched banking products.
Great benefits for Apple Card users to have Apple abstract all the drudgery away. Experience is the differentiator, back office is a commodity.
What’s left is to make Apple Cash a deposit account with FedNow instant payment rails access. Buy a distressed regional bank to get a charter if needed. Every iPhone user then becomes a potential banking customer (136M US iPhone users, compared to 66M JPMC household customers, for example). Interchange revenue will slowly decline (again, FedNow), which Apple can compensate for with the deposit spread.
There are lots of downsides to actually becoming a bank, though. It creates many restrictions on the kinds of things you can do, and unless it's the majority of your business, it's not something you want. Better to work with banks but not be a bank yourself.
I suppose it’s going to depend on how many willing partners are out there with an appetite to be beholden to Big Tech as the smaller partner with less leverage. Evolve just dumped a bunch of fintech partners over the last year (conversely, they were aggressive in who they were willing to partner with), and moving is not trivial. While Apple has deep pockets, I’m sure engineering time is better spent delighting users vs engineering around partner churning.
Depends if Apple really feels they can run a backoffice banking arm effectively and cheaper than a partner that is already at scale.
Underwriting credit & customer risk, handling edge cases, maintaining relationships with ATM networks, card networks and ensuring compliance with state and federal banking rules is quite an undertaking.
Goldman Sachs did not have scale like Chase, Capital One and others to create a diversified portfolio of clients, limiting their ability to hedge against the risks of a single platform or two dominating their involvement in this market. One bad software update by Apple could flood their support queues, and they can't afford to keep significant staff on hand to keep wait times below an hour (unlike a larger company, who is already staffed up to serve their non-Apple customers).
Hat tip. This part is so important. It prevents a non-bank from taking over a bank with the implicit goal of lending money to themselves. This would be a real danger.
I imagine they'll replace the physical cards as the existing ones have Goldman's name on the back. The transition could otherwise be nearly invisible, the Goldman name and actual card numbers don't show up often in normal usage.
New card better have the same weight and feel! It’s what made me want to sign up if I am being perfectly honest. I mostly tap to pay but enjoy getting the card out every once in awhile.
>Unless Apple discontinues the card completely, they will choose a new bank
That's the problem. All other banks turned Apple away because Apple was demanding some significant concessions. Goldman agreed to them because at the same time they were trying to break into the consumer business.
I had the Uber credit card which at launch had something like 4% cashback at restaurants/bars/uber trips.
Uber progressively slashed the benefits overtime to the point where it just had some generic 1% cashback. That was through Barclays and eventually they shipped me some vanilla master card with no benefits.
I hope the Apple card doesn't follow a similar path.
This would be a bit of a detractor for me, Amex is not as widely accepted, especially when traveling in Europe. Mastercard is accepted virtually everywhere in the EU and UK.
If the Amex partnership includes global (or at least, European) expansion (which seems more plausible than with GS), it may generate extra pressure on vendors to accept it. iPhone market share is quite high in Europe(~35%), and I’d guess mostly comes from high spending sectors (e.g. 56% in Swirzerland, 50% in UK). I would try to attract their business.
It would definitely help Amex, but I'm not convinced that Apple would inflict the significantly worse acceptance on themselves without significant upside.
The Apple card was only available in USA. So market share abroad is not really relevant. Card margins are much lower elsewhere so its not such an attractive product.
There's little incentive to change. Retailers also know their clients who use Amex, are aware how little it is accepted and are likely to have a backup alternative they can just use.
This is not true. Anyone in the US who has told you this is confused or getting ripped off by a predatory ISO (the companies that offer credit card processing).
Numbers below are only looking at the percentage, not the flat per txn fee or the other fees like assessments, etc... Only apply to the US. Also assuming you do less than 1 million a year in card volume.
First let's look at actual merchant services costs:
Stripe, Braintree/PayPal (online) you pay the same fee for all cards. Around 2.90%
Wells Fargo (in-person) charges the same rate for all cards until you are high volume. Around 2.40%
Chase (in-person) charges the same rate for all cards until you are high volume. Around 2.60%
Bank of America (in-person) charges the same rate for all cards until you are high volume. Around 2.65%
Now let's look at the actual amount the card issuer charges for a restaurant to accept a card (assuming you're working with an ISO that does OptBlue, all the above do). The markup you pay your merchant services provider is added on top of this.
The difference is not that high. In fact, my understanding is “Visa Signature” and “World Mastercard” (which are most of the premium credit cards) normally cost about the same as Amex. At worst it may be about 1% more not double.
High fees are what Apple uses to offer such “great benefits” with their existing card. If they want to expand to Europe, the only cards enabling that would be Amex, or Diners (which is even less accepted I think).
The fact the Apple card was a Mastercard and had no foreign transaction fees was largely the only reason I opened it, as I too find my Amex a pain in the ass in Europe. If it does become an Amex card, I will likely close the account.
In an FX transaction, what is the difference between a trading fee and a wider spread? Nothing. (Why do people keep falling for this?)
What you really want to see is a combined promise. For example: No fees, plus 1% or less FX spread on major currencies. (My preferred credit card promises that.)
Honestly, it is very hard to pay a total of less than 1% on foreign transactions. Still, this is pretty cheap, given the convenience.
The FX spread is fixed at around 25-50bps for Mastercard/Visa due to a settlement long ago. The foreign transaction fee is an additional charge on top of that, usually 3% of the gross transaction volume in USD.
The banks don't control the exchange rate, it's determined by the card network. So yes, when a card advertises 0% foreign transaction fee, it really does mean that they don't take an additional charge on top of the spread (which they don't control or profit from).
It's in fact quite easy to pay less than 100bps for a foreign currency transaction; everybody with a 0% FTF card is doing it right now (especially for high volume corridors like EUR/USD).
> No fees, plus 1% or less FX spread on major currencies. (My preferred credit card promises that.)
You bank can't promise what they don't control; Visa and Mastercard determines FX rates, and they're below 100bps because of an old settlement. So the bank is promising you something they had no role in creating; you're the one here falling for the marketing, not everybody else.
> Honestly, it is very hard to pay a total of less than 1% on foreign transactions.
I would argue that you are not looking hard enough if you're paying 1% on FX card transactions.
All you need is a multi-currency card from one of the Fintechs, that will get you down to 0.5% or less without any effort.
Of course if you're the sort of person who likes taking cash out of ATMs on holiday then you'll have to look harder, since there is usually a surcharge on ATM withdrawls. But even then its not impossible.
In France, the fees required to accept Amex are still way higher than MC/VISA. They are still not widely accepted and not a lot of persons know about Amex.
The fees are higher everywhere. Their pitch is "our fees are higher, but we have higher-end customers who spend more", which roughly tracks with reality. But a hot dog stand isn't gonna have whales but an upper-end store might, so it's not surprising to see less support it.
High-end businesses accept Amex, because it's worth it. Major chains can probably negotiate good deals. Tiny/seasonal businesses often use middlemen like Zettle that charge high fees and accept almost every payment method imaginable. Those in the middle who use traditional payment terminals and pay list prices may still avoid Amex due to the high fees.
I thought the EU had regulations on credit card fees? As I understand it, the Amex isn't widely supported because Amex's fee-heavy business model wouldn't be allowed to launch.
Visa's highest tier cards (Visa Infinite cards, such as the Chase Sapphire Reserve), already have higher fees than the Amex Platinum. The difference is, Visa won't let merchants ban single cards (you have to accept ALL Visa cards), while banning Amex meaning you are banning mostly high tier cards and losing nothing on the low end.
At least it might solve an issue a friend of mine has. He really wants an AMEX card, due to traveling, but you can only get corporate cards here, AMEX doesn't deal with private individuals and won't issue you a card. I suppose he can just get an Apple card then.
The beauty if going with AMEX, if that's what they'll do, it that it's a one stop shop. No need to go through a bank to issue a credit card, just deal with the credit card company directly. Currently the card is pretty much useless, but it does fit Apples way of doing things, cutting out the middle man.
For American Express it could also help make them relevant as a card company again. If they have plans to expand beyond the US, this might be a good way to do it. Companies will want to be able to accept Apples card, even if that means signing up with AMEX. Then in a few years, AMEX can start pushing their own branded cards which will now be more widely accepted.
Interesting. I had zero issues using my Amex in France and Switzerland this past summer. In fact, there was only one restaurant that I visited that wouldn't take it. I must have been lucky.
I'm more interested in the savings account integration. I've found it super convenient. Too low APR for long term savings, but the convenience is worth the difference to me for short term savings parking. I keep $30K or so in it revolving for moving money around. Not to mention the cashback deposit right to the account.
What APR is your baseline for long term savings? I'm interested in where you see significantly higher APR savings accounts because the Apple Card Savings Account is 400x my previous savings account APR.
I don't have a savings account but buy CDs on a regular basis. For the next two years, I have something between 5% and 6% maturing every 3 months. Apple Card Savings is 4.15%.
So you can definitely do better than the Apple Card, but to some extent you're paying bankers to do what I do manually every 3 months. (You just pay them in "spread"; they're buying the same CDs I am, but keeping some of the profits to themselves. And letting you withdraw the money whenever you want, not just when the underlying CD matures. I get only a small amount of interest on my "what if I get fired and need to eat for 3 months until the next CD matures?" fund, sitting in my checking account.)
I never bother with actual savings accounts because in a year or two interest rates will be back down to 0.0000001% or whatever, in which case just holding the cash in my brokerage account is easier. (At least it gets swept into an overnight account that earns 0.0000015% interest! Wow!)
There’s at least 50 different online banks that are paying more than 4.15%. Check out depositaccounts.com. Off the top of my head, Ally, Capital One, Vio Bank, MyBankingDirect, SoFi, and a bunch of others. If you’re getting less than 5% it’s time to open a new account.
I have a HYSA with UFB Direct (5.25% APY) and if you use Wealthfront or Robinhood, their paid offerings have 5%-ish. Apply is like 4.5% or something. I've been meaning to move that out to one of the 5% accounts.
This is largely not a big deal - credit cards move to new servicers all the time, the customers are just transferred and you get a new card.
In the last 10 years the Costco credit card used to be serviced by AMEX but now it's Citibank. Fidelity credit card moved from FIA Card Services (Bank of America subsidiary) to Elan Financial and became a Visa. The AARP credit card went from Chase to Barclays. Those are just off the top of my head.
Since Apple manages the whole thing through their own app and not a Goldman Sachs app, it should be fairly seamless as everything should look the same and you won't need to make a new login or worry about how to start paying a new bank. If there's new cards to be issued it's likely it will just show up in the Wallet app and they'll mail you a new physical one. Last year Apple moved the Apple Cash card from Discover to Visa and most people didn't even know that happened. There was even a button to switch it over sooner if you wanted to.
With the Savings Account I expect it will be similar as long as they can find a bank willing to offer a similar APY. Especially for people who just use it with the Apple Card and don't deposit directly to it using the routing/account number, you probably won't really notice.
source: all speculation, but I have worked extensively in payments for years and have launched banking products.