Physical Apple Card

Apple has teamed up with Goldman Sachs for the innovative Apple Card in the United States. It was not only Apple’s first credit card but also the first one for Goldman Sachs. As it turns out, Apple was also in talks with Citigroup for the Apple Card but the bank pulled out amidst doubts that it could turn a profit on the partnership.

Unlike other credit cards, the Apple Card does not have any kind of fees whatsoever. Plus, Apple is offering customers cashback of anywhere between 1 to 3 percent depending on their purchase.

Citigroup felt that there was no way it could make a decent profit off this partnership which led to it from pulling out of the talks. Other banks like Barclays, J.P. Morgan Chase, and Synchrony also bid for the Apple Card business.

A Goldman Sachs spokesperson said that the company was thrilled to partner with Apple over the Apple Card.

“Goldman Sachs seeks to disrupt consumer finance by putting the customer first,” Williams said in a statement. “We are excited for customers to use Apple Card, which is designed to help people take control of their financial lives.”

U.S. banks earn billions of dollars every year in late fees, interest, and other charges from their customers. With the Apple Card though, the consumer-first approach means that there are no fees involved whatsoever on late payment, getting a physical card issued, or more. Then, Apple will also actively encourage Apple Card customers to pay off their credit card bill as soon and as much as possible which means that there is going to be less room for banks to earn any money via interest payment.

Our Take

Goldman Sachs has long been in the trading side of the business. The company has been making a push in the consumer finance space and this partnership with Apple will allow it to gain millions of new credit card users in a very short time. It also does not offer anything similar to its existing customers so there’s no risk of cannibalizing its own business. However, it remains to be seen how Goldman Sachs scales up its operations to handle the influx of millions of new customers.

It looks like the Apple Card partnership could make or break things for Goldman Sachs in the consumer finance space. If Apple Card ends up being successful, other banks would end up having a lot to worry about.

[Via CNBC]