Apple Card's future in question as Goldman Sachs relationship ends
posted Sunday Dec 3, 2023 by Scott Ertz
Since Apple's 2000s renaissance, the company has seemingly tried to get into every industry it can. In addition to computers, the company's initial intention, Apple had gotten into music, cars, and even financial services. Some of the endeavors, such as music, have been huge successes. The iPod and iTunes introduced a new group of consumers to a long-existing product category of portable digital music. But others, like financial services, have been a disaster for the company and its partners. The Apple Card and its issues have caused a breakup between Apple and Goldman Sachs and left the future of the service in question.
What is the Apple Card?
The Apple Card is a credit card created by Apple and issued by Goldman Sachs. It's designed primarily to be used with Apple Pay on an Apple device such as an iPhone, iPad, Apple Watch, or Mac. Because the card is operated by Apple, it is fully integrated into the Apple ecosystem. All of your transactions, balances, and payments are done through the Wallet app. You also get an estimate of the total interest for a purchase as you are making it, based on your plans to pay it off over time.
You also get a percentage of your purchase back as cash in the form of Daily Cash. Unlike other cards, this is proper cash, as opposed to points, which means it never expires or loses value, except to inflation. That cash can be deposited directly into your Apple Cash account on your phone for immediate use. In addition, the card has no fees, including hidden or future fees. These benefits have led millions of Americans to sign up for the Apple Card.
What is the Apple Savings account?
Similar to the Apple Card, Apple Savings is a financial offering underwritten by Goldman Sachs. This account works similarly to a traditional savings account you can get from banks or credit unions, but without the overhead of a physical bank. Instead, it is all done through your computer or phone, similar to other mobile banking options. The difference here is that Apple has integrated it directly into its ecosystem, making it easier for Apple users to access.
The Goldman Sachs connection
Apple is not a financial institution. As a result, they are not underwriting or funding the Apple Card experiment. Instead, they partnered with Goldman Sachs, a traditionally investment-focused bank. This partnership with Apple was part of a foray into the consumer market, and one that the company hoped would be an easy and successful one because of the value of Apple's brand in the marketplace.
Unfortunately for Goldman, the Apple Card and Apple Savings have not been a huge success for them. In fact, the consumer division of the company, led by the Apple Card, has lost billions of dollars in just a few short years. Goldman has reportedly been looking for a way out of the partnership, and this week made those intentions clear to Apple. As a result, Apple has reportedly proposed a split, which is likely to come to pass in the next year or so.
What it means for consumers
This split would mean that Goldman Sachs would no longer be involved in Apple's financial goals, which would be a welcomed change for Goldman. However, the future of these offerings gets thrown into question for consumers. How will this breakup affect existing cardholders or savings account users?
The future of Apple Card
Apple will spend the next year looking for a new underwriter for the Apple Card. Some banks turned Apple down before the launch of the card with Goldman, and a failure of the product would not likely cause them to change their minds. So, don't expect Citibank to become the new partner. There is a possibility that another card issuer, such as American Express, could become the new partner for the cards.
On the user side, likely nothing will change. You likely will receive a new physical card with a new number, but other than that, process and procedure is unlikely to be affected. Your payments will still be made through your phone, but the end result will be a payment to another bank. This is because Apple manages the card and its rules and operations, while the bank merely handles the financial aspect of the business.
The future of Apple Savings
Apple Savings has a more nebulous future. If Apple partners with American Express as its Apple Card underwriter, then Apple Savings will not be part of that relationship. So, it is possible that Apple Savings will need a different partner. This could mean a disconnect between the operations of Card and Savings, or it could mean no change at all. Only time will tell how this will proceed.
