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Apple Plans to End Credit Card Partnership with Goldman Sachs

Apple Plans to End Credit Card Partnership with Goldman Sachs

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In a surprising move, tech giant Apple (AAPL) has reportedly informed Goldman Sachs (GS) of its intention to dissolve their consumer credit card partnership within the coming 12 to 15 months. This decision could have implications for cardholders and potentially reshape the landscape of Apple’s financial services strategy.

The collaboration between Apple and Goldman Sachs led to the creation of the Apple Card and savings accounts. Despite being a part of Apple’s services revenue, Tech Editor Dan Howley from Yahoo Finance points out that these financial offerings might not be pivotal in Apple’s revenue stream. Howley suggests that while these services might not significantly bolster earnings, they serve a different purpose – creating a “lock-in” effect.

Lock-In Strategy: Anchoring Users to the Apple Ecosystem

The concept of ‘lock-in’ revolves around linking a user’s credit card and savings account to their Apple devices. Howley explains that this strategy aims to enhance customer loyalty by making it inconvenient to switch to competitor products. With the integration of financial services into the Apple ecosystem, users are less likely to shift to rival platforms, ensuring a long-term commitment to Apple’s products and services.

Apple Plans to End Credit Card Partnership with Goldman Sachs

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Speculations arise regarding Apple’s potential collaboration with different banks to continue their foray into financial services. While Apple maintains its brand presence in these services, the banking infrastructure is supported by partners like Goldman Sachs. Any transition to a new financial institution might involve reissuing cards, but the core strategy of ‘locking in’ users is expected to persist.

Apple's Dual Role: Innovator in Tech, Cautious in Finance

Apple’s dominant position in technological innovation contrasts with its cautious approach to highly regulated financial services. Howley underscores that Apple’s separation from the banking infrastructure allows it to maintain a positive sentiment among consumers, steering clear of potential apprehensions associated with being deeply involved in finance.

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Amidst reports of dissolving the partnership, concerns arise regarding the continuity of user-centric features. The unique attributes of the Apple Card, including its color-coded spending indicators and flexible payment options, have garnered praise. Howley points out the importance for Apple to preserve these aspects while potentially switching banking partners, ensuring a seamless transition without compromising user experience.

Apple’s move to unwind its partnership with Goldman Sachs signifies a strategic shift in its financial services landscape. While the decision might not heavily impact revenue, it solidifies Apple’s intent to maintain a strong grip on its user base by integrating financial services within its ecosystem. As the tech giant navigates this transition, preserving user-centricity will be crucial in retaining customer trust and loyalty.

high-yield savings account

Apple and Goldman Sachs collaborate to provide high-yield savings accounts to Apple Card customers

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Apple is taking a major step toward providing its customers with more banking services. The company announced today, that it is collaborating with Goldman Sachs to launch a new high-yield savings account feature for Apple Card credit cardholders that will allow them to save and grow their Daily Cash which is the cashback rewards earned from Apple Card purchases.

high-yield savings account
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In the upcoming months, Apple says cardholders will be able to automatically save this money in a new, high-yield savings account from Goldman Sachs which will be accessible through Apple Wallet. Customers can also deposit their own funds into this account.

“Savings enables Apple Card users to grow their Daily Cash rewards over time, while also saving for the future,” said Jennifer Bailey, Apple’s vice president of Apple Pay and Apple Wallet,” Bailey said in a statement late on Thursday.

Source: in.investing.com

According to Apple, the account has no fees, minimum deposit, or minimum balance requirements, making it competitive with various neobanks that are often used as a way for customers to reserve digital cash and monetize interest payments.

However, Apple did not specify what interest rate would be paid out on these high-yield accounts in its press release. According to Bankrate data, competitors are currently offering APYs ranging from 2.20% to 3.05%. According to Investopedia data, some are going even higher, with APYs currently exceeding 3.1%. Apple stated that it is not prepared to announce the APY due to the current highly volatile interest rate environment.

When the new service becomes available, Apple Card users will be able to set up and manage their Savings account directly in the Apple Wallet mobile app. From then on, all Daily Cash earned through Apple Card purchases will be automatically deposited into this account, unless customers choose to have the cash added to their Apple Cash card in Wallet instead, as they do at the present time. According to Apple, this option can be changed at any time.

An in-app Savings dashboard will show the account balance as well as the interest earned over time.

Apple currently offers 3% cashback on Apple Card purchases made with Apple Pay at select merchants such as Apple, Uber/Uber Eats, T-Mobile, Walgreens, Panera Bread, Nike, ExxonMobil, and Ace Hardware. Apple Card purchases will earn 2% cashback when using Apple Pay, and 1% cashback when using the titanium card or a virtual card number to shop online.

Cardholders would not have to depend solely on Apple Card purchases to fund their brand-new Savings accounts. Customers will be able to deposit additional funds via a linked bank account or their Apple Cash balance, as per Apple’s statements.

They can also withdraw this money at any time by transferring it to the same linked bank account or any linked bank account or even their Apple Cash card, without incurring any fees.

Apple has been steadily moving into the payments market with the launch of the Apple Card, allowing it to establish a more direct connection with its customers as it accelerates its “services” business, which perceives it selling subscriptions to a variety of offerings, including Apple Music, Apple Arcade, Apple TV+, iCloud+, Apple Fitness+, Apple News+, and more.

It’s also attempting to make Apple Pay a more realistic choice for online shopping, with the announcement of an Affirm competitor, Apple Pay Later, for dividing purchases into four interest-free payments. This offering, however, has been postponed until 2023, according to Bloomberg.

Meanwhile, Goldman Sachs has been repositioning itself as a more traditional bank with its Marcus by Goldman Sachs product, which announced last year that it had reached a milestone of more than $100 billion in customer deposits after five years of operation. The collaboration with Apple will give it a new perspective on the consumer deposits market.

Apple did not provide a specific launch date for its high-yield Savings account, only stating that it would be available in the coming months.  The company stated that the Savings account feature will be included in an upcoming iOS release, but did not specify which version number would include the option.

Goldman Sachs

The Founding Story of Goldman Sachs: Investment Banking Giant

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Goldman Sachs is a well-known name in the investment banking, securities, and investment management industry.

About the Company

It is a global investment bank and financial services company. It was established in 1869 and has regional offices in Warsaw, London, Bangalore, Hong Kong, Salt Lake City, and Tokyo in addition to offices located in other major global financial hubs.

Goldman Sachs
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The company has its headquarters in Manhattan, New York. As per revenue, it is the second-biggest investment bank in the world. It is also placed 57th among the 500 largest American companies on the Fortune 500 list.

History of the Company

Marcus Goldman established Goldman Sachs in 1869 in New York City. Samuel Sachs, the son-in-law of Goldman, started working there in 1882. Goldman brought his son Henry and son-in-law Ludwig Dreyfuss into the company in 1885, and the company then took on its current name, Goldman Sachs & Co. The company entered the NYSE in1896 and was a pioneer in the utilization of commercial paper for business transactions.

The company’s capital was $1.6 million in 1898. By putting Sears, Roebuck, and Company on the public market in 1906, Goldman debuted the IPO market. Henry Goldman’s personal acquaintance with Sears owner Julius Rosenwald made the deal possible. Continental Can and F. W. Woolworth were among the next companies to go public.

Henry S. Bowers was the first person outside of the founding family to join the company as a partner and get a portion of the earnings in 1912. Henry Goldman resigned from the firm in 1917 as a result of mounting pressure from his fellow partners over his pro-German stance. Before Waddill Catchings joined the corporation in 1918, the Sachs family had complete control of the business. Waddill Catchings was Goldman Sachs’s partner with the single-largest ownership position in the company by 1928.

In 1928, the company introduced the closed-end fund Goldman Sachs Trading Corp. During the 1929 stock market crash, the fund failed amid claims that Goldman had been involved in insider trading and share price manipulation. Goldman Sachs opened its first overseas office in London, United Kingdom, in 1970. To increase its presence in the UK, it also established a fixed income and private wealth unit in 1972.

It bought the commodities trading business J. Aron & Company in 1981, traded in coffee, precious metals, and foreign exchange. Through the acquisition, it was able to get access to the market in South America which boosted the company’s growth in subsequent years. It established Goldman Sachs Asset Management in 1986, a business that still oversees its hedge and mutual funds today.

Goldman Sachs was one of the companies that profited from the U.S. Treasury’s rescue of financial institutions during the financial crisis as a component of the Troubled Asset Relief Program (TARP). The US Treasury invested $10 billion in the company in 2008. In the type of $318 million in dividends and $1.418 billion in warrant redemptions, Goldman reimbursed the money with a 23% interest.

Services Offered

Goldman Sachs offers services in areas like investment banking (advice for acquisitions and mergers and reorganization), securities underwriting, asset and wealth management, and prime brokerage. It also trades credit products and mortgage-backed and insurance-linked assets. It is a key trader in the market for Treasury securities issued by the United States.

It offers custodian bank and clearing services. Goldman Sachs Personal Financial Management, offers wealth management services. It runs hedge funds, real estate and credit funds, and private equity funds. It builds sophisticated, specialized financial products. Additionally, it owns a direct bank Goldman Sachs Bank USA. It trades both for its own account and on behalf of the customers (flow trading).

Founder: Marcus Goldman, Samuel Sachs

Marcus Goldman was an American banker, entrepreneur, and financier. Goldman Sachs, which he founded, is now among the biggest investment firms in the world. Goldman changed the company’s name to M. Goldman & Sachs in 1882 and extended an invitation to his son-in-law Samuel Sachs to assist him in the company.