On Monday, March 25, Apple announced its new US co-branded credit card, Apple Card, issued by Goldman Sachs on the Mastercard network. The card is a combination of a digital card issued through Apple Wallet and a laser-etched titanium physical card for non-Apple Pay transactions. Although unlikely to set the world of rewards chasers ablaze, Apple Card is notable both for how it is being positioned, as well as some of the changes to the industry that it may portend.
Apple Card: The basics
Apple’s approach is to deliver a consumer-friendly card through the elimination of fees (foreign transaction, annual, late, etc.) as well as lower APRs than average. The card design is impressive and clearly fits in visually with Apple’s larger product portfolio. Apple has always embraced the premiumisation megatrend and the physical card is no exception, opting for laser-etched titanium over a metal core sandwiched by plastic. The rewards scheme itself (3% on Apple purchases, 2% on Apple Pay transactions and 1% on physical card transactions) is hard-pressed to compete with premium plus cards in the US but delivers a solid rate for a no-annual-fee offering.
The Apple spin on a credit card
Apple Card leans into some of the most important trends in the consumer finance industry, beyond the ongoing premiumisation shift from plastic to metal. Apple has highly touted its API-powered insights such as providing location data for transactions and making sense of the often perplexing merchant names that appear on monthly statements. Apple will surely highlight these features in its forthcoming advertising blitz. While its rewards rates have elicited a tepid reaction from industry observers, the Daily Cash mechanism, which allows consumers to almost instantly access rewards via Apple Wallet’s Apple Cash card, will likely draw praise – both from consumers for its appeal to instant gratification and for Apple by incentivising a means of keeping consumers’ rewards within its payment ecosystem.
Apple’s interlocking digital ecosystem has long been one of its most valuable features. Apple Card is designed to fit snuggly within it. Online applications and immediate card provisioning lower the barrier to entry to getting a new credit card in a manner akin to putting candy and gum packets at checkout in a supermarket. Integrating customer service into messages through natural conversation is also not a new phenomenon, but will benefit from a seamless interaction within the ecosystem.
The Apple effect
Apple seldom invents entirely new products, though the company refines and markets those products in a manner that provokes consumer zeal, shifting the way that existing competitors must approach aspects of the industry. Apple is playing a long game with this release, placing a number of strategic bets.
Security and privacy
First, they are looking to dispel the mistaken notion that digital wallets are insecure. Apple went to great lengths to emphasise privacy and security in their unveiling: removing identifying information like a card number from the physical card itself, highlighting one-time security codes and repeatedly underscoring that transaction data is not shared for advertising or other purposes. Operators have largely removed signature requirements from cards, but issuers continue to include them in many cases. Apple’s decision to entirely do away with the signature line may help hasten this shift.
API adoption and visualisation
The age of APIs is here. Apple’s payment and transaction interfaces are, as expected, visually arresting. More importantly, their leveraging of data natively within Apple Wallet highlights the potential for information aggregation and budget and transaction tools that are coming as open banking takes root. It would not be a distant jump for Apple to forge its way into a financial aggregator position that allows consumers to manage their wealth from a native app – and perhaps give the Stocks app additional functionality.
Mobile wallet momentum
Mobile point-of-sale payments have fallen short of the tremendous hype that accompanied the initial releases of the “pays,” in part because there is little incentive for consumers to use them. While Apple Card is not the first credit card to offer rewards tied to using a mobile wallet, it will be a motivator to a new swath of Apple’s mammoth customer base.
Chasing the next generation
Perhaps most important for Apple is Apple Card’s ability to serve as some consumers first credit card – or first credit card they actually use. In an environment where younger consumers are less attached to specific banks, it isn’t a stretch to imagine teens whose first credit card – and their first phone – is provided by Apple. Apple Card’s rewards might not be the most lucrative, but nor are its sought-after phones the most affordable. After all, if applying for a credit card is the next new iOS feature will new customers want to visit a branch?