Tim Cook thinks the freshly announced Apple Card – made of titanium, wrapped in the iPhone maker’s distinctive, minimalist brand and issued by a Wall Street investment bank – is a game changer. In fact, he is confident it is the biggest credit card innovation in half a century.
But is the company’s chief executive right to claim that the Apple Card offers something strikingly different to what is already available in a deeply competitive market? According to Apple’s launch partner, Goldman Sachs, it is a “terrific” opportunity to be exposed to a new distribution channel under the Apple brand as the bank enters the credit card market for the first time.
Apple Card – which will use the MasterCard network – seeks to entice customers with a number of incentives, such as a budget tracker and the claim of “no fees” (while including a standard footnote about variable APRs that range from 13.24 per cent to 24.24 per cent “based on creditworthiness”), that on the face of it appear to fall into line with its soon-to-be competitors. “This is pretty straightforward in terms of a consumer credit card, with some novel elements to it,” says Peter Berg, who previously led venture investing and partnerships at Visa.
Apple says the card, which is expected to be released in the US in the summer before potentially being rolled out internationally at a later date, will give three per cent back on everything a customer buys from its physical store, website, iTunes or App Store. Each time a purchase is made using Apple Pay, customers will receive two per cent back. On all other purchases, where stores, apps and websites do not accept Apple Pay, customers will receive one per cent back in the form of Daily Cash. It is then added to the Apple Cash card in Apple’s Wallet app on a daily basis and can be used in a variety of ways.
Significantly, Apple’s strategy seems to be one of stickability.
“I don’t know if Apple is testing the waters or making a concerted push towards keeping cash in its ecosystem, but when you think about it from a perspective of using that money for iTunes purchases or anything inside of the Apple walled garden broadly, its cost of funds drops dramatically. Because that money can simply be recycled within its own ecosystem,” Berg says.
It is also possible that the reluctance among consumers, particularly in the US, to view their smartphone as their wallet, is one of the reasons behind Apple’s decision to launch its credit card stateside first.
Analysts at Loup Ventures have estimated that 43 per cent of Apple iPhone users globally have enabled Apple Pay, but its adoption in the US is sluggish compared with other markets, such as the UK. “We estimate that 24 per cent of US iPhone users have used Apple Pay [compared to] 47 per cent of international users,” Loup Ventures said in February.
Apple is also, once again, making a big cosmetic play for privacy by laser-etching users’ names on the Apple Card, with no other sensitive information, such as the account number, visible. It is a neat marketing trick that will make it easier for the Instagram generation to share photos of their Apple Card with others, because they will presumably be less fearful of becoming identity theft targets.
Apple has not said when it will bring the Apple Card to Europe, where the fintech market is more mature. And, given it’s tie-in with Goldman Sachs and MasterCard, it’s hard to say whether it is seeking to directly compete with the likes of Monzo, Revolut and Starling.
“Things change very slowly in payments,” says Berg. “Apple Pay, Google Pay and Samsung Pay, all these things are built on top of a standard and a bunch of technologies that the card networks such as Visa and MasterCard had for years, if not decades.” Berg adds: ”This is not a new technology, it’s just been rebranded in a different way and now with the ubiquity of smartphones it becomes much more interesting.”
It’s worth noting that this isn’t Apple’s first rodeo. There have been several incarnations of an Apple credit card since at least the mid-80s. But there is something new about the Apple Card: it represents Cook’s boldest effort yet to increase the adoption of Apple Pay across the globe now that the allure of having a shiny new iPhone in your pocket has waned. Berg says: “Apple want to own the entire stack, they own the entire ecosystem, they own the device, they own everything. It makes sense, inch-by-inch, to go out to the edge and consolidate and own the entire experience end-to-end.”
This article was originally published by WIRED UK
