I’ve had the opportunity to use the Apple Card as a part of a private invite/preview since Friday. While I don’t intend for this to be a review, what I do want to discuss is the strategic opportunity for Apple with Apple Card that living with it has caused me to observe.
Why a Credit Card From Apple?
Casual observers of Apple will remark that releasing a credit card is out of character from Apple. I disagree as forming an opinion on this matter depends entirely on what you believe Apple is as a company. Is Apple a computer company? Services company? Product company? Technology company? In my view, and I’ve written extensively on this, Apple is a customer experience company. If you view Apple as a company, who strives to look for product opportunities where customer experience is lacking, and they have an opportunity to solve some pain points for consumers, then any product category is not off-limits. This certainly extends to technology, but technology is simply an ingredient of the overall Apple process.
Apple Pay was always an interestingly positioned solution within Apple’s products because making payments are a part of daily life. The opportunity for Apple to insert themselves with their emphasis on customer experience into payments was clear with Apple Pay and extending into the banking arena is a natural progression.
From my own usage, having an Apple Card made me more intentional about using Apple Pay. While I was already a heavy Apple Pay user and the vast majority of places I shop take Apple Pay, I still did not use it 100% of the time. For whatever reason, at certain stores that accept Apple Pay, I still pulled out my credit card. Perhaps just a creature of habit. All of that changed once I got Apple Card. The 2% cashback on Apple Pay payments was the first start but seeing that daily cash show up on a daily basis was even more psychologically rewarding. Those two things have caused me to me only use Apple Pay now.
I’ve also moved all my Apple iTunes purchases, and subscriptions over to Apple Card to get the 3% on the >$100 a year I spend on app purchases, and subscriptions facilitated by Apple. Here again, the psychological benefit comes through as I started thinking about moving all my subscriptions, even ones I’ve set up outside the App Store, to go through the App Store so I can get 3% on a range of other subscriptions to news or media services. All of this is designed to incentivize me to go through Apple as the marketplace for commerce and services as much as possible.
Last quarter on their earnings call, Apple announced they now facilitate over 420 million subscriptions. While this number will continue to go up without Apple Card, I can imagine the portion of Apple’s base who do get an Apple Card will only help drive this number higher faster.
Ultimately, however, strategically, Apple Card is less about making money (on services) for Apple. The real strategic play here with Apple Card is driving customer loyalty even higher, creating more stickiness, and ultimately adding more customer value.
Apple likes to do things that send messages to their customers that staying, and investing in their ecosystem, will bring you exclusive advantages. Apple does a number of things that I view simply as software, or services, whose sole function is to increase customer value. These things aren’t about making money and more about providing a unique, differentiated, and exclusive customer experience. Apple Card falls into this category for Apple.
Apple’s Long Game and Financial Disruption
I firmly believe, Apple feels the old systems of banking are poised for disruption. I have a lot of friends who are investors in FinTech companies, and the more I dig into this space, the more I’m convinced that huge holes in the market of finance and investors are open to innovative solutions. Banking, commerce, transactions, investing, etc., are all on the cusp of being disrupted by technology that solves the major pain points that are glaringly obvious for many consumers.
The relationship with Goldman Sachs is an interesting one. This is not the company I would have expected Apple to partner with here, nor is it a company most consumers think about when they think about banking of financial products relevant to them. Both companies, Apple and Goldman Sachs, are playing a long game here as Apple (as I’ve long predicted) starts inserting themselves more directly into financial services, and Goldman Sachs wants to start to great more brand affinity for future consumer products and services[efn_note]Thanks to Apple’s privacy stance, Goldman Sachs is keeping all your data private and not selling a profile as some credit card companies do[/efn_note] . If my words here don’t make this glaringly obvious, at least on Apple’s part, just see how they position it on Apple’s own website.
Going even further, Apple is directly highlighting Goldman Sachs as their partner and positioning them in a positive way.
Every credit card needs an issuing bank. To create Apple Card, we needed a partner that was up for the challenge of doing something bold and innovative. Enter Goldman Sachs. This is the first consumer credit card they’ve issued, so they were open to doing things in a whole new way.
This wording is a demonstration of how Apple is planting the seeds for future disruption of financial services. And, one of my favorite sayings, that serves as a helpful barometer for disruption is “wherever unhappy customers are, the potential for disruption exists.” While a consumer may be content with their banks or financial services, I can’t imagine customer satisfaction is at all-time highs in that sector. There is much to be desired, and Apple Card feels like a step in the direction of raising the bar for customer experience and satisfaction when it comes to financial services.
The Apple Card Customer
What makes this play interesting is Apple is willingly competing with the points and rewards system with Daily Cash. And to be honest, for a lot of mainstream consumers that makes sense as a perk. There will certainly be those frequent flyers and travelers for whom airlines reward cards make the most sense simply due to how much they travel. But knowing most consumers in the US, balance multiple reward or points cards for different things, I would not be surprised if Apple Card becomes one of the cards consumers keep at their disposal to use in the scenario that gets them the most value.
Apple Card fits Apple’s underlying product strategy. While it competes with other credit cards, which offer similar things, it is the total experience and the sum of its parts that separate it from the pack. It is a fully integrated experience, something Apple does very well, and its deep integration with iPhone is a differentiator.
But ultimately, I think Apple will raise the bar here, and other credit card companies will likely feel pressured to step up their game. This, I think, is positive whether or not Apple gains a critical mass of customers for Apple Card. If they can help shift the industry to better practice, including privacy and security, and help create a better more inclusive financial experience for the consumers, then its a big win for consumers in general.