Is Apple Card a threat to banks?

The joint venture between Apple and Goldman Sachs is now out there. As Billy Streeter, Editor at The Financial Brand, comments, “Even if the Apple Card doesn’t achieve the mega-success proponents predict, its ‘no fees’ and ‘daily cash’ features will have a powerful impact on the legacy credit card business. “ He also adds that the card’s impressive user experience that us integrated into the Apple Pay mobile wallet is something that no financial institution can afford to ignore.

Streeter rightly questions how this card could be such a big threat to traditional banks. he compares Apple’s venture with Amazon attempting to go into banking with full force. Streeter argues, “While Apple is very different from the ecommerce giant, the two do share one thing in common: They’re both customer experience companies. Apple has built a consumer product empire on seeking out ways to improve the consumer experience in computing, music, phones and more. Most people think of Apple as a product company, and they sell billions of products to be sure. But always the focus is on the design, the function, the experience.”

Ben Bajarin, Principle Analyst with Creative Strategies, observed, “The opportunity for Apple to insert themselves into payments was clear with Apple Pay, and extending into the banking arena is a natural progression.”

Streeter also remarks that the partnership with Goldman Sachs is an important key to Apple Card’s success. Goldman Sachs is after all one of Wall St’s giants, and he surmises that if the relationship is successful, it won’t stop there. As it is, in the view of several industry observers, the Apple Card is already much more than “just a credit card.”

The Apple Card is primarily virtual, residing in the Apple Pay wallet. The card also exists as a physical card, a stunning white-titanium card containing a chip, issued for free, on request, to be used in places that don’t accept Apple Pay. Currently about 70% of U.S. merchants accept Apple Pay.

Uptake of the card is likely to be strong. In a survey done about three months after the initial announcement, J.D. Power found that 38% of US adults were already aware of the Apple Card, and among millennials, the percentage was much higher at 52%.

Cornerstone’s Managing Director of Research, Ron Shevlin, notes, “If the millennials who said they’ll apply for the Apple Card actually do (and are approved), Apple will have the second-highest market share among young millennials behind Capital One, and third-highest market share among older millennials, tied with American Express behind Capital One and Bank of America.”