Apple Card's Future: A Potential Game-Changer?
It's been over six years since the launch of Apple Card, and its partnership with Goldman Sachs has been a rocky road. With Goldman Sachs looking to exit, the future of Apple Card is up in the air, and we're here to break down the latest rumors.
Goldman Sachs' Losses and the Search for a New Partner
Goldman Sachs is actively seeking to end its partnership with Apple Card, and the frontrunner, according to recent reports, is none other than JPMorgan Chase. Other rumored contenders include American Express, Capital One, and Synchrony, but they seem less likely to take over at this point.
Amex CEO Stephen Squeri commented on the potential takeover in 2023, emphasizing the importance of distribution and brand value in co-brand partnerships. Many interpreted this as a rejection of the idea, given Apple Card's subprime customer base.
The partnership has cost Goldman Sachs dearly, with losses totaling at least $1 billion for Apple Card alone and a staggering $6 billion for all consumer products. However, it's important to note that not all losses are due to credit delinquencies. Apple Card offers generous benefits, including no foreign transaction fees, late fees, or returned payment fees, along with up to 3% cash back on partner merchants and 0% APR financing on Apple products.
JPMorgan Chase Steps In?
JPMorgan Chase is currently the preferred choice to take over the Apple Card partnership, according to The Wall Street Journal. However, a deal is not yet finalized, and there are challenges to overcome. One key issue is Apple Card's high percentage of subprime customers, with a rate of 34% compared to Chase's 15% and Capital One's 31%.
Apple Card also has a delinquency rate of around 4%, higher than the industry average of 3.05%. As a result, a takeover deal will likely only happen if a new lender can acquire it at a significant discount. With Apple Card balances totaling over $20 billion, this is a substantial consideration.
The Apple Card Savings Account: A Missing Piece?
One aspect often overlooked in these discussions is the Apple Card Savings Account, also issued by Goldman Sachs. While Apple Card customers can hold this savings account, it doesn't have a strong tie to the credit card offering. You can choose to deposit your Apple Card cash back into the savings account, but that's about the extent of the connection.
Interestingly, JPMorgan Chase doesn't offer high-yield savings accounts, so it's unclear if they would take on this product for Apple Card customers. Despite a larger pullback from the consumer finance market, Goldman Sachs continues to offer its Marcus by Goldman Sachs savings account to the public. This suggests that Goldman Sachs might continue to offer the savings account even if the credit card offering switches hands.
Wrapping Up: What's Next for Apple Card?
It seems highly likely that the Apple Card partnership with Goldman Sachs will come to an end in 2026, after years of negotiations with various lenders. The future of Apple Card is uncertain, but given the high number of subprime customers and substantial losses, it's plausible that changes will be made after a takeover. Late fees could be introduced, and the overall generosity of the product might decrease.
Capital One could be a strong contender if JPMorgan Chase's deal falls through. With their acquisition of Discover last year, they have a profitability advantage as both a card issuer and payment network, which could help offset some of Apple Card's losses. Only time will tell how this partnership evolves.
And there you have it! A potential shake-up in the world of Apple Card partnerships. What do you think? Will Apple Card change hands, and what impact will it have on its users? Let us know in the comments!
