Monday, December 4, 2023
Goldman, a storied investment bank, has spent the last eight years strategizing to find its place in the retail payments space. Becoming the Apple card issuer was central to this effort. In the last couple of years the partnership had expanded to include a high-yield savings account and buy now, pay later (BNPL) offering.
In April 2023, the Apple card savings account was paying an impressive 4.15 percent, well above the national average. Apple Pay Later, a BNPL offering launched in March, may be a newcomer, but the name recognition seems to have helped. Among consumers surveyed in May and June by J.D. Power, 19 percent had used the Apple BNPL product in the previous 90 days, which beat out some BNPL products that have been in the market for a linger time, like Sezzle and Zip, according to the research firm.
"Apple has some sizable advantages over its BNPL competitors, who had to attract users and build merchant acceptance one at a time," Miles Tullo, managing director of banking and payments at J.D. Power, said in a press release. "Apple was able to instantly tap its army of Apple Pay users and existing global acceptance footprint to create instant scale."
There have been rumblings in recent months that some Goldman executives wanted out of the Apple partnership, and for good reasons: the bank was losing money hand over fist. Some blamed it on Apple's insistence the bank issue cards to just about any Apple customer who applied.
In a September 2022 financial report, the bank revealed that 28 percent of its Apple card customers had FICO scores below 660, a common demarcation between fair and subprime borrowers. This followed reports that Goldman's entire consumer banking franchise accumulated $4 billion in losses from 2020 through 2022.
Goldman Sachs also has attracted scrutiny from the Consumer Financial Protection Bureau regarding alleged lapses in compliance with error resolution rules, and the Federal Reserve for problems with its consumer loan monitoring and control systems.
News of the breakup is seen as a temporary setback for Apple, which has been trying to build up its services business. According to Apple financial statements, the company generated $383.2 billion in its 2023 fiscal year. Fifty-three percent of that money came from iPhone sales; Apple Services, its second largest division, generated 22 percent if revenues.
The rumor mill has been active with speculation on what bank Apple might partner with in place of Goldman Sachs. Back in June, the Wall Street Journal reported that Goldman had been in talks with American Express to purchase its Apple card portfolio and reissue the cards. One downside of that partnership, industry analysts have noted, would be that AmEx cards don't have the broad acceptance of cards carrying the Mastercard and Visa logos.
The private-label card company Synchrony Financial, which according to published reports at the time had sought a deal with Apple and lost out to Goldman, has also been mentioned as a potential replacement issuer. Synchrony has been positioning itself as a bank with close ties to the tech sector, and already has a small issuance deal with Apple.
There also is speculation around JPMorgan Chase, which is the top card issuer in the country with 149 million cardholders, the vast majority Visa-branded. Reporting by the website AppleInsider.com suggests Chase is in talks with Apple. It also noted that Chase already handles merchant acquiring for Apple stores. 
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