An industry reflection from Head of Global Team Financial & Professional Services, AIMS International, Torsten Miland.
Last week Apple announced Apple Card – in essence Apple Pay with a digital and/or psychical credit card – backed by Goldman Sachs Bank and Mastercard this is a true alliance of Masters of The Universe: a digital frontrunner, a global bank and one of the world’s largest credit card issuers.
And as we have seen before with Apple the announcement came with words like: ”the most significant change in the credit card experience in 50 years” and ”a way to become financially healthier”.
So, Apple wants me to put my money into my credit card account and track my spending – right. They are also saying they are offering the most significant change seen in the credit card industry for 50 year – right.
Let’s examine this from the perspective of credit cards in the era of digitalisation.
My money – eh, I mean the credit lines I have – resides with a number of banks. I also have at least 3 credit cards and one of them is even a Mastercard. Essentially, I act like most people; I earn money, it goes into an account and I use it via credit cards or money transfers on my smartphone. It’s a pretty neat ecosystem and I feel comfortable with it – most of the time. I probably could track things a bit better – just like my physical health.
And here is the first thing I noticed with the announcement last week; Apple pre-supposes that we WANT to become financially healthier and that we would therefore track our spending in our Apple universe. It’s an interesting point and I would actually think it can make sense in the US, where the average number of credit cards is 4 per person (not to mention the charge cards) – a real heavy usage. Banks earn a lot of money from these cards and here we could see a significant change if Apple had chosen to go another way; but even if the card comes with no annual and also no transaction fees it will have an interest rate attached to it – some rumours have the interest rate placed as high as 24 % annually – not cheap at all – my bank lends me money at a much lower rate.
Ask yourself: Do you want to become financially more healthy? – The answer is probably, yes – but would you use a tracker on your phone to do it? I personally doubt it – but let’s follow this, when the apple card is issued this summer.
Already die-hard Apple fans will be the first customers to sign up for the service, but can Apple attract new comers with their card? This is the second thing I doubt; the card does have some extra features, like cash back every day but the rewards are very low compared to other cards on the market. So, it would take a really interested new potential client some convincing to buy an iPhone, download Apple Pay and apply for an Apple Card – this person might even be rejected based on credit score.
But the Apple-effect in itself has been one of the strongest attractions for both new and old clients: I write this on an Apple MacBook Air (more expensive than other computers with the same features), I have an Apple Watch on my wrist (It looks cool, but I never use anything else other than the clock on it) and I am connected to the internet via my iPhoneX (which also looks cool and which I do use all the time) – so maybe I should consider becoming more financial healthy, Tim?
Final verdict on the Apple Card:
- Usability 9/10 – You can track your financial health
- Credit card Innovation 5/10 – basic features actually seen before
- Digital Breakthrough 3/10 – nothing new – phew, you bankers can wipe your foreheads
Written by Torsten Miland, Managing Partner AIMS International Denmark