Goldman Sachs, Apple Team Up on New Credit Card
Apple and Goldman Sachs are preparing to launch a new joint credit card, a move that would deepen the technology giant’s push into its customers’ wallets and mark the Wall Street firm’s first foray into plastic.
The planned card would carry the Apple Pay brand and could launch early next year, people familiar with the matter said. Apple will replace its longstanding rewards-card partnership with Barclays, the people said.
The Apple-Goldman card could help the companies combat weaknesses in their core businesses. As new iPhone sales growth slows, Apple is focusing on services such as mobile payments, streaming-music subscriptions, and App Store sales. Apple Pay, which generates revenue on each transaction, is a key contributor, but adoption has been slower than executives hoped.
Goldman, meanwhile, is pushing into consumer banking to compensate for a slump in securities-trading, where revenue has fallen by two-thirds since the financial crisis. It launched a retail banking business called Marcus in 2016 for online savings accounts and personal loans, and executives have been exploring adding credit cards and wealth-management tools.
The partnership will extend into other services including Goldman offering in-store loans to Apple customers buying iPhones and other gadgets, an effort The Wall Street Journal reported on in February.
Apple and Goldman are still hashing out the terms and benefits of the planned card including the perks for customers, these people said. The current Apple credit card with Barclays offers interest-free financing on Apple devices and points toward Apple gift cards.
Apple, Goldman and Barclays declined to comment.
The Apple Pay card is the latest example of a technology giant broadening its presence in the banking and finance industry. Besides Apple, Amazon.com Inc., Alphabet Inc.’s Google and Samsung Electronics Co. are all vying to make mobile payments easier for consumers while adding to their formidable revenue streams.
Goldman has the potential to raise Apple Pay’s profile, tying the mobile payment service to plastic touted in advertising and pushed by cashiers at Apple stores.
Apple also stands to boost its revenue by collecting a bounty from Goldman for each new cardholder, the people said. These payments, which are common in store-brand cards, can exceed $100 per account. With the Barclays card, Apple declined to collect bounties and instead put that money toward interest-free financing of devices.
Additionally, Apple could take a larger cut of mobile payments from the card if it is used for purchases, the person said. Currently, when a consumer pays for a purchase using the digital wallet on the iPhone—regardless of what credit card the customer charges—Apple receives 0.15% per transaction. Apple could more than double that under the agreement with Goldman, one of the people said.
The additional revenue could help Apple as it pursues a goal of doubling its services business to about $50 billion annually by 2020 from $24.35 billion in 2016.
But as Apple shifts from a Barclays card that encourages device sales with interest-free financing to a card designed to boost Apple Pay, the challenge could be driving enough of an uptick in mobile payments to offset any decline of high-price iPhones, iPads or Macs.
For Goldman, the card could help its nascent retail-banking operation, launched in 2016, add new customers who may be sold other banking products. It also deepens the firm’s ties to Apple, a company its bankers have advised in deals and fundraisings for years.
Without branches or a well-known Main Street brand, Goldman has relied on referrals, and pays for customer leads from firms including tax-preparation software maker Intuit Inc. and personal-finance website Credit Karma Inc. Last month it bought personal-finance app Clarity Money, gaining access to its roughly one million users.
Still, the push into credit cards is fraught for Goldman, whose track record in consumer finance is scarcely two-years old. Credit cards are a cutthroat business dominated by larger rivals like JPMorgan Chase & Co. and Citigroup Inc. Yields are falling. And Goldman lacks much of the infrastructure to be able to issue credit cards and process payments to merchants.
And after marketing its Marcus products in part by criticizing credit-card fees and high interest rates, its entry into that business may invite criticism from consumer advocates and regulators.
It is unclear which card network— Visa Inc., Mastercard Inc. or Discover Financial Services —will process transactions for the new card. Apple has had a longstanding relationship with Visa, which is based in San Francisco.
Barclaycard executives managing the Apple account met at the tech giant’s Cupertino, Calif., office in recent weeks to determine whether the account—one of its most high profile—would be extended, a person familiar with the meeting said. The bank began issuing the Apple credit card in 2005.