How Apple Can Keep Growing in Financial Services Without Ever Becoming a Bank

In a recent (and rare) data release, Apple claimed over 12 million Apple Card accounts, five years after launch. Meanwhile, Apple Pay, Apple Savings and Apple Pay Later keep growing, all inside the famous Apple 'Walled Garden.'

Banks and credit unions have been watching Apple move further and further into the financial services business for over a decade now. Even after all that time, the question remains: Does Apple want to be a bank?

Not likely. For one thing, It has already attracted sufficient regulatory attention from the Consumer Financial Protection Bureau.

And even as few nonbanks have delved so far into banking and payments as Apple, its name never came up when insiders spoke of companies that might try for a “fintech charter,” back when that pipedream was still vivid. Nor has Apple ever been seriously spoken of as a potential bank acquirer. And when it launched the Apple Card in 2019, it did so in partnership with Goldman Sachs, when the Wall Street bank was trying to make a foray into consumer banking in a big way.

The losses Goldman has since taken on the card are well-known now. The deal is being renegotiated and many expect Goldman’s role to be supplanted by another lender. At the megabank’s recent yearend 2023 earnings briefing, management all but slammed the window on answering any questions about credit card partnerships.

You Need an Apple Card to Get In:

Like a poker dealer, Apple keeps peeling new cards off the deck, including most recently its Apple Savings and Apple Pay Later variation on buy now, pay later financing, all of them available only to holders of the Apple Card.

As 2024 begins, and The Financial Brand looks at new year expectations, we decided, atypically, to zero in on a specific single company, Apple. We spoke to four experts, in the field of payments and fintech competition. As research progressed, on January 30, Apple itself made the uncustomary move of releasing numbers about the Apple Card and related products.

Apple rarely reveals data about its financial products, and it wasn’t yet the fifth anniversary of the Apple Card (introduced in August 2019). Richard Crone, veteran payments consultant and a longtime Apple watcher, suggests that Apple published the data, which we’ll discuss shortly, in the context of the ongoing rumors that Apple would be seeking a new partner.

“Apple likely aims to put more pressure on Goldman, while also attracting attention from new, potential partners,” says Crone. Likely candidates, he says, include a range of companies that offer co-branded and traditional private label credit cards, including Chase, Citi, Synchrony, Wells Fargo, Capital One, TD Bank and Bread.

Examining the Apple Financial Services Phenomenon

Observers say that Apple is a good example of “patient capital,” in the financial services business, sharing a “test and learn” mentality with other big tech companies, according to Peter Davey, a payments veteran who goes by the handle @paymentsjedi on X, and who is now a venture partner for payments and identity at the Alloy Labs Alliance. It has deep pockets for trying out a lot of things — in fact, in January alone Apple had hundreds of new patents listed on the U.S. Patent and Trademark Office site, some involving financial services.

Because of those deep pockets and its all-inclusive strategy, Apple doesn’t have to monetize every single thing that it does, says Alex Johnson, consultant and creator of the Fintech Takes newsletter. What doesn’t make money right away can still make the iPhone “better and slicker,” says Johnson.“It makes being a resident of the Apple walled garden more pleasant.”

In addition, Apple tends to create products and businesses that scale well once they get their legs under them.

“Apple can build things that may require a lot of investment upfront, but then throw off an incremental percentage return on every transaction that happens through them,” says Jason Mikula, consultant and publisher of Fintech Business Weekly. The App Store is one lucrative example: Apple gets 30% of every buck spent there. And while it took a number of years before it caught on, “Apple’s collecting a small share of every transaction that happens through Apple Pay,” says Mikula.

U.S. market share for the iPhone. is estimated at over 50%. In the company’s fiscal year fourth quarter earnings briefing last November, Tim Cook, CEO, noted that many of Apple’s services businesses had done well and “the engagement in our ecosystem continues to grow.”

Read more: Apple’s Strategy in Banking: Memojis, Marketing & Next Moves

Apple Shares Some Numbers About the Apple Card

On January 30, Apple announced that it currently has 12 million cardholders. (For perspective, JPMorgan Chase, the country’s leading card issuer, had 52 million cardholders at the end of 2022, as disclosed at its 2023 investor day.) Of the 12 million, one million cardholders share the card account through Apple Card Family.

Among those cardholders, Daily Cash, the card’s instant rewards, came to $1 billion in cash rewards, and total balances in Apple Savings, a high-yield account, hit $10 billion. Most cardholders deposit their Daily Cash into their Savings accounts and two-thirds have made further deposits to those accounts, according to Jennifer Bailey, vice president of Apple Pay and Apple Wallet, in a company announcement.

Applying some card industry rules of thumb, consultant Richard Crone extrapolated from the numbers released.

He says that by assuming that the average cash-back rate was 1.5%, total purchase value on the card for the past 15 months would come to roughly $70 billion. Assuming that the portfolio had typical levels of revolving card accounts, Crone estimates that between $17.5 billion and $21 billion would carry over month to month. (The 15-month period reflects the 15-month history of the Apple Savings Account, Crone explains.)

Crone says potential buyers of card portfolios that would want to take over the Apple Card program would arrive at the same conclusions. He interprets the information release as Apple inviting potential partners for a look-see.

Read more: Fintech’s Wild Ride: Who Will Dominate the Next Phase?

Is Apple’s ‘Walled Garden’ an Ecosystem or a Barrier?

There’s some marketing appeal to an “everything Apple” lifestyle, ranging across laptops, tablets and phones to payment accounts. But Peter Davey suggests that can go too far.

“The walled garden concept creates a lot of one-sided activity. I think its going to catch up with them,” says Davey. As it is, many banks and credit unions have yet to authorize use of their card accounts through Apple Pay because they object to the fees and to dealing with a nonbank behemoth.

Even for institutions, says Davey, working with Apple can be one-sided. At an earlier job with a major bank, Davey was part of the team that worked with Apple to put their accounts into Apple Pay. “You had to sign up for Apple’s way of thinking,” he explains. He also found that, while the company’s representatives could be collaborative on the task at hand, they didn’t share technology. “They clammed up pretty quickly,” says Davey.

While Apple often has the reputation of wonderful product design, Alex Johnson says he doesn’t get the logic of the way Apple Wallet works.

“It’s a strange interface,” he says. “It’s kind of a jumbled mess.”

Johnson feels that way about some other Apple financial products. Take Apple Pay Later. Rather than offering approval at the moment of purchase (typical with basic buy now, pay later services), Apple Pay Later requires the user to apply on their iPhone for a given amount of credit. With the approval in hand, the consumer can then use it to shop.

Read some of the history of Apple’s gradual ramp up in financial services:

Open the Walled Garden’s Gate a Little

Jason Mikula for one thinks it’s time to open the gate to the walled garden, permitting other financial providers to introduce selected products and accounts for potential engagement via Apple customers’ accounts and devices.

This could take the form of a “marketplace” or a platform, Mikula says. It would give consumers a range of solutions to various financial needs, presumably with the knowledge that the services abide by Apple concepts of privacy and safety. This could be an opportunity for more financial institutions to participate with Apple beyond a single institution providing the muscle behind the card and savings products. (Both are currently handled by Goldman Sachs. Apple takes BNPL debt onto its own books via its Apple Financing LLC subsidiary.)

Of course, there would be something for Apple to gain through this marketplace idea. He says it could function much like the App Store, which takes a fee for transactions through that platform. Institutions would be paying a “toll” to Apple, but they would also be obtaining a huge distribution network that is where many Americans increasingly live — on their iPhones.

Read more: Why the CFPB Proposal for Big Techs May Affect the Entire Industry

Opening Up NFC Functionality in the European Union

In a related vein, in late January Apple rolled out changes in its iOS, Safari and the App Store in the European Union to meet the requirements of the Digital Markets Act. This includes granting developers outside of Apple access to new applied programming interfaces that would enable them to tap the NFC antenna technology in iPhones for their own banking and wallet apps in the European Economic Area.

Crone points out that PayPal will be the first to be able to take advantage of this access. The company already has an app, a full suite of payment options, and roughly 430 million consumers worldwide.

At first glance this sounds like a big setback, but the experts believe that Apple could turn the situation to its advantage.

For one thing, Crone points out, Apple Pay will remain the default choice among payment apps on the iPhones in the EU. Among consumers that have heretofore not used Apple Pay, this could create an opportunity to get them to try it out and begin using it.

And Mikula sees any newcomer facing a high hurdle. A payment app would have to offer something new and really special to overcome user inertia, he says.

What Could Apple Add Next to Its String of Banking Services?

Mikula points out that most traditional banking services are commodities at heart. The interfaces that Apple brings to its products are what set its offerings.

Indeed, Davey thinks banks and credit unions should become more cooperative with digital wallet providers, because they will always be able to provide a better experience for the institutions’ customers.

“Apple, Google and Samsung will be much better at customer experience than financial institutions ever will be.”

— Peter Davey, Alloy Labs Alliance

But what could Apple add to its package on its own that would enhance its financial services selection without being just a better customer experience grafted onto the same old thing? The experts had some ideas.

One option would be an Apple-quality subscription management service. Some institutions offer functions like this, but Johnson envisions a subscription management “command center.”

A good deal of Apple’s marketing approach to financial services stresses concern for the customer, helping the customer improve their financial health, and more along those lines.

Would consumers pay a fee for that? “If it saves them money, I suspect they would,” says Johnson. He notes how tangled up people get with expensive subscriptions. And he points out that Apple offers numerous subscriptions itself, for everything from extra memory provided through cloud storage to the Apple TV+ subscription service.

A possible service that isn’t financial on the surface but could actually become indispensable is identification.

“Something that’s not covered much is Apple’s push to own identity,” says Mikula. It already works with a handful of states on digital drivers’ licenses through Apple Wallet. More of that will be coming. Mikula says Apple has already filed a number of patent applications in this area.

Crone thinks the iPhone makes a good tool for going beyond digital documents for identification. He points to devices like the “orbs” of Worldcoin that the company uses to capture iris scans. These are stored as a basis of a biometric identity scheme.

If orbs — silver spheres with scanning technology offered at a handful of Worldcoin locations in the U.S. for now — could be miniaturized and built into coming generations of iPhones, it would revolutionize identity methodology, Crone says.

The urgency here is driven by the increasing sophistication of generative artificial intelligence, according to Crone.

“In an AI-driven world, the greatest challenge is proving ‘human-ness.’ Am I dealing with a real human? Am I able to authenticate you with biometrics before I allow you to transact?”

— Richard Crone, consultant

Crone thinks this would go a long way to solving the challenge of digital fraud. Iris scans from phones would become a new front in payments authentication.

Speculation aside, Crone thinks there’s a definite plan in mind at Apple for financial services.

“It’s a thousand-piece puzzle and you’re only seeing part of it,” says Crone. “Apple engages in a very methodical and timed release of new features and functions. And they will play a long game.”

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