Apple takes on challenger banks with credit card launch

Apple has entered into the banking sector with the launch of a no-fee credit card.

The technology company has partnered with Goldman Sachs and Mastercard to create its new banking business, offering customers a physical credit card as well as a digital card via Apple Pay on an iPhone. The ‘Apple Card’ will be available in the US this summer.

Customers will be able to sign up for the card via the Wallet app on their iPhone and begin paying with Apple Pay immediately. They will then be sent a titanium Apple Card which will not feature a card number, CVV security code, expiration date or signature – this information will be available via the Wallet app for use online.

Similarly to many of the challenger banks like Monzo and Revolut currently making headway in the UK market, the Apple Card aims to simplify finances and be more transparent with customers by offering real-time views of transactions. Apple Card support will be available 24/7 by sending Apple a text message.

The card proposition will also offer a compelling cash back programme, giving customers 2% of every Apple Card purchase amount back as ‘Daily Cash’. These rewards will be added each day and can be used immediately to pay off their balance or sent to family or friends via a text message. But customers who wish to use their physical credit card to shop will only receive 1% cashback. Meanwhile, Apple Card customers shopping directly with Apple will receive 3% cashback on purchases.

Apple Card will be available as a digital payment method via Apple Pay as well as a physical titanium card
Apple Card will be available as a digital payment method via Apple Pay as well as a physical titanium card

To further entice customers, Apple claims there are no fees associated with the card. Customers will not have to pay any late fees, annual charges or even fees when travelling abroad. The company said its goal is to “provide interest rates that are among the lowest in the industry and if a customer misses a payment, they will not be charged a penalty rate.” In fact, Apple Card will show a range of payment options to help customers calculate the interest cost on different balances in real time, with Apple suggesting customers pay off a bit more each month if they wish to pay less interest in the long term.  

“Apple Card builds on the tremendous success of Apple Pay and delivers new experiences only possible with the power of iPhone,” said Jennifer Bailey, Apple’s vice president of Apple Pay.

“Apple Card is designed to help customers lead a healthier financial life, which starts with a better understanding of their spending so they can make smarter choices with their money, transparency to help them understand how much it will cost if they want to pay over time and ways to help them pay down their balance.”

A push into services

The technology giant revealed the Apple Card at an event in California last night, which had been billed as a services launch, rather than its usual hardware and software announcements. Alongside the credit card, Apple launched a TV streaming service to go head-to-head with the likes of Netflix, as well as a news and magazine subscription service, and a similar offering for gaming. The company also announced that Apple Pay will be available on public transportation systems in NYC, Portland and Chicago later this year, playing catch up with London's contactless transport hub TfL.

The move into services is important for Apple as the company’s iPhone penetration continues to slow. Sales of iPhones nosedived in 2018, with Apple experiencing the biggest decline out of the top five smartphone vendors. According to Gartner, sales over the year dropped 2.7% to just over 209 million units, while the technology firm witnessed a significant 11.8% year-on-year decline during its fourth quarter, which was put down to market share loss in China.

While, it has been acknowledged millennials are more prone to spending their hard-earned cash on ‘experiences’ rather than ‘things’ and with advances in technology reaching a point where customers are refreshing their iPhones less regularly, the technology titan needs to ensure it has other revenue sources going forward. And not to forget launching a credit offering which will help customers pay for these multiple subscriptions. But with much of Apple’s woes coming from China, it will take more than a credit offering to solve its problems in a country which pioneered mobile payments with the likes of AliPay and WeChat Pay.