Market Insight

Apple to launch credit card to consolidate payments offerings

March 29, 2019

Ruomeng Wang Ruomeng Wang Research & Analysis Manager, Security - Fintech & Blockchain
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Apple partners with Mastercard and Goldman Sachs to launch Apple Card in Summer 2019. This will be a credit card that can be applied for through the Wallet App. Once approved, customers will receive a physical card. The card will be issued by Goldman Sachs and payments will be processed by MasterCard.

Apple Card will be linked to Apple Pay, and customers will be able to use it for online, in-app and in-store purchases. The card offers 2% daily cash back, as well as 3% daily cash back on all purchases made directly with Apple, including at Apple Stores, on the App Store and for Apple services.

Our analysis

Apple Card will consolidate payments offerings but challenges still lay ahead

Apple Card will be launched in the US first and will only be available to Apple Pay enabled iPhone users; hence its adoption will largely rely on the customer base of Apple Pay. According to IHS Markit, the addressable devices for Apple Pay in the US will increase to 175million by the end of 2019. The launch of Apple Card will facilitate Apple Pay to continue to reach these devices and acquire new customers, meanwhile offering more flexibility for existing Apple Pay users when making payments.

 

Apple Card offers no fees, lower interest and incentives to attract customers onboard. However, existing Apple Pay users are a group with high credit card penetration, which indicates that there will be challenges to convince them to add another credit card without providing competitive incentives. Comparing with other credit cards, Apple’s incentives are relatively limited. For instance, Amazon Credit Card offers 5% cash back for Amazon products with a $50 gift card on sign up; and Uber Credit Card offers 4% on all dining as well as $100 back when you spend $500 in the first three months.

Security could be a unique selling point for Apple Card  

With comparatively limited incentives, Apple Card may look to security and monitoring features to add value and differentiate. Apple Card’s titanium version of the credit card has no visible numbers, which protects the card from unwarranted use if lost or stolen. Apple Card will also integrate with Apple Maps to provide users with more meaningful transaction details on their payment summaries. Such detail facilitates the monitoring of spending, allowing users to keep track of activity.

Apple Card to strengthen Apple’s ecosystem instead of getting involved in wider fintech space

The features and incentives offered by Apple Card indicate that Apple is focussing on leveraging its own ecosystem by utilising payments to add value to its existing products and services:

Apple Maps – Apple Card uses machine learning and Apple Maps to clearly label transactions with merchant names and locations.

Apple Pay – Apple Card will be integrated with Apple Pay, enabling customers to manage their spending and card details.

Apple devices, iCloud and other digital contents – Apple Card offers Daily Cash to reward customers when purchasing Apple products online, in-store and in-app.  

The current direction for fintech players is to move away from payments only services. For example, OTT players such as Alipay and WeChat, as well as challenger banks Revolut and Monzo, are all looking at ways to diversify their services. Apple has adopted a different strategy, with the payments focused Apple Card. This highlights Apple’s intention to strengthen its own ecosystem instead of getting involved in the wider financial service offerings. 

Geography
USA
Organization
Apple Inc.
Research by Market
Security Technology
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