Apple, Goldman Sachs Team Up on Credit Card Paired with iPhone
February 21 2019 - 7:29AM
Dow Jones News
By Tripp Mickle, Liz Hoffman and Peter Rudegeair
Apple Inc. and Goldman Sachs Group Inc. plan to start issuing
this spring a joint credit card paired with new iPhone features
that will help users manage their money.
The card will be rolled out to employees for testing in the next
few weeks and officially launch later this year, according to
people familiar with the matter. The companies hope to lure
cardholders by offering them extra features on Apple's Wallet app,
which will let them set spending goals, track their rewards and
manage their balances, the people said.
The Wall Street Journal reported last year that the companies
planned to launch a joint credit card. It is a major push by Apple
into the financial lives of hundreds of millions of iPhone users.
It is also part of Goldman's broader strategy to appeal to
rank-and-file consumers.
Apple and Goldman are entering a crowded field with little
experience. Both are looking for new revenue sources as their
bread-and-butter businesses struggle.
As iPhone sales cool, Apple is turning to fee-generating
services. It has apps that stream music, curate news stories and
make mobile payments, and is teaming up with Hollywood studios to
produce original TV shows. The company aims to boost its services
revenue to $50 billion by 2020.
Apple currently takes a small cut when iPhone users make
credit-card purchases through Apple Pay. It would get a bigger
slice of the swipe fees from its own card, some of the people said.
Executives also hope the card will boost use of Apple Pay, which
has been slow to catch on among users and merchants.
Goldman launched an online consumer bank, Marcus, in 2016 to
offset a decline in securities trading. Apple has a loyal following
among wealthy, tech-savvy young adults whom Goldman hopes to turn
into Marcus customers.
The credit card is Goldman's first, and a heavy lift. The bank
is adding customer-support call centers around the country and
building an internal system to handle payments. The latter project
has a $200 million budget, people familiar with the matter said, a
major investment at a time when the bank is trying to cut
costs.
The Apple Pay card will use Mastercard Inc.'s payment network,
which is the second-largest in the U.S. after Visa Inc., some of
the people said. Cardholders will earn cash back of about 2% on
most purchases and potentially more on Apple gadgets and services,
some of the people said.
Banks including JPMorgan Chase & Co. have spent heavily to
lure cardholders with travel points, airport lounge access and
other generous perks. Neither Apple nor Goldman is eager to join
that race, people familiar with the project have said. Instead, the
companies are betting that Apple customers will use the card
because it is better integrated into the iPhone.
Engineers are working on new features for the Apple Wallet app
that would encourage users to pay down their credit-card debt and
manage their balances. Executives have discussed borrowing visual
cues from Apple's fitness-tracking app, where "rings" close as
users hit daily exercise targets, and sending users notifications
about their spending habits. There also could be notifications
based on analysis of cardholders' spending patterns, alerting them
for example if they paid more than usual for groceries one
week.
Goldman has been critical of the credit-card industry,
positioning its Marcus loans as an alternative to higher-interest
cards.
"Borrowing on revolving credit perpetually and chronically is a
little bit like eating mac and cheese and coke for lunch every
day," Harit Talwar, who runs Marcus, said in 2017. Executives must
now walk a fine line between encouraging responsible borrowing and
getting users to spend enough on the card to generate profits.
By putting its muscle behind a Goldman-issued card, Apple risks
angering banks whose cards account for the bulk of the transactions
running over Apple Pay. Executives discussed making their new card
the default in the iPhone's digital wallet, but Apple's contracts
with banks prevent it from doing so, one person said.
Goldman executives hope to eventually offer Marcus loans,
wealth-management services and other products to Apple customers,
people familiar with the matter said. Without bricks-and-mortar
branches, the bank spends heavily on direct mail and paid referrals
to bring in customers.
The companies at one point considered creating a more ambitious
financial offering that would provide financial management beyond
the credit card, but Apple executives worried that tapping into
people's bank accounts would raise privacy concerns, people
familiar with the matter said.
Write to Tripp Mickle at Tripp.Mickle@wsj.com, Liz Hoffman at
liz.hoffman@wsj.com and Peter Rudegeair at
Peter.Rudegeair@wsj.com
(END) Dow Jones Newswires
February 21, 2019 07:14 ET (12:14 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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