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Source: Thailand Fintech News  Aug 29, 2019

Traditional Financial Institutions Threatened By Apple Card

Traditional Financial Institutions Threatened By Apple Card
Source: Thailand Fintech News  Aug 29, 2019
The debut of a  financial product of a joint venture between one of planet’s most iconic brands, Apple  and Wall Street giant Goldman Sachs is now  causing a major nervousness among major traditional banks and financial institutions around the world. Even if the Apple Card doesn’t achieve the mega-success proponents predict, its 'no fees' and 'daily cash' features is having  a powerful impact on the legacy credit card business. Further, the card’s impressive user experience integrated into the Apple Pay mobile wallet is something no financial institution can ignore and many see that the conventional credit card business is really going to lose out to the new fintech innovation by apple and by others to come.



The rollout of the much-discussed Apple Card unleashed an avalanche of media coverage only a few months after a pre-launch announcement stirred up a similar media frenzy. But, really, this is about a credit card. How could that be a threat to traditional banks and credit unions? It’s not like this is about Amazon moving full-bore into banking.

Although Apple is very different from the ecommerce giant, the two do share one thing in common: They’re both customer experience companies. Apple has built a consumer product empire on seeking out ways to improve the consumer experience in computing, music, phones and more. Most people think of Apple as a product company, and they sell billions of products to be sure. But always the focus is on the design, the function, the experience.

The company has explored co-branded cards before, and has an existing arrangement with Barclaycard. But the Apple Card is at another level altogether, being mainly a virtual card integrated into Apple Pay, the company’s mobile wallet launched in 2014. The opportunity for Apple to insert themselves into payments was clear with Apple Pay, and extending into the banking arena is a natural progression. And Apple is  extending in partnership with Goldman Sachs, the Wall Street giant, itself already deeply embedded in retail banking with its Marcus brand. It’s likely that if the relationship is successful, it won’t stop there. As it is, in the view of several industry observers, the Apple Card is already much more than just a credit card.
Briefly, the card is primarily virtual, residing in the Apple Pay wallet. The card also exists as a physical card, a stunning white-titanium card containing a chip, issued for free, on request, to be used in places that don’t accept Apple Pay,or don’t have NFC (near field communication) capability. Apple says about 72% of U.S. merchants accept Apple Pay.

The card has no fees, and offers cashback rewards of 3% on purchases made directly with Apple using the card in Apple Pay, 2% on all other purchases made using Apple Card on Apple Pay, and 1% for all purchases made with the physical cards. These rewards, about average in the highly competitive card rewards market, feature an unusual twist: they are paid daily and available to use for (almost) any purpose in the Daily Cash feature of the Apple Card app. Apple says it will extend the 3% cashback reward to additional merchants and has already added Uber and Uber Eats since the initial release.

A large selection of  money management features is also part of the Apple Card experience with weekly and monthly spending summaries grouped in color-coded categories; an interactive tool to see how much interest will be charged at any amount a consumer decides to pay

In a survey done about three months after the initial announcement, it was found that 38% of American adults were already aware of the Apple Card. Among Millennials, the percentage was much higher ,52%. Further, of those who were aware of the new virtual card, 35% said they were either very likely or somewhat likely to apply for it. The research firm concluded from this and other factors that the Apple Card would be a hit.

In a survey conducted earlier, it was found that more than one in five Millennials intended to apply for an Apple Card. If the Millennials who said they’ll apply for the Apple Card actually do (and are approved), Apple will have the second-highests market share among young Millennials behind Capital One, and third-highest market share among older Millennials, tied with American Express behind Capital One and Bank of America according to a industry source.

Even if demand is not as strong as expected, various people have noted that other Apple products have seen slow adoption at first, notably the Apple Watch and Apple Pay. Apple has always been great at the long game —,getting the critical pieces in place over time and fine tuning things to deliver a game-changing experience. This could mark the early beginnings of “The Bank Of Apple.”