The future of Apple’s credit card offering has been thrown into limbo, as the iPhone giant apparently wants out of its collaboration with Goldman Sachs, issuer of the Apple Card.
Cupertino has reportedly proposed bailing from its arrangement with Goldman over the next 12 to 15 months, with the move severing the pair’s entire consumer partnership. It’s not immediately clear if Apple has another bank lined up to take over the credit card – we asked, but haven’t heard back.
News of the move was first reported by the Wall Street Journal, which cited “people briefed on the matter.” We’ve reached out to Goldman Sachs for confirmation as well. We’re pretty sure our emails to Apple go to
Apple and Goldman teamed up to launch the titanium Apple Card in 2019, but the partnership has been rocky. As we reported a few months after its launch, the Apple Card was called out for having a sexist algorithm that gave far larger credit limits to men than women, which prompted the state of New York to launch an investigation.
The credit approval and limit algorithms aren’t managed by Apple, but by Goldman and/or Mastercard, according to Apple co-founder Steve Wozniak, who noticed the issue when he and his wife applied for the cards.
Apple had also reportedly taken flak from the investment bank when it didn’t market the card as being issued by a bank, and Goldman also apparently disliked Apple’s push to approve most applicants, which led to losses for Goldman, according to the WSJ.
The Wall Street bank, which has traditionally served the ultra-wealthy and large corporations, has made several forays into consumer banking in recent years, including a General Motors-branded credit card and a home improvement lending arm known as GreenSky. Both of these initiatives were recently dumped, with Goldman scrapping the GM card earlier this month and selling GreenSky to an investment consortium in late October at a loss a little more than a year after acquiring it.
With that in mind, it comes as no surprise that Goldman may have wanted out of another loss-making deal, especially with the Apple Card’s app incentivizing people to clear their balances with minimal interest payments – not exactly what the banks want.
Poor margins on the Apple Card were something CEO David Solomon even admitted during Goldman’s Q3 earnings call when he said consumer programs had been a drag on the giant.
“Our partnerships with Apple and GM are long-term contracts, and we don’t have the unilateral right to exit those partnerships,” Solomon said, “so our focus at the moment is on managing them better, getting rid of the drag and bringing them to profitability.”
While we were unable to reach Apple for confirmation of the decision to cut Goldman out of the Apple Card picture on its own initiative, the iMaker did seem to dispute the move in statements to other journos – albeit vaguely.
“Apple and Goldman Sachs are focused on providing an incredible experience for our customers to help them lead healthier financial lives,” an Apple representative told CNBC. “The award-winning Apple Card has seen a great reception from consumers, and we will continue to innovate and deliver the best tools and services for them.”
Whether Apple and Goldman’s “focus on providing an incredible experience” includes finding another financial servicer, though, is another matter altogether. ®
source: The Register