How the Partnership Between Apple and Goldman Sachs Soured (theinformation.com) 76
The tech giant and the Wall Street titan went from "the most successful credit card launch ever" to Goldman trying to exit the partnership. From a report: Apple and Goldman Sachs were in test runs before embarking publicly on one of the biggest-name partnerships ever between tech and finance. Engineers from the Silicon Valley giant and the Wall Street titan were pulling an all-nighter a few months before launch, scrambling to find a solution to a problem that had cropped up: Tim Cook couldn't get approved for an Apple Card.
Apple and Goldman had struck the powerful alliance as they set out to build a revolutionary digital-first credit card with designs on expanding into other consumer finance products. For Goldman, it was a key opportunity to grow the consumer business it had jumped into as it sought to diversify away from the old-school Wall Street revenue model of trading and advising on deals. For Apple, it was a way to bolster its services business, broaden its finance offerings -- which began with Apple Pay -- and, maybe most importantly, prompt people to buy more iPhones.
In October 2019, a couple of months after customers began signing up, Goldman CEO David Solomon described it as "the most successful credit card launch ever." Less than four years later -- and only a handful of months after the two companies extended their contract through the end of the decade -- the Apple-Goldman deal is teetering. Some of the partnership's shortcomings have blemished both companies' world-class reputations, and a falling-out could threaten future collaboration between Wall Street and tech at large. Goldman has been trying to get out of the pact because it won't be profitable enough for the bank in the near term, according to people familiar with the matter, and it has shopped the relationship to credit card issuer American Express.
Apple and Goldman had struck the powerful alliance as they set out to build a revolutionary digital-first credit card with designs on expanding into other consumer finance products. For Goldman, it was a key opportunity to grow the consumer business it had jumped into as it sought to diversify away from the old-school Wall Street revenue model of trading and advising on deals. For Apple, it was a way to bolster its services business, broaden its finance offerings -- which began with Apple Pay -- and, maybe most importantly, prompt people to buy more iPhones.
In October 2019, a couple of months after customers began signing up, Goldman CEO David Solomon described it as "the most successful credit card launch ever." Less than four years later -- and only a handful of months after the two companies extended their contract through the end of the decade -- the Apple-Goldman deal is teetering. Some of the partnership's shortcomings have blemished both companies' world-class reputations, and a falling-out could threaten future collaboration between Wall Street and tech at large. Goldman has been trying to get out of the pact because it won't be profitable enough for the bank in the near term, according to people familiar with the matter, and it has shopped the relationship to credit card issuer American Express.
Think (Score:3)
Re: Think (Score:4, Insightful)
Variety (Score:2)
...vs tending to the garden for long term prosperity.
Yes but does it have to be a walled garden? It's even healthier to have a variety rather than just Apple.
Re: Think (Score:5, Informative)
Actually, it turns out that over 25% of the Apple Cards went to people with credit scores below 660, and the default rates on the Apple cards are twice as high as were expected. People assumed that Apple customers would be well to do, but like many parts of the growing luxury goods market a surprising amount of the business comes from people who are shockingly bad at math.
Goldman Sachs gave out cards to a whole pile of Apple enthusiasts who couldn't afford to pay their bills. These customers used their cards to pay for expensive Apple hardware and services and then defaulted on the loans. That's great business for Apple, but it has added up to billions of losses for Goldman Sachs.
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Goldman Sachs gave out cards to a whole pile of Apple enthusiasts who couldn't afford to pay their bills.
Is there a link or citation you can provide for any of this? (I'm not saying it's not true, but it is a claim that I'd like to see evidence for)
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I googled it and found tons of articles. Here's one:
https://www.cnbc.com/2022/09/1... [cnbc.com].
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Thanks for the lift there.
Re:Think (Score:5, Funny)
Re:Think (Score:5, Informative)
They were pissed that Apple was a bigger vampire squid than them?
Apple more likely wanted a larger slice of Goldman's golden goose... Interchange fees.
Meanwhile Apple wanted Goldman to continue to bear the costs of regulatory compliance required in order to be a bank.
For those who are completely unfamiliar with how credit cards work... I.E. most of you, every intermediate party (read: middleman) takes a chunk of the transaction for themselves out of what you are paying the merchant. Due to abusive T&C's the merchant must NEVER let the purchaser know how much of their transaction is being siphoned off. Usually it's between 2 and 6%, not including terminal fees which again, must be silently eaten by the merchant.
For every transaction there are a minimum of five parties, three of whom are middlemen.
You -> Your bank -> Credit Network (Visa/AMEX/MC) -> Merchant's bank -> Merchant.
All of the middlemen are taking their cut (conveniently, this is why refunds take so long, the merchant can start the process immediately pushing his part back to his bank, the middlemen can drag their heels knowing it's the merchant who gets it in the neck).
As this is their co-brand card they're demanding a larger cut whilst not bringing in enough business for Goldman. For comparison, American airlines (small a, not talking specifically about AA) co-brand cards bring in huge amounts of business for banks whilst the airlines aren't asking for much. So much business that Delta recently announced that most of it's high tier frequent flyers rarely actually fly (usually at this point, the airlines introduce a second scoring system to give priority to those who actually fly but chances are Delta have done that already). Goldman is willing to give up Apple's business because it's low margin and high maintenance. Goldman are a business after all.
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Re:Think (Score:4, Informative)
Most credit card merchant contracts in the US prohibit the merchant from charging more for using a credit card.
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Re:Think (Score:4, Insightful)
To nitpick:
American Express and Discover (and probably a few other more minor players) are not just credit card networks, but are credit issuers, that is, they are* banks that issue and service their own cards. That technically cuts out one of your middlemen, though I don't know if the bank and credit service network divisions for them each still take as big of a cut.
* own? are owned by?
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Amex is its own bank, not owned by another. Discover, I dunno.
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AmEx is famous for having higher fees than the other cards, and a lot of businesses don't accept it for that reason. I think Discover has slightly lower fees, but they're also less commonly accepted. Not sure why on Discover.
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Because it's a US-only thing while the others are all global? Far fewer people on it, even in the US if I understand correctly.
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You can get AmEx cards issued by banks as well as AmEx cards issued by AmEx themselves. AmEx isn't actually a bank as such - they're a kind of non-bank lender. They're regulated differently.
Re: Think (Score:1)
You should check your facts. American Express is a bank and is regulated by the Federal Reserve.
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Nope, they were ineligible for US government assistance in the 2007-2008 financial crisis due to not being a bank. They converted themselves to a bank holding company (but not an actual bank) in November 2008 to gain access to TARP funds. They're regulated by the same government agencies as banks, but they are not a bank.
The former America Express Bank Ltd division, which operated outside the US and was an actual bank, was acquired by Standard Chartered Bank in 2008, and is no longer a subsidiary of Ameri
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at least amex also licenses out as a network.
WF, at least, issues a card that goes through amex.
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Add to that the probability that demographically the folks attracted to the Apple brand and not going to be fee generators in the credit card world. Anyone who has a credit card knows how to avoid its fees. Apples users, I'm sure are paying off every month, on time. This provides no operating income, unless there is an annual fee, I didn't look. Anyway, we used to cynically call these people "deadbeats" because they used the card essentially free. Especially as mjwx noted above, if they are not "transacting
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One of the big perks of the Apple card is having one also enables you to have an Apple savings account. The savings account pays a higher interest rate than most other accounts do. There's probably a good chunk of money sitting in those savings accounts. I don't know enough to say how that plays out for the bank.
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The opposite is true if you google it. The main problem with Apple cards is much higher default rate than expected. I.e. not only do people max out these cards, but they can't afford to pay the monthly fees.
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Nope. They are, in fact, doing the exact opposite: they are defaulting on the cards. The reality is that way more people than predicted who took out the card had poor credit ratings, and Goldman Sachs is losing money because they aren't paying off the cards at all.
https://www.cnbc.com/2022/09/1... [cnbc.com]
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The profile is flatly subprime, but that's still a profitable profile.
Capital One has a higher loss rate, and makes plenty of money on their cards.
Of course, to have a high loss rate, you must also have people paying a lot of interest.
And that's where the problem comes in.
If you've got 25% of the cohort that sucks ass, and the other 75% are financial tightwads, then you only lose money.
What a nothingburger (Score:5, Insightful)
There's all this buildup, all this teasing of some big secret about to be revealed... and then it turns out it's just because Goldman Sachs finds the partnership is "not profitable enough in the near-term"?
Seriously, what a crap article. This could've been a Tweet and lost absolutely no substance.
Re:What a nothingburger (Score:5, Funny)
Seriously, what a crap article. This could've been a Tweet and lost absolutely no substance.
Of course, you mean an "X" ...
[ (sigh) speaking of crap and no substance ... ]
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Seriously, what a crap article. This could've been a Tweet and lost absolutely no substance.
Of course, you mean an "X" ...
The Xs are incremental due to the character limit on the platform. Thus I would suggest that the new term for 'tweets' be a portmanteau of X and increment:
Xcrement.
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Of course, you mean an "X" ...
[ (sigh) speaking of crap and no substance ... ]
{Surely you mean a "Xeet" --but be careful how you pronounce that!}
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There is no secret - Goldman never provided any value.
I still fail to understand why they were involved in the first place.
They are a parasite that leeches equity from companies on front and back side of deals, never actually providing any value.
world-class reputation (Score:2)
I suspect they are in the same class as the Sirius Cybernetics Corporation.
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I think a more apt comparison would be to the Umbrella Corporation.
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I also agree with your comment.
Paywall (Score:4, Interesting)
It's behind a paywall, or at least registration-wall, I don't want to find out. But from what I read elsewhere, Tim Cook's application was rejected due to the high risk of fraud from the person applying being a high profile CEO and they had to manually apply an exception to approve him. It's a hard life for big name CEOs I guess...
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I said it at the time (Score:5, Interesting)
That I couldn't see what was in this for GS or Apple. GS is the company that was found to be blatantly manipulating the global aluminium market by abusing a market structure that had been put in place to foster stability for those who actually do useful stuff with aluminium, and didn't care. They were literally called the 'giant vampire squid' after the GFC and again, they don't seem to care (though apparently they had to offer graduates more once nobody wanted to tell their friends they worked there).
I know someone who was in HR there, they said they would actively try to find smart people who had a chip on their shoulder about the world (e.g. had been bullied at school) because these people could be turned into ruthless sociopaths more easily.
The company is just absolutely sick. I'm sure Apple is not all sunshine and roses like Tim Cook conveys, but I know people who work there and they are not encouraged to become raging sociopathic destroyers of the world in their attempts to increase quarterly earnings.
My best guess is that GS thought they'd be able to shove their way into abusing Apple customers in the same way other credit card companies do (harvesting data, ripping off merchants etc), but Apple didn't want to do that and now GS is stuck just being a boring payment provider and having to chase up Bob's $10 late payment charge.
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Saying Apple is known to be greedy in a story which contains Goldman Sachs?
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That I couldn't see what was in this for GS or Apple.
It's been good for Apple, and for the cardholders. It's Goldman that isn't happy. Just another bit of evidence that the card is a good deal for consumers.
Never got it (Score:3)
Why would I want an "Apple" credit card. I just want my card to work. I don't want a Google or Apple or any other tech branded card regardless of what I think about that tech company otherwise.
And how did Goldman-Sachs fall so low, credit cards, really? You guys were supposed to be the shady deal making kings of the world, the Switzerland of buyouts and secret funding shite and backroom deals. Now you're peddling failed credit cards.
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Once it's really an Apple creditcard and not a kinda sorta one, it's one less party to deal with.
If you use Apple wallet for everything, no other creditcard will be as well integrated.
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Not going to happen. Apple won't want to deal with the regulatory burden of becoming a non-bank lender, let alone becoming an actual bank if they want to continue with the savings account product.
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Presumably this article implies the reason you might want the Apple credit card. You won't get screwed as hard as other banks would screw you. (That's what less profitability means for a free product with fees.)
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It's less profitable because they've taken on customers with lower credit ratings, although apparently they haven't been as aggressive in chasing repayments. Also as a new business, they've got a lot of customers who are struggling and will drop out, so they can expect the profitability to improve. Not quickly enough for them apparently.
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Why would I want an "Apple" credit card.
You'll probably want some kind of credit card; an Apple card works as well as any other. If you have an iPhone, it works better than any other, since your card's transaction info, balance, and payment notifications are built directly into the OS, which makes the user experience of dealing with them more effortless than having to use a third-party app or web site. (Yes, there are potential anti-trust implications there)
There's also the Apple Savings account feature which is linked to it, which pays a good
Greed meets greed (Score:4, Funny)
greedy b'stards fall out over money (Score:3)
Do Not Want (Score:2)
Is this thing even available outside the USA? I don't think I have ever heard about anyone having one. I certainly know people who use their iShiny to pay. Like my Android, they just work.
When I heard about the Apple/GS deal, I remember feeling happy that I was not going to be caught up in that!. Are Apple credit cards less common here because they are less profitable or is it that they fall foul of our laws on predetary financial organisations?
Apple has more to worry about (Score:2)
Goldman has been trying to get out of the pact because it won't be profitable enough for the bank in the near term
Goldman Sachs has bought all of the finest regulators so they can get away with whatever here in the states. Apple operates internationally and can't just do anything they want. GS no doubt wanted Apple to do super nefarious shit that Apple knew they couldn't get away with.
Neither company thought differently enough (Score:2)
I have an Apple Card, and really like it; I use it pretty much as my primary card, and it has about a 20% higher credit limit than my Chase card. But it should have been so much more. I think antitrust concerns prevented Apple from being more aggressively disruptive with it, and Goldman didn't really try to leverage it for more business either.
The card has done several things for Apple though which were quite effective: normalizing pay with phone/watch, reducing fees for small transactions, and creating a t
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I have much higher limits on other cards, I suppose this card will go up in time. I'm curious what their international behavi
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Wow...you get paper statements on yours??
How?
I prefer dead tree statements and the Apple Card is the singular one I cannot get a paper statement sent to me from......
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I have no idea why I get paper. I have called to cancel them at least twice. Between having recent transactions instantly logged on the phone, and downloading the PDF statements for my records I have plenty.
Watch this one... (Score:4, Interesting)
If indeed Apple/GS are shopping this to Amex, then;
- Amex may decline. Either because it's a money loser, the volume does not justify the effort, or it is incompatible with other products.
- Amex may accept. And this could mean GS just had a bad deal, or more likely GS overestimated the returns.
Either way, Amex knows this business. Their response will tell you what this is worth.
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I was one of the first Apple Card recipients. If they move to AmEx, I will cancel my card. Fuck AmEx.
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Sure. It's a free market, sufficiently for you to choose. I think you're a Discover person.
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No, not a Discover person. They wanted me to send them a copy of my ID to get a card. Fuck them too.
Visa or Mastercard is fine with me.
My best card is a Chase Sapphire card with a $53K limit and $0 balance. Never any problems with Chase, or Citi for that matter.
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Sapphire is pretty good. Asking for ID is de riguer for any credit card, as if you did not for your Sapphire.
Eh, as my former CEO once commented on winning customer service awards in the financial services industry, "Not that it's a very high bar"...
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No other credit card company has EVER asked me to send them a scanned copy of my ID. Only Discover. And I've had probably 50-60 cards over the course of my life.
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It's not normal. As indicated above. If it were normal, every other card issuer would have asked me to send them a scanned copy of my ID.
Soured? (Score:2)
Call me skepitcal. While I'm sure they exist, I've yet to hear anyone be other than satisfied with their Apple Card. The biggest criticism I've seen is "some cards have better rates", but everyone praises the usability, app, etc.
Goldman, on the other hand? I've never heard anyone say other than derisive things about them, before and after the partnership. "World-class" is an interesting term to use.
Article at MacRumors (Score:2)
Not making money (Score:2)
Had same problem like Cook (Score:2)