Report Delves Into Why Apple and Goldman Sachs Want to Break Up

[dontwalkhand]

🤣

Apple TV+ is a success?

The Apple Car is a success? That thing's been in development for a decade now with no actual product in sight.

Apple Car Project Scaled Back and Delayed, Won't Feature Full Self-Driving Capabilities

Apple has scaled back its Apple Car project and the company no longer plans to release a fully self-driving vehicle, reports Bloomberg. Apple...

www.macrumors.com

Hey if that new CarPlay experience comes out, that will be what I considered the Apple Car and I am excited. Unfortunately we just don't have any updates on that project at all, even after WWDC

 

[GooseInTheCaboose]

Recent rumors have suggested that Goldman Sachs is aiming to end its financial partnership with Apple, and The Information today shared a new report on what went wrong and why the relationship between the two companies fell apart.

Goldman Sachs is Apple's partner on the Apple Card, the Apple Savings account that is open to Apple Card users, and Apple Pay Later, Apple's buy now, pay later service that is being beta tested. Apple and Goldman Sachs have worked together since the Apple Card launched in 2019, but the venture is not making Goldman Sachs enough money, and Goldman Sachs' customer service issues with the Apple Savings account are impacting Apple's reputation.

Apple had a lot of demands that were atypical for credit cards and led to development problems ahead of when the Apple Card launched, including billing statements that lined up with calendar month, instant cash back rewards (did not launch), and the design of the physical card and customer agreements.

In one anecdote relayed by The Information, Goldman Sachs and Apple ran into a glaring issue. Apple CEO Tim Cook was testing the service and was not able to get approved for an Apple Card. The Goldman Sachs underwriting process rejected his application because he is a high-profile figure that is regularly impersonated, and flags on his credit bureau accounts caused issues.

Goldman Sachs was able to make a one-off exception, but internally, there were other issues that Goldman Sachs was dealing with that eventually led to an investigation by the U.S. Consumer Financial Protection Bureau (CFPB). Goldman Sachs ended up with more disputed transactions than anticipated, and customers were receiving conflicting information or long wait times for dispute resolutions.

Shorty after the Apple Card launched, Goldman Sachs was also investigated for how credit limit increases were provided following reports of gender discrimination. Goldman Sachs was ultimately cleared of gender bias, but the situation created tension with Apple. The company also had issues with inaccurate statements, delayed payment postings, and problems with credit reports.

Goldman Sachs is now aiming to get away from consumer banking. It wanted to hand the Apple partnership over to American Express, but Apple Card has to run on the Mastercard network until at least 2026 according to a deal Apple and Goldman Sachs established, and American Express has its own payment network. Apple also has to approve any new partner, and sources that spoke to The Information have suggested that few companies would be willing to agree to Apple's terms.

Because Goldman Sachs was new to consumer banking and was eager to establish a deal with Apple, it is not collecting fees that it would typically get in a partnership for a credit card. Goldman Sachs does not get a portion of the fee that merchants pay to Apple to accept the Apple Card. Retailers pay a percentage of each transaction when taking a credit or debit card payment, and Goldman Sachs gets no funding from this.

Goldman Sachs is unable to collect annual fees, late fees, or fees for foreign transactions because the Apple Card does not charge these fees. Apple does pay for the Daily Cash that users earn, and Goldman Sachs is able to earn money from loans issued to cardholders who split Apple product purchases into installments, but it is not making enough for the deal to be appealing to a new partner.

Apple could decide to partner with a lesser-known bank to handle the regulatory functions while Apple takes over underwriting, fraud prevention, and customer service, but it is not yet clear if that will happen. The Information does not believe that Apple and Goldman Sachs will be able to maintain their relationship, and the report suggests that it could take around 18 months to dissolve the partnership.

More details about the relationship between Apple and Goldman Sachs can be found in The Information's full report.

Article Link: Report Delves Into Why Apple and Goldman Sachs Want to Break Up

My bet is that the biggest issue is that most Apple customers don’t carry a balance on their credit cards and make their payments on time, so the usual ways credit card companies make their money off of the disproportionately not as well healed folks are not available for them to exploit.

It is sort of a poor business choice for them, imo, wouldnt they have been able to predict many apple users are high(er) income, students with high income parents etc?

 

[CWallace]

🤣 Yeah, I'm sure American Express is just itching to bring in a large number of sub-prime Apple Card holders.

GS also has the GM Rewards MasterCard (issued through Marcus by Goldman Sachs).

 

[gigapocket1]

I mean, that just sounded like an awful deal from the start! Kudos to Apple contract negotiators lol.

 

[CWallace]

My bet is that the biggest issue is that most Apple customers don’t carry a balance on their credit cards and make their payments on time, so the usual ways credit card companies make their money off of the disproportionately not as well healed folks are not available for them to exploit.

I would also expect major purchases on the card are Apple products and those offer Same as Cash terms with the balance paid in equal amounts within the SAC term which when chosen ensures you pay the balance due before any interest charges come due.

 

[nimitz9]

This reminds me of when Costco and American Express ended their partnership a few years back. In the end, AMEX couldn't make money with Costco's demands.

 

[patrickbarnes]

Wouldn’t be surprised if Citi takes this.

 

[JPack]

My bet is that the biggest issue is that most Apple customers don’t carry a balance on their credit cards and make their payments on time, so the usual ways credit card companies make their money off of the disproportionately not as well healed folks are not available for them to exploit.

It is sort of a poor business choice for them, imo, wouldnt they have been able to predict many apple users are high(er) income, students with high income parents etc?

It's the opposite. Given that "more than a quarter of Goldman’s card loans have gone to customers with FICO scores below 660," the customers are likely carrying a balance.

The problem is paying that balance. Many Apple Card customers aren't paying it.

Goldman’s Apple Card business has a surprising subprime problem

Goldman's consumer business has had a bumpy ride as of late, marked by mounting losses, leadership turnover and missed product deadlines.

www.cnbc.com

 

[platinumaqua]

🤣 Yeah, I'm sure American Express is just itching to bring in a large number of sub-prime Apple Card holders.

Goldman’s Apple Card business has a surprising subprime problem

Goldman's consumer business has had a bumpy ride as of late, marked by mounting losses, leadership turnover and missed product deadlines.

www.cnbc.com

- Goldman’s loss rate on credit card loans is the worst among big U.S. card issuers and “well above subprime lenders” at 2.93%, according to a Sept. 6 note from JPMorgan.
- More than a quarter of Goldman’s card loans have gone to customers with FICO scores below 660, according to company filings. That could expose the bank to higher losses if the economy experiences a downturn


Plus...

Not surprised. The people who cares about fees (except annual fees and foreign transaction fees) probably shouldn't be using credit cards anyway.

 

[kkee]

GS sounds a tad whiny. Most of their petty complaints are just nitpicking Apple.

"The Goldman Sachs underwriting process rejected his application because he is a high-profile figure that is regularly impersonated, and flags on his credit bureau accounts caused issues."

Really?

 

[jbjarko]

Those who are complaining about Amex, aren't likely to be have a premium Amex card, IMO. Apple Card isn't targeting that market which is why the average user has a much lower FICO. They're after folks who generally can't purchase Apple hardware outright. I don't think Amex is a good partner for Apple in this use-case, I see JP Morgan or Citi picking it up. It'll have to be a bank (IMO, larger than GS), that can absorb Apple's demands, and support the network.

 

[iReality85]

Obviously you don’t know Amex or haven’t done solid long term business with them.

Ditto, AMEX customer support is great.

Apple Card changing to AMEX would be a big downgrade since MasterCard is accepted in a lot more places than AMEX. Hopefully it doesn't come to that.

I think it’s a YMMV sort of thing. AMEX does have a lesser presence among Internet vendors, but honestly, it’s been years since I’ve walked into a business (shopping, groceries, gas, etc) that doesn’t accept AMEX; it’s really rare in day to day life, at least in the US. Plus, that’s why you should keep one of each card.

 

[kkee]

🤣

Apple TV+ is a success?

The Apple Car is a success? That thing's been in development for a decade now with no actual product in sight.

Apple Car Project Scaled Back and Delayed, Won't Feature Full Self-Driving Capabilities

Apple has scaled back its Apple Car project and the company no longer plans to release a fully self-driving vehicle, reports Bloomberg. Apple...

www.macrumors.com

Not sure which year you have been stuck, but here is news for you. Apple TV+ is a big success now.

As for Apple car, here is for you.

 

[Rigby]

In one anecdote relayed by The Information, Goldman Sachs and Apple ran into a glaring issue. Apple CEO Tim Cook was testing the service and was not able to get approved for an ‌Apple Card‌.

Goldman Sachs: You earn what?!? Get the **** outta here. Declined!
Tim Cook: 😐

He probably asked for a 7+ figure credit limit.

 

[Lioness~]

Just make it work internationally, just as Apple’s business.

I really don’t care that much, my Amex works great for my Apple purchases.
But I wouldn’t mind some sweet benefits that I hope Apple have on their cards, do they?

 

[aberdeenmeadows]

It was the billing cycle that sold me. Why Goldman-Sachs had a struggle with this is beyond me!

It makes absolutely no sense in today's time to have billing cycles in the middle of the month.

I was hoping that the Apple Card would transfer detailed receipts from the seller to the card so we could once and for all get rid of paper receipts. I assumed Steve Jobs and later on Tim Cook would want to make this a reality.

I doubt that American Express will agree to work with Apple. They have partnerships with other companies that are lucrative. People can use American Express already on Apple Pay and use their app, which links to flyer miles, club benefits, discounts, and a plethora of services. I doubt American Express wants to have Apple take any of that revenue.

I predict that it will be Citi, but I bet it will be very costly for Apple and probably just as costly for us.

 

[Mr. Dee]

He probably asked for a 7+ figure credit limit.

It would be interesting to know what his credit limit is. I think its modest considering he still lives in the same house when he joined Apple and drives a BMW. I would say likely $100,000. Tim doesn't come across as a splurger to be honest.

 

[kwikdeth]

No annual fees, late fees, or fees for foreign transactions, plus high yield savings. Like it or not, banks gotta eat too.

Oh no, fewer bottles of Crystal on the fifth yacht. Boo-hoo.
Don't ever forget GS was one of the big stars of the 2008 housing collapse.

 

[iLog.Genius]

Sounds like this was a trial for both companies. Apple likely gained enough data and information to determine whether or not it would make sense for them to open their own finance arm within the company (see: BMW Financial Services, Mercedes-Benz Financial Services) and Goldman probably learned that consumer banking is a totally different animal than investment banking they're known for, enough to not want to go this route anymore.

Regardless of outcome, I don't see another agreement happening with another bank or financial arm for the Apple Card - it really is just two different cultures like the article mentioned - West Coast Silicon Valley vs. Banking culture. You're not going to change any side and there is no right/wrong, just different business practices.

Apple would be best to spearhead this as independently as possible, just like their computers.

 

[JungeQuex]

I wonder if this is going to result in all Apple Card accounts being closed.

 

[Rogifan]

Goldman Sachs more interested in profit than customer service.... who could have seen that coming? They are notorious for taking great delight in screwing over their customers when those customers are paying them billions, so what on earth ever made Apple think they would be any different in the consumer space.... Had the Apple Card ever made it to the UK, I would never have wanted one as long as it was being run by GS.

Where did this article say they were more interested in profit than customer service? Last quarter Apple reported $24B in profit. Goldman Sachs $3.2B.

 

[jbjarko]

I wonder if this is going to result in all Apple Card accounts being closed.

That would absolutely never happen.

 

[danpeake]

Apple Card changing to AMEX would be a big downgrade since MasterCard is accepted in a lot more places than AMEX. Hopefully it doesn't come to that.

AMEX is accepted at 99% of the places that MC is accepted in the U.S.

99% of merchants in the U.S. who accept credit cards now take American Express

The most recent Nilson Report found that 10.6 million U.S. merchant locations accepted American Express at the end of 2019.

www.cnbc.com

 

[Sheepish-Lord]

I wonder if this is going to result in all Apple Card accounts being closed.

That would never happen unless GS went bankrupt and the federal government would never let a large bank fail.

 

[danpeake]

My bet is that the biggest issue is that most Apple customers don’t carry a balance on their credit cards and make their payments on time, so the usual ways credit card companies make their money off of the disproportionately not as well healed folks are not available for them to exploit.

It is sort of a poor business choice for them, imo, wouldnt they have been able to predict many apple users are high(er) income, students with high income parents etc?

Very unlikely give that low credit scores associated with this card.