According to reports, Apple (APPL) informed Goldman Sachs (GS) that it wants to unwind their consumer credit card partnership within the next 12 to 15 months. Yahoo Finance Tech Editor Dan Howley argues that while Apple leads in technological innovation, it lacks credentials in highly regulated financial services, suggesting Apple's move into finances is a "lock-in" method to keep users loyal to the Apple brand.
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- Well, Apple and Goldman Sachs are parting ways. That's according to several reports. Now the tech giant sent the big bank a proposal to end its partnership on its credit card and savings accounts in the next 12 to 15 months. So what does this mean for cardholders? And who better to ask than Yahoo Finance's Dan Howley. And Dan, we were having this discussion earlier this morning. I think there's a lot of cardholders out there that are asking, what exactly does this mean for me personally? Can you shed some light?
DAN HOWLEY: Yeah. I mean, I have an Apple Card myself. It's not bad. So what's going on, man? What's going on, Apple? I need to figure this out. But chances are they're going to keep this going. Let's put things in perspective real quick. The Apple Card, the Apple Savings Account that they just recently launched with Goldman, it's not going to be a huge part of their services revenue, right? You're going to get most of their services revenue from something like Apple Care, like Music Plus, like Apple TV Plus, Fitness Plus, things like that. This isn't necessarily going to be a huge part.
What it is is a lock-in, right? If your credit card is attached to your smartphone, why the hell are you going to go pick up a Google phone? It's on your iPhone. So that's part of the idea there. Ditto if you have a savings account with Apple. Then you're definitely not leaving. So it's all part of the lock-in.
Now there's been speculation in some of these reports that they would go with different banks. That's probably what's going to happen. Apple's been kind of putting its toes into the financial market for a little bit with this card in 2019, with the savings account, with the buy now, pay later plans that they have.
They don't run the actual banking part though. That's where Goldman comes in. So it's an Apple brand. It's Goldman on the back end. When you get the card itself, sure it says Goldman on the back. But when you pick it up, it looks like an Apple product. So you know I think they're going to continue with this. It's just going to be a matter of I guess reissuing cards to people if it's going to be a new financial institution. And then continuing to see if that institution will move forward with Apple indefinitely.
I think if they pulled out, it would be kind of egg on their face entirely. I don't think they're going to do that. This is a chance for them, as I said, to really push forward the lock-in for users. Look, you buy a pair of AirPods, you buy an Apple Watch, yeah, you're probably going to stick around. But it's not a do or die after a few years if you want to go to an Android phone or something like that. You can. Again, if you're banking is connected to your phone, you're not ditching that company. You're sticking with them for the long term. You're going to continue to buy their products and their services, and that's really what this is about.
- You think about sentiment around Apple as a technology company. Will that same sentiment prevail if they were seen as one of the major tech companies that was influencing financial services?
DAN HOWLEY: That's a good question, right? I mean, you look at Apple as this huge innovator in the tech space. People have generally good feelings about Apple because they love the phones. They love the iPads. They love the products.
- It's a sticky ecosystem.
DAN HOWLEY: Right. When you get into the financial side of things though, people aren't really going to feel as warm and fuzzy about Apple if they really started going headlong into this. So I think the idea that they're separate from the actual banking infrastructure gives them kind of leeway, right?
The card also, by the way, I mean, the way they set it up is awesome. The colors there basically indicate what you're spending on and how much you're spending. You can pay early. There's issues with how they give statements, which is different than other credit cards. So that's something that Goldman was trying to deal with, cause problems with customer service. And so now that they're seemingly backing out according to these reports, it would behoove Apple to ensure that they keep everything the same outside of the actual back end banking stuff.