Apple and Goldman Sachs made headlines this week in rolling out Apple Card. However, the card’s bark is greater than its bite. People will sign up for it because they love Apple – not because it’s better than anything else that exists.
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On Monday, Apple and Goldman Sachs announced Apple Card. Frankly, I’m underwhelmed. This card will get a lot of headlines, but its bark is greater than its bite. People will sign up for it, but that will be mostly because they love Apple and the plunk factor of laser-etched titanium, not because this card is better than anything that already exists.
For example: Citi Double Cash Card is a very simple, easy-to-use 2 percent cash back card (1 percent when you spend and another 1 percent when you pay). And that’s on everything (not just Apple Pay purchases). If you want to maximize Apple Pay, the U.S. Bank Altitude Reserve Visa Infinite Card gives 3 points per dollar on mobile wallet spending (worth 3 percent cash back or 4.5 percent off travel).
I definitely see why Apple is getting into the credit card space. They want to juice Apple Pay usage (research from Crone says PayPal and Venmo have 267 million users versus 32 million for Apple Pay). Plus, as a merchant, they’ll save on interchange fees when Apple Card users buy something from Apple. And as a service provider, they’ll get a cut of Apple Card transactions elsewhere.
What Apple could have done differently
Because this card is so integrated with Apple Pay, you need to be an iPhone user to maximize your benefits. That sounds obvious, but at a time when Apple’s phone market share is declining globally (from 18 percent in Q4 2017 to 16 percent in Q4 2018, according to Gartner, although its U.S. phone market share has oscillated somehow consistently above 44 percent for over a year, according to Statista), it’s surprising to see Apple double down here. By contrast, you don’t need to use Uber to get high-end cash back from the Uber Visa Card (notably: 4 points per dollar at restaurants). Apple could have made a similar push for a broader customer base but did not.
I don’t see a clear target customer for Apple Card. Sure, someone who loves Apple might gravitate to this card, and Apple has a leg up in marketing the card through their existing base of iPhone users. But in terms of real consumer benefits? If you’re knowledgeable about credit card rewards, you’re already doing better, whether through mobile payments or a physical card. And if you love the latest, greatest financial technology, then you probably already have a robust financial management app on your phone – even though we will only know how robust the financial management tools in the app will be when the card launches in the summer .
I think Apple should have gone all-in on rewards or financial management tools, rather than pursuing both through half-measures. Surely Apple could have afforded a mega sign-up bonus, truly compelling ongoing rewards or really robust financial management tools, right? Even as a loss leader to gain market share and play the long game toward a cashless society? I’m surprised they didn’t go all-in on one of these categories.
Apple didn’t announce a sign-up bonus for Apple Card. They also didn’t say anything about 0 percent promotions (whether on new purchases or balance transfers). Their existing Barclays Visa with Apple Rewards, which is more of a store card, provides 0 percent financing for six months on Apple purchases under $499, 12 months on purchases from $499-$998 and 18 months on $999 and up.
It’s deferred interest, so you’ll be charged retroactively if you fail to pay in full by the end of the term, but if you can pay in full, that’s a nice stretch of zero-interest financing on a new phone, computer or tablet. I’d give the existing Barclays Visa with Apple Rewards the edge on special financing.
That longstanding card also gives 3 percent back on Apple purchases and 1 percent elsewhere (paid as Apple Store, App Store or iTunes gift cards, which aren’t as flexible as cash back). Still, those rates are comparable to the new Apple Card. The big difference is 2 percent on Apple Pay with Apple Card versus 2 percent at restaurants on the Barclaycard with Apple Rewards.
Security a plus
I do give Apple props for security. Apple Card is unique because it has an ever-changing card verification value (CVV), and the card number will not be printed on the physical card. Both measures will help to limit online fraud.
Normally when a physical card is lost or stolen, it’s susceptible to online fraud because everything a criminal would need to make an illicit online purchase is right there (such as the card number, CVV and expiration date). Chip cards provide great security in person but don’t help online.
Apple Card’s security features, particularly online, are a step forward. A counterpoint, though, is that credit card fraud isn’t that big of a deal for consumers. Because of zero liability policies, consumers won’t be held responsible (provided they report the fraud fast enough).
And it’s easy to get a line of credit restored, which is a big reason why I recommend using credit over debit. If your debit card is compromised and money gets stolen from your checking account, that’s actual money that’s missing for at least a few days.
Apple may have hit on something good here with online security. I doubt this alone will be enough to entice customers to sign up, but they are doing something new with dynamic CVVs and hidden card numbers. And laser-etched titanium, of course.