How is Apple Savings’ business with Goldman Sachs?
The digital bank experiment created by Apple in synergy with Goldman Sachs hasn't gone very well so far. But in Cupertino they want to persevere. Facts, numbers and insights
Will Apple also be a bank thanks to Goldman Sachs?
Here's what Apple is up to and what the relationship is with the investment bank.
Apple introduced its savings account (Apple Savings) with an annual yield of 4.15%. It does not require a minimum deposit, there is no constraint and users can open it directly from their iPhone Wallet. The account is launched in collaboration with Goldman Sachs and is currently reserved for US customers with Apple Card.
But so far Apple hasn't been a golden apple for Goldman Sachs. The collaboration between the two giants, one technological and the other banking, was launched shortly before the pandemic, when they joined forces to launch Apple Card, a payment service based on a virtual credit card created by parts of Cupertino, integrated in the Wallet app, curiously never left the US.
THE USA ONLY PILOT NATION
Why the Apple Card has remained confined to the States is a mystery that could however find an easy answer in a recent study by Bloomberg , which brought to light the numbers of Platform Solutions, the division that deals with new consumer financial products of Goldman Sachs, including collaboration with Cupertino for Apple Card.
THE LOSSES OF DIVISION
Thus it was seen that from 2020 until the end of September 2022 the losses of that business unit amounted to 3 billion dollars and that the total is destined to rise further: when the last quarter of 2022 is also included, the negative should reach nearly $4 billion. Of course, not all of the losses are attributable to Apple Card, as the division handles other digital affairs, but analysts estimate its impact to exceed $1 billion. A good 1.2 billion dollars were burned in just nine months last year, primarily related to Apple Card.
GOLDMAN SACHS REGRETS THE ALLIANCE WITH APPLE?
In light of these numbers, it also explains why the CEO of Goldman Sachs, David Solomon , stated on the occasion of the World Economic Forum in Davos that the company had perhaps too ambitious aspirations when it launched its credit products aimed at consumers: “ In consumer platforms we've done a few things right. We haven't done well in others. We probably took the extra stride, much longer and too fast ”.
Most of the losses are due to provisions for loans that are not expected to be repaid in the future. The absence of commissions and the low interest rate also weigh on the accounts, the main benefits of Apple Card for users, but more expensive to manage than competing credit cards.
But then Goldman Sachs had reassured them anyway about the goodness of the investment in Apple Card: “I think we now have a good turnover for deposits. We are working on our card platform and I believe the partnership with Apple will pay substantial dividends for the company,” Solomon said. Previously, the investment bank planned to reach financial equilibrium in 2022 and start making profits with Apple Card: now this goal has been postponed to 2025.
According to some information circulated at the time of the launch of the new service in 2019, but never confirmed, Goldman Sachs had spent about $ 350 in acquisition costs for each new Apple Card customer. What now? Now the two continue to try to transform the virtual card into a real digital banking service. We've been talking about it for some time, and finally everything is ready for launch.
On paper, the operation appears win-win for both parties: Apple will be able to count on a ready and structured banking circuit, Goldman Sachs on the presence of the app in the devices sold by Cupertino which, it is known, is aimed at wealthy customers ( given the prices of the devices themselves) incentivized to build loyalty towards the brand. And let's not forget that last year Goldman switched from its previous strategy involving large-scale digital bank Marcus on the run.
But will it really be a happy marriage? Impossible to tell. For the moment, the menu has been designed to focus on large numbers. Users will be offered a deposit account, which can be activated without commission costs, which yields up to 4.15% per annum, implemented in their iPhone wallet. These are significant and, therefore, promotional numbers. That Apple and Goldman Sachs want to expand their clientele is evident from the conditions: there is no need for a minimum balance to be able to request the promotional rate.
Once a savings account is set up, users can deposit additional funds into their savings account through a linked bank account or from their Apple Cash balance. Customers will also have access to an easy-to-use savings dashboard in Wallet, where they can conveniently monitor their account balance and accrued interest over time. Account withdrawals and transfers to a linked bank account are fee-free.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/come-vanno-gli-affari-di-apple-savings-con-goldman-sachs/ on Tue, 18 Apr 2023 08:55:24 +0000.