Subscription services and plus signs were big news at Apple’s Spring Event, which took place on 25th March. The Cupertino event saw the launch of TV+, News+ and Apple Arcade, three new entertainment services in TV, magazines and gaming respectively. The glitz and celebrity of the media industries mean that these announcements will garner plenty of attention. However these are well trodden areas, and in reality just constitute Apple exercising its scale to stretch into areas that are already well established and explored by the likes of Netflix and Microsoft amongst others.
It was the fourth announcement that caught our attention here at TAB: Apple Card. The launch of the Apple Card is indicative of the direction of travel for fintech generally, whilst also laying the groundwork for a different type of commerce and payments ecosystem.
Here are six things about the Apple Card that have got TAB’s finance and payments people talking.
The end of cards as we know them
Mag stripe technology should have been the nail in the coffin for the long card number, but well into the age of e-commerce cards have remained the same, with shoppers dutifully entering that number into checkout boxes. Native payment services like Apple Pay and Google Pay are making them unnecessary by automatically authenticating payments made on device, and now Apple Card takes the next step by doing away with the long card number on its physical card. The card number is instead safely locked away within the Wallet app, a safe and secure solution easily retrieved if customers need it for online transactions. Conceived as something that will be digitally augmented, rather than with online components as an add on, the physical object can be made very differently. Time will tell if this change proves as controversial - or forward thinking - as doing away with the headphone jack.
Onboarding as a competitive advantage
Revolut boast a 60 second onboarding, but signing up to an Apple Card is arguably even easier for those already with Apple Pay. By instant issuing a tokenised card, a customer is ready to pay with Apple Pay immediately - before the physical card even arrives. Fast onboarding flows are a competitive advantage, with every extra step in a flow being a step a user can drop off. Apple Card doesn’t just get users signed up quickly - it gets them to making that all important first purchase quicker than the competition.
Good UX in finance is the new normal, not a differentiator
When Monzo first added company logos to transactions, it was revolutionary. Now, it is expected. Users have come to demand good user experience from their financial products. Indeed, in the era of Open Banking a good UX means customers are less likely to go to another provider (such as Yolt) for their financial insights. Customers demand more data, more insights and more value from their financial providers, something which Apple Card hopes to supply with its smart interest calculations and monthly and daily spend charts.
Privacy as a differentiator
Privacy has been a key selling point for Apple over recent years. Indeed, privacy was a running theme of the 25th March keynote. “Apple doesn’t allow advertisers to track you” was a sentiment heard over and over again whether referring to what users watch or what they read. Given most of Apple’s profits come from selling hardware rather than advertising, they’ve made something of a statement of the fact that they don’t sell user data. This is a fact echoed in the Apple Card, with Apple claiming that they won’t know what users spend, or where they spend it. Apple’s partnership with Goldman Sachs to deliver the underlying payment infrastructure is a key enabler here. With Goldman doing things like fraud monitoring, Apple won’t need to know a lot of information it would otherwise need to collect to run an effective payment product.
The future of ‘Cash’
Apple ‘Cash’ has been showing up in patent filings for years, and with this launch we finally get to see it in the wild. For now, it’s just a repository for the simple cash-back feature of the new card. But it raises the possibility for an Apple owned fund-repository across your devices. This lends itself to a huge number of potential propositions over time. It could evolve into a payment method that Apple lets you fund from bank account and prioritises in the UX. ‘Cash’ could, in the future, be a platform that other financial products plug into for customers to choose from. The recently launched Goldman Sachs Marcus savings product seems like an obvious first choice here. ‘Cash’ could also be the place from which you manage and pay for all of Apple’s emerging subscription and app-mediated services. The ‘sell’ to merchants and financial services companies would be easy for Apple for any option - offering native UX enhancements, and potentially circumventing card network fees.
Unbundling the finance ‘stack’
There’s a lot in here for fintechs and incumbent banks alike to be worried about. But there’s opportunity as well. Apple have partnered with Goldman Sachs to do the ‘banking’ part of their proposition rather than build a bank from the ground up. Quite rightly, Apple does not want to manage the complex regulation and expensive infrastructure involved in being a bank. That’s a win for Goldman Sachs who’ll be taking their share of the revenue from these customers, as Apple will effectively be buying things that Goldman does well - such as compliance and pricing risking. What this means is that any well run bank can be broken up, like Goldman Sachs, into services that can be sold at a profit to partners. Apple also have a consumer credit product, the iPhone Upgrade Programme, with credit managed through Barclays. As banks and fintechs become more proficient at bundling these services and delivering them to market, technology companies like Apple (and indeed any company) can become a competitor to traditional banks without necessarily having to build the ecosystem. Fintechs and banks will need to raise their game to compete, or think about how they could become suppliers in this ecosystem.
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