Why the apple credit card is a worrying sign for apple

Hardware
1

I wont be getting an apple credit card.

I suppose you could argue that the function of any company is to make money for shareholders. I think of apple as primarily a hardware company. My beloved iPad, iPhone and iMac are really important to me.

It does concern me that apple is just chasing cash. I can live with some of the services because they augment my computer experience like the iCloud storage, or possibly Apple Music, Apple news plus.

However i think it is stretching it a bit when they are becoming a TV company and the most egregious example of this is the new Apple Card. What is next Apple investment banking, Apple hedge fundā€¦are they just going to chase the biggest profitā€¦

You could argue that what does it matter when I still have my apple devices. But what of the possibility that they start making a large amount of money out the credit card or the investment bankā€¦will they then loose interest in hardware and softwareā€¦it has to be a possibilityā€¦

2

This isnā€™t to argue with you, 'cause your worries may be well founded, but as I read your post I was struck at how much it echoed what people said about Apple getting into the phone business in the days leading up to the iPhoneā€™s release. And yes, there are those who would argue that the venture fundamentally altered Apple, but I think that it could likewise be argued that ultimately the company is far better off across all of its product lines than it would have been had it remained primarily a computer company.

The credit card business may have a similar effect, or it may just end up being a marginally successful (or even failed) foray a place they hadnā€™t gone before. Likewise with any of their service offerings.

One thing that I believe, though, is that any technology company must always be looking to adapt to a rapidly changing landscape, or to invent new landscapes. Apple has never been especially good at inventing new things when compared with their phenomenal ability to take an existing product category and redefine it entirely.

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4

I see these things as Apple investing in content where the network effects of providing devices and a ā€œmarketā€ canā€™t result in the kind of third party activity that makes their devices popular and that gives them a revenue cut for facilitating the transaction.

In the case of the credit card, Apple would fail if they announced ā€œCreditCardKitā€ and just made these Wallet and Apple Pay tools available to financial companies. Even though Apple has a special relationship with Goldman to develop Apple Card, Apple had to push hard to get Goldman to meet the improved UI goals. Apple Card is expensive for Goldman; theyā€™re talking four years to recoup their investment. But the end result will hopefully be changed consumer expectations of cards and a lot more Apple Pay usage, which is good for hardware sales.

Also, if it turns out Apple is trying to learn from Goldman so they can enter consumer finance themselves, I donā€™t think itā€™d be too distracting as they have operated a massive financial company (Braeburn) for years to manage all their cash.

With Appleā€™s streaming service, they canā€™t just make a store and draw thousands of content and service developers as they can with apps since that industry doesnā€™t work that way. What they can do is provide really good content that takes full advantage of the TV app and successfully competes with the other streaming services to increase the likelihood theyā€™ll continue providing first class support for AppleTV so that continues to be valuable.

So, I think they are investing in services in a way that benefits their hardware. That said, we know services are taking executive attention, so Appleā€™s focus is diluted in that sense, but I think they are ultimately just executing a mature, complex hardware/software strategy that they werenā€™t capable of until recently and that ultimately increases the value of their devices.

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5

Actually, if Apple announced full banking services like checking, savings, etc. I could not hand them my :moneybag: fast enough.

6

Apple was stretching it when they came out with home speakers. No wait, they were stretching it when they came out with a watch. No wait, they were stretching it when they came out with a TV box. No wait, they were stretching it when they came out with a phone. No wait, they were stretching it when they came out with networking hardware. No wait, they were stretching it when they came out with music players. No wait, they were stretching it when they came out with stores for music and videos, books and apps. No wait, they were stretching it when they came out with physical stores. No wait, they were stretching it when they came out with server hardware. No wait, they were stretching it when they came out with printers. No wait, they were stretching it when they came out with their own branded software to compete with other developers. No wait, they were stretching it when they came out with a UNIX-based operating system.

:wink:

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7

Like all other mayor hardware and software manufacturers they all have to have a form of continuous revenue in the form of services. Apple Card is a genius move by Apple to leverage their reputation in customer service, quality, design, reliability and PRIVACY.

Remember Steve Jobā€™s prediction that one day the laptop and desktops will be the workhorses and trucks to do big work. The majority of users will be on mobile platforms. From my experience and observation I can tell that he was correct and that its already happening in an increasing rate. In order to survive and migrate to the future they have to rely on services rather than hardware sales.

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8

If you sit still, you get ā€˜runt over.

Some of the best examples of creative thinking:

IBM

Shell

Walgreens

Nokia

NES

OverStock

Volks Wagon

General Electric

And in ā€˜my opinionā€™, the absolute KING OF CHANGE, Hughes Corp.

9

In the past, Apple has taken a poor experience and made it better: computers, phones, MP3 players, TV, PDAā€™sā€¦ (wait, not that last one).

Credit cards and cable TV are two of the worst customer experiences out there. Now if someone can unbundle ISPā€™s from cable companies and improve thatā€¦

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10

Apple didnā€™t do anything with phones that Blackberry and Nokia couldnā€™t have done themselvesā€¦

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11

There are a lot of good points here.

One concern is as larger companies acquire or get access to large sums of cash, they ultimately become banks. Examples of this are the auto companies (GM and Ford make most of their profit from financing). GE is another example of a company that for many of itsā€™ years the largest source of its profits are from financing.

Then, the company is producing a product so they can finance it. When a company is not making its profits from its core business, often the product suffers. The company cannot find the return in its product line to justify the investment.

I would hate to see this happen with Apple.

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13

Iā€™m in the camp with @Cornchip and @MacExpert. Apple has this exactly right (so far), and we customers NEED THIS. A little history that contrasts Apple Pay and CurrentC helps to understand this:

Remember CurrentC? This was the ill-fated measure backed by a number of large retailers, including Walmart, Target, Best Buy, CVS, Rite Aid and many others. The goal was to bypass the huge fees raked in by the banks for credit card and debit card transactions. In addition the retailers would benefit through access to customer data for various purposes including loyalty programs.

The CurrentC system was customer-toxic in several respects - privacy, security and usability. Instead of the quick NFC-based communication now used by Apple Pay, CurrentC used a clunky QR-code method. Multiple steps were required: customer unlocks phone, opens CurrentC app, scans QR code on cashierā€™s screen, and hopefully the transaction processes correctly. CurrentCā€™s worst feature, in my view, was the requirement to link the customerā€™s bank account to the CurrentC system. Think about that: providing a direct tunnel linking your bank account to a complex, widespread system that not only processes cash transactions instantly, but also acquires, stores and serves up extensive customer data for tracking, gift cards, promotions, loyalty programs, ads, sharing with or selling to partner companies, and who knows what else.

Apple developed and introduced Apple Pay before CurrectC could get off the ground. Apple Pay was optimized for the customer in terms of privacy, security and usability. The customer simply double-clicks a phone (or Apple Watch) button and the transaction occurs instantly. No unlocking phone, no opening an app, no scanning a QR code. The customerā€™s information is not provided to the retailer; only a one-time transaction code is processed. Many retailers initially balked; they desperately wanted access to customer data, in addition to relief from the banking fees At least two retailers enabled, then withdrew, access to Apple Pay, honoring exclusive contracts with MCX (the company that developed and implemented CurrentC). Two retailers (CVS and Rite Aid) reversed course and now accept Apple Pay. Walmart is the big holdout, still not accepting Apple Pay.

Fortunately Apple Pay won (or is in the process of winning), and the CurrentC suffered a well-deserved demise.

During that time period I predicted that customers would reject CurrentC. Customers would balk at the clumsy purchase process. Only a fool would provide a direct bank account link to this complex, widespread system rife with security vulnerabilities.

I also wondered at the time why Apple chose to partner with the existing banks and credit card companies and the onerous fees involved? Why wouldnā€™t Apple itself be the bank, undercut the banksā€™ fees and walk away with everything? It turns out now that Apple may have gone part way down that path with its Apple Card, partnering with only one large bank and demanding customer-friendly terms that do no exist elsewhere.

Now, enter Apple Card. Appleā€™s focus on the customer and privacy is apparent. Apple Pay can now be focused through Apple Card, with itā€™s customer-friendly features. Privacy and security appear to be good. Even though a bank account must be linked for payment, each transaction is still a credit transaction and not a direct debit transaction. Payments from the customerā€™s bank account are initiated by and controlled by the customer.

In the future perhaps Apple might become a bank. Whether or not that happens is not important now because the game is already changed. Apple is big enough to impose its terms on its partner bank, benefitting Appleā€™s customers and not the retailers. And the terms imposed on Goldman Sachs may be the chink in the armor of the Visa/Mastercard/Discover/AMEX oligarchy.

Iā€™m all in with Apple Card. Let the games begin ā€¦

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14

I think the bigger picture here is being overlooked.

Apple IS primarily a hardware company. However they have struggled of late to continue being profitable simply riding iPhone sales.

For the past couple of years every financial analyst I have heard speak on this topic has said the same thing - ā€œApple must expand into services.ā€

To that end, I see the AppleCard as a stroke of geniusā€¦and perhaps the most well thought out product developed under Tim Cook.

Will they earn more money by being in the ā€œcredit card businessā€? Probably so, but that is the icing on the cake. I donā€™t think their primary goal is to be a credit card company.

The real genius behind this is developing a product that increases the likelihood of customers staying in the Apple ecosystem.

Letā€™s face it, there is a LOT of churn in the market these days as manufacturers are constantly trying to ā€œone upā€ each other. But people are not as likely to change credit cards as they are to chase after the sexiest new electronic gadget.

By having an AppleCard, you are choosing to use a product which is designed to keep you using the iPhone/iOS in the future. Since the card is designed and deeply embedded into iOS and is almost, if not completely, unusable without an iPhone, it may serve as a motivation for those who may be considering switching to an Android to reconsider yet another benefit of the iPhone they would lose.

And if a customer stays with using iPhone/iOS, they are even more likely to stay in the broader Apple ecosystem because the entire system becomes so much more powerful and convenient together than any single device is on its own.

Eight years ago I bought my first iPhone. I wasnā€™t interested in any other Apple product at the timeā€¦and honestly wasnā€™t even all that sure about the iPhone. But I quickly came to love its simple reliability.

But over time, I added an iPad Air. Later I decided to get the larger iPad Pro. Then when I wanted a streaming TV box and was considering a Rokuā€¦well, I bought an Apple TV instead.

And so it went. Finally, four months ago, I bought my first Mac and am now completely inside the Apple ecosystemā€¦Apple Watch, HomePod the works! In spite of the very loud (and justified) complaints from those who have had problems with their Apple products, for the majority of us, ā€œThey just work!ā€

That simple synergy is what people love about Appleā€¦and AppleCard is one more product that embeds into and further strengthens that synergy.

This isnā€™t about having just ANOTHER credit card. It is about developing long term customer relationships.

Honestly, I ordered the Titanium physical cardā€¦but I doubt I ever use it. For only 1% cash back and the hassle of dealing with carrying yet another card, itā€™s not very convenient for me. But, it is EXTREMELY convenient and private to use Apple Pay and earn 2% cash back! And with ApplePay finally being widely accepted in my city, that is exactly what I will be doing!

The card wonā€™t be for everybody. But for the person who is happy and plans to stay with Apple over the long term, this is a very nice addition that further enhances the power and convenience of using their iPhone.

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15

Yes, good point. You wouldnā€™t really lose anything by leaving the physical card at home in a drawer. The benefits of the Apple Card account accrue from using Apple Pay and buying from the Apple Store. The physical card is not involved with either of these.

I am testing one of those minimal wallets in which I place only a few (folded) cash bills, driverā€™s license, ATM card and 2 or 3 credit cards. No need to carry the Apple titanium card - I would use that account only as stated above.

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16

I think Horace Dediu at Asymco has some cogent points to make:

http://www.asymco.com/2019/08/27/apple-card/

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17

We were promised flying cars but ended up with cogent points :slight_smile:

18

Here in Aus I almost never have my wallet with me now. No need for cash* or ATM cards. Australia had a mature electronic point of sale payment system before applepay (eftpos) which was everywhere, the only drawback being a $10 minimum charge. Now with applepay there is no minimum limit. Also the maximum limit of $100 for a physical card is not applied because applepay has better security with touch or face ID. So who needs a physical card (or a wallet)ā€¦

*I should have added that there may be a difference because tipping isnt a big thing here, we pay people decent wages :roll_eyes:

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