Apple Partners With Goldman Sachs on Apple Card
Apple’s Mar. 25 event unveiled a wide array of new services, marking Apple’s shifting focus towards integrating services into their existing hardware and software.
These new services include the long rumored Apple News+ and Apple TV+, as well as the less anticipated Apple Card. Despite Apple’s previous denouncement of credit cards, Apple is partnering with Goldman Sachs to offer the Apple Card to promote Apple Pay while integrating its other services.
Apple has historically leaned heavily on its iPhone sales’ revenue as its primary form of revenue. However, iPhone sales dropped year-over-year in Q4 of 2018 to 64 million from 73 million a year before in 2017. Analysts are projecting that there is a growing trend of consumers taking longer to upgrade their phones, so Apple has come under fire to diversify its revenue stream.
This is where their service branch enters, since subscription models allow companies to build a stronger ecosystem and promote brand loyalty, making it harder for consumers to switch away from their current subscriptions and the hardware that powers it.
Companies like Netflix and Spotify focus on subscription services, which is where the technology industry as a whole is headed as hardware improvements start to slow. With Apple’s existing hardware dominance, branching out into the services business allows Apple to add additional revenue streams to prop up its slumping iPhone sales. By introducing of the Apple Card, Apple is incentivizing users to use Apple Pay and interact with other services like Apple Maps and iMessage.
The Apple Card resides primarily within one’s iPhone and rewards the user with two percent cash back if they use Apple Pay. Tim Cook went on stage during the event to say that Apple Pay is on track to hit 10 billion transactions in 2019 and this incentive further promotes the use of Apple Pay, putting pressure on businesses to adopt NFC technology capable of accepting this emerging payment form.
Implementing a credit card required Apple to partner with an existing bank to handle the lines of credit. This is where Goldman Sachs and Apple could help each other because the partnership allows Goldman Sachs to make its first step into the consumer banking area. Goldman Sachs’ CEO, David Solomon, said that the Apple Card “is a major step in the growth of our consumer franchise.” Many believe that being a newcomer to the credit card business makes Goldman Sachs’ partnership with Apple ideal, as it lets Goldman Sachs innovate more than other companies that are stuck with their existing structures.
The partnership between Apple and Goldman Sachs is symbiotic, for it has the potential to benefit Apple in its customer retention and recurring revenue stream while allowing Goldman Sachs to enter the consumer banking industry with one of the largest companies in the world.