If you were paying attention during Apple’s quarterly earnings call back in August you would have noticed clear signs that Apple was becoming a fintech company. Apple Pay transactions had tripled from a year earlier, to more than 1 billion. This was more than Square and exceeded mobile transactions via PayPal.
Today, Apple is securing their places as a significant player in the fintech space with Apple Card. The iPhone offers the Apple’s Wallet app, Apple Pay, and Apple Pay Cash, the Apple credit card is the next logical step.
Apple has partnered with US bank Goldman Sachs to improve the credit card experience by offering a healthier approach to spending. They’re offering a more transparent list of transactions, organized in an easy to read format, with a more flexible way of making payments on outstanding balances.
Apple Card is designed to complement existing Apple-branded payment options, and it hopes to replace other credit cards in your wallet by bribing you with Apple Cash.
Every time you spend with Apple Card, you get 2 percent cash back — a feature the company calls Daily Cash. Purchases directly from Apple come with 3 percent cash back. That could lift the company’s sales of its own products, providing a greater incentive to pay “full price” at Apple than seek discounted prices elsewhere.
The card also has no fees, no late fees or international fees, and promises lower interest rates than competitors. It will be accepted via MasterCard’s global payment network.
While the card will be digital and connected to an iPhone, there will also be a physical card made from titanium that can be used in stores; purchases made with the physical card are only eligible for 1 percent Daily Cash.
Apple is maintaining its focus on privacy and security. They are promising that its customers are “not the product” with its services, which is to say that it doesn’t harvest or sell their personal information to profit off their data. With Apple Card the company can facilitate transactions that have similar end-to-end encryption and privacy protections as other communications through its servers. Additionally, it says that Goldman will not share transaction details with third-parties.
Previously, Apple’s proprietary Apple Pay system served largely as a facilitator between card issuers and retailers, authenticating users’ identities so their purchases can be completed wirelessly. Apple took a tiny cut of each purchase in exchange for biometrically identifying the customer; now it will get a larger cut for handling a bigger part of the card issuing, relationship management, and transaction business.
What is the rest of the industry doing?
Alibaba affiliate and fintech giant Ant Financial expanded from payments and into wealth management. According to analysts at research firm Bernstein, the Chinese company now runs a robo-advisory service that uses artificial intelligence based on payment activity to suggest investments. “The core payments service acts as a gateway to a broader use of service,” the analysts wrote. “This is a model other tech companies could follow.”
US Banks
Zelle, a money transfer service that launched in June 2017 to help banks compete with peer-to-peer payment apps like PayPal’s Venmo and Square’s Cash App. Zelle, which is also integrated into member banks’ apps, is expected to overtake Venmo this year in terms of users, according to a forecast by eMarketer. It will grow more than 73% in the US, to 27.4 million users by the end of the year, pulling ahead of Venmo, with 22.9 million users, and Square Cash, with 9.5 million.
Android Pay and Samsung Pay have a larger potential user footprint, however, research analysts at Juniper forecast Apple Pay will have 227 million users by 2020, more than Android and Samsung combined.
Apple and Goldman will begin to offer Apple Card this summer. Apple says that signups will be handled directly from iPhones, with quick approvals and access to device-specific card numbers.
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