Goldman is looking for a way out of its partnership with Apple | Hacker News Reader

Goldman is looking for a way out of its partnership with Apple

wsj.com

93 pointsExMachina7392 comments

"In January, Goldman disclosed that it had lost about $3 billion on the consumer-lending push since 2020."

Looks like Tim Cook will be joining Warren Buffett in the 'squeezing Goldman Sachs' hall of fame: https://markets.businessinsider.com/news/stocks/warren-buffe...

In the attached article

> After hovering around record lows for much of the pandemic, consumer delinquencies are rising across the industry.

> It lost slightly more than $1 billion in 2021 and $783 million in 2020, after accounting for operating expenses and money set aside to cover possible losses on loans

That seems like an enormous amount of money to support buy now and pay later

The retailers love it though.

I even Amazon is getting in on it.

Apple has enough cash reserves to be able to be a bank themselves, but I guess are much too smart to use their own money.

Is the buy now, pay later all of what this stems from? I have never looked into it, but I assumed they were also backing the Apple credit card which I consider totally different from each other.

It's more than that. Consider Apple's strongest advantage, it's brand.

If Goldman is the one handling the lending, it is also the one sending you to collections.

The PR damage to Apple's brand can be significant

But Apple could take it to an 11 too. If they finance your equipment and you fall behind on your payments, guess whose equipment just went into lock-out mode... Apple could then allow the device to be returned to an Apple Store, and credit will be applied to the account. A voluntary return policy, only throw in a carrot of if you provide a memory stick, they'll make you a copy of the data for a small nominal fee.

That will most definitely destroy the brand

Ford, Chevy, Toyota, Honda, et al. repo cars daily, and their brands are not hurting. People know when they can't make payments that their collateral is likely to be collected.

I'm not saying I'm for them doing this or anything, but just taking the dystopian concept to a logical completion. We've already seen where self driving cars have been discussed repossessing themselves, so this is just the natural extension of the same concept. This forum tends to think that places like FB, Googs, etc should have a very negative brand due to the data collections, but the masses don't give a damn.

Those are typically dealers

Those are typically finance companies, so dealers are no where near repossession. Each of the big auto makers all have their own financing companies, so it very much is the manufactures.

I believe that remotely disabling your car if you don't pay has been an established practice among "buy here pay here" dealers for many years. It's an "innovative" way to lend to people who have bad or no credit.

On the other hand, I've never heard of it spreading outside that market segment.

It would be news to me if the major manufacturers finance arms have the capability and are keeping it on the down low.

Goldman considers its brand a key asset.

“””Our assets are our people, capital and reputation. If any of these is ever diminished, the last is the most difficult to restore. “””

https://www.goldmansachs.com/our_firm/investor_relations/fin...

It’s the truth.

The retail bank was a mess. It’s a stepping stone for Solomon to disrupt the trading culture and take control of the bank from the investment bank. It costs a lot to set up a retail bank, and the political will was there to start but not to finish. The politics around the retail bank was hyper toxic, with a classic us and them mentality. The established tech and back office were marginalized and the retail bank tried to build it all themselves but learned the hard way very late those groups exist for a reason - regulatory and security bars are super high and can’t be achieved by hubris alone. Apple had extremely aggressive asks of the technical stack, they outsourced a lot of core stuff to SaaS finserv at a high margin, and a bunch of other issues. Finally the timing of it all was awful. They started in a super low rates cash flush world and things have gotten harder everywhere for them.

Source: I was there

Apple's reputation is focused on its consumer business. Financial news is unlikely to affect consumers' perception of them.

I doubt that Apple's reputation would be hit on this unless Goldman launched a PR battle to get Apple to let them out of the deal.

Wait to see what the realized losses are. Banks are kinda infamous for huge preemptive write downs, then discovering "profits" when the loans pan out.

I think it is that, I assume "money set aside to cover possible losses on loans" means income statement provision for future losses.

What's really shocking is that this number is post provision for future losses, which is a non cash accounting charge that the media often uses to make banks look worse. These are real losses.

Ha ha good luck, suckers. Negotiating with Apple is a fool's effort: they have too much experience and are too good at it.

Amex are no dummies either (despite a couple of near death experiences over the years). They'd be a good match with Apple from a consumer perspective but I find it hard to imagine that Apple would give up the terms of the sweet deal they struck with Goldman nor can I believe Amex would be willing to accept those terms.

Goldman isn't going to go out of business due to their botched consumer foray, but I'm sure Apple would be quite content to continue to peacefully pump blood out of Goldman until the original agreement runs out.

And Goldman: next time don't recruit a DJ to be your part time CEO!

This is extraordinary because Goldman Sachs has been negotiating contracts for 150 years, from companies to governments. You can't expect them to win every bet, but it's a striking example that a tech company might have better financiers than a financial one.

Apple, headed by a supply chain guy, famously has a single balance sheet and pl, not divisions. They are not afraid of walking away from a deal that doesn’t meet their criteria, and they are past master at squeezing their suppliers.

Goldman is a sprawling group of interests, far more transactional, and though it’s no longer a partnership, doesn’t speak with one voice like apple does.

I don’t like Goldman, and while I use apple gear I don’t want to do business with them beyond making purchases.

I use an Apple Card and it’s good but nothing amazing. The incentives and benefits are pretty basic. The interest rate isn’t competitive, not even a 0% teaser rate. But I use it because it’s super fucking convenient. 1 account for my entire family. It helps catch billing mistakes for example we were paying for 2 Prime subscriptions for years; a monthly and annual.

My impression is Apple is trying to be the universal app. Chat, App Store, media, and bank. And GS is there stepping stone.

yeah the best part is the instant push notifications when a transaction goes through

I don't think this is unique to Apple as my Chase cards do this. I'm assuming most CCs do.

Sadly no. My AMEX does it. But my BofA does not.

My BofA does so I think you just haven't set it up.

The settings pages for BofA are awful so I don't blame you. Took forever to figure out how to setup auto payment for my credit card.

This isn't default for all US banks and cards?

I use a community credit union, most of their rates and products are better. Up to a certain amount of money

My Citi Double Cash does this

Getting your data out of their platform to do analysis on it use to be such a PIA. Have they resolved this yet?

Nope, still a nightmare

Workaround: an app like Mint that can export the transactions as CSV.

Indeed - Mint has mechanism for it. Don’t think any others do but I believe CoPilot is working on it.

Copilot also lets you import Apple Card transactions as CSV

It does but I think the Mint version is more automated and seamless. You are right anyways. Don’t love how it works at the moment in CoPilot

How do you get a CSV of your Apple card transactions?

I personally hate my Apple card because of its locked down nature. I own a Mac but can only view transactions on my iPad for some reason? That is worthless and there's no valid reason I can't just login into a website on any device like with every other credit card or banking company. I find it such an annoyance having to enter in the transactions manually.

It only makes sense to use the card to get the initial discount and interest free payment plan for expensive Apple products. The cash back rate is uncompetitive compared to other cards, and they actually work with budgeting software like YNAB.

https://card.apple.com but you can only view/export statements which makes it next to useless for YNAB as I don’t want to wait for a statement to reconcile.

I only use my Apple Card for Apple purchases because of this. I’d use it everywhere if it supported YNAB.

This is the #1 thing that stops me from using it (except for Apple Purchases), I can’t get the data into YNAB automatically. That’s a dealbreaker for me.

that's my impression too. The reward is mediocre to say the least, but it's super convenient by optimizing the most common path: payment in a single click on the dashboard and real-time activity feed. And the killer feature: autofill on web pages with Safari.

You can do all of those things with regular credit cards added to Apple Pay too

https://archive.ph/sp4sl

It's bizarre how Goldman screwed up their push to consumer products so bad. How do you manage to lose 3 billion dollars in 3 years?

You loose 1 billion a year

You lose a billion a year. Chump change, Uber has lost a billion a quarter for a decade.

Q: The article doesn't say much on this point, but are there any hints about why Goldman was losing so much money on consumer lending at a time when other lenders seem to be doing comparatively better?

I think it's a combo of not having a culture for it and that the margins in that space are lower than that of their other lines of business.

Apple is the master of entering new LOBs always with (only when) they can get the same margins they do on the rest of their business. Remember how people laughed at the price of the iphone? They didn't care -- the target was 1% of the phone business: the profitable part.

from previous readings, some of it's "we're counting potential future loses as current loses" but post pandemic lots of lenders are starting to feel some squeeze.

Does apple's foray into being a financial institution that can lend not already undercut the Goldman venture by being a lender(Apple Financial LLC ) and owning the PoS for the transaction via the iPhone? In other words why did goldman not sue apple(or think it should have put that in the contract)?

1. I thought their Apple Financial LLC is now a lender that gets to keep all the interchange fees from transactions on its own Digital wallet. This means users don't have to keep a 3rd party CC and Apple can lend to the Merchant.

2. Apple will then need to collect money from the users at the other end, which I thought was gonna be via their High Yield saving account: https://www.apple.com/newsroom/2023/04/apple-cards-new-high-...

This should complete the loop...

And assuming I am right about apple owning the whole loop e2e. The play here is to replace Mastercard and Visa's monopoly, or in other words be what Square Payments was aspiring to be but hasn't gotten there, yeah?

A question: Credit cards are generally profitable for banks, interest rates set accordingly to account for high default risk for these types of unsecured loans.

So what is it about these particular cards (really the audience using them) that makes them disproportionately more risky/prone to default?

Apparently the default rate for pay later loans was astronomically low during the pandemic, and it kicked back up again afterwards, probably compounded by rampant inflation. Additionally, the way to get such a loan is "own an iphone" which is way more accessible than having to sit at a bank and talk to a guy, or even do it on your bank's app. If this trend continue I could see lawsuits (with or without merit) about how vetted loanees actually were.

Getting a credit card usually is pretty easy though unless you have a recent bankruptcy, in which case you need a secured card to work your way back up the credit ladder. An 18 year old with no credit history can generally get a very low limit card (my first as such, in the 90’s, was $500 limit)

Makes me think their screening process for Apple cards was awful from the start. Either that or all the banks are seeing higher defaults right now (inflation etc) but GS doesn’t have a deep enough consumer base for profitable customers to cover things.

Or GS got into an area of finance they didn’t understand well enough to do it right.

Partnership with American Express could lead to Apple Card being available in more countries.

American Express is often not accepted even in countries where it's supposed to be present (e.g. quite a few shops in Sweden don't accept AmEx).

Visa and MasterCard are much more universally accepted.

Real talk, shops will not continue to reject AmEx when they realize Amex is bringing the size and scope of the APPLE consumer market

That consumer market is already available to them via Apple Pay, and people paying with their Visas and MasterCards.

Apple Card is non-existent outside the US.

How many Amex holders don't have a second card? I've never heard of anybody getting to the checkout line, then saying oh drat, they only take visa, and walking out.

OTOH I typically only have 2-3 non-Amex charges a month. Costco is the main one (used to be Amex only too).

I'm sure lots of people use their Amex preferentially, but I've never seen anyone put their hand on a door handle, then see that only visa/mc stickers are in the window, and walk away.

I have. When someone wanted to expense something. Or when they didn’t want to bother with the Chase card declining because it forgot they were still overseas or whatnot.

For 16 or so years Costco required you to have an AmexEx card if you weren't paying with cash or debit, now they only take Visa. This was apparently something lots of newish members weren't aware of so it wasn't too uncommon to be in line and have someone say they didn't have the right card to pay. You'd then have to wait for the checkout person to give them the Costco Amex card spiel.

Maybe. I think Amex is still the leading corporate card — hard to find a less price sensitive bunch than people spending someone else’s money. That was part of why Amex was accepted in many places: high potential for big orders.

If my Apple Card switched to Amex I might switch the default tap to pay card to something else. Right now it’s very convenient for everywhere that takes tap-to-pay, but… who wants to deal with it sometimes not working?

It’s basically zero effort to use a different card.

I think GP's point was that with AMEX not being accepted everywhere, it would no longer be a transparent action to pay with tap. Now they would have to either deal with the rejection and change to a non-default card, or they would need to prepare in advance by looking around for what kinds of cards are accepted. Neither of these things are a big deal, but it's friction, and consumers don't like friction.

Yeah I mean if it happens once or twice I’m gonna switch to a different default card. The .5% extra cash back isn’t that much, especially for something that’s all about convenience.

Mostly the Apple Card was a novelty for me: 100% of my usages is via Apple Pay.

Apple devices aren't nearly as universal outside of the US (except Japan where they're even more universal) and there are already payment options for non-US Apple users. I think I have four different payment cards in my Wallet.

If you want the Apple consumer market, you support Apple Pay and then the cards you support don't matter.

Make me paw my credit card out of my wallet like an animal, be it an AMEX or Apple Car, and I find somewhere else to shop.

In my country they will, just because of the far higher merchant fees Amex charges compared to Visa and Mastercard.

And ironically, less available in America.

Do you have an AMEX? It's accepted basically nowhere outside of the US, actually very annoying

Anecdotally, I can use it in 75% of shops I frequent.

Total nonsense. I was traveling for 3-4 months last year, and my AMEX was accepted almost everywhere in Spain, Portugal, Germany, etc.

In Germany being able to pay with a card is not a standard. And from that subgroup of places accepting cards, a big number of them will accept only Giro (German card standard). Visa/MC is far from being universally accepted and AMEX is even rarer.

That changes of course, but mostly in big cities' centers (Covid accelerated things in Berlin). I hope businesses catch up with the new wave of payment terminals like iZettle and SumUp - they support all these different cards without a problem

Where I'm from AMEX is basically used for free stuff and cancelled afterwards. And for curiosity like reservations for me and my fisherman's friends.

In the last six months, I have used my AmEx in Italy, Canada, and The Bahamas.

Where are you having trouble with AmEx?

India, Malaysia, France, Switzerland and Germany. Go to small towns in most of Europe and you'll find a significant number of vendors not accepting Amex.

I know it is not accepted in many smaller places. I was reading maybe too literally the nonsense assertion, "accepted basically nowhere outside of the US."

Back when you needed to swipe that magnetic stripe the Amex one was different and required a special reader that almost no one in europe had. Except maybe tourist traps.

Not sure how it works now if Amex has discovered chips and contactless. The payment processors probably still need a separate path for Amex and I haven't seen that logo in a lot of places that do display visa and mc. So maybe it's still only available in tourist traps.

My current AmEx has had chip and contactless for three years or more now. But I wouldn’t want anyone to have to update their priors.

UK experience (some years back) of a platinum card was that the few places who accepted it preferred Visa or Mastercard. Minimal utility, basically.

I gotta say MasterCard is pretty trash too. I was traveling in Japan and effectively unable to use my Apple Card anywhere because they only accepted VISA nearly everywhere.

Funny enough, loading money from my bank account into my Apple Cash which is VISA allowed me to use Apple Pay, avoid ATM fees, foreign transaction fees, and was just more pleasant than using my bank card.

I was also recently in Japan (about 3 months ago), I never took out my credit card. I paid with my Apple Card (Mastercard) via Apple Pay.

I was there around the same time. I don't remember a single convenience store accepting Mastercard. And anywhere outside Tokyo or a major city you were unlikely to even see the logo. Cash only was certainly more rare than it was a decade ago.

Shrewd shopkeepers know the AMEX deal – higher transaction fees, potential chargebacks, etc. Even when they do accept it, I feel bad giving my AMEX to a small business, especially when I'm abroad. Accepting AMEX is common at a high-end restaurant or hotel around the world, but good luck once you're off the beaten track...

I thought it's the opposite: MasterCard has much wider global coverage compared to American Express.

I wonder how the savings kickback feature would work under Amex--I don't think they have any partnerships like that

> savings kickback

Are you talking about cash back? If so Amex does offer cards that support cash backs (I've had one for quite a few years). If you are talking about savings accounts, Amex also offers a High Yield Savings account whose rates are very competitive with other banks in the US.

Yes, the cash back into a high yield savings account. My wife has it and it’s a great setup

Amex does have products that cover both these use-cases independently, so I'm assuming if Apple-Card indeed moves over to Amex these features won't go away and would instead be fulfilled via Amex savings account + Amex's existing cash back support.

No wall: https://archive.fo/sp4sl

Was I the only person to get the Apple card and then cancel it because I wanted to have the titanium card?

Damn Goldman actually getting squeezed. That is quite some delightful irony you don't see everyday!

Apple could do the financing part themselves and partner with a card network for comms infrastructure.

Being a retail bank is not a simple undertaking. They would not want the complexity and regulatory distraction partnering with a bank is a smarter move.

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