Hm, what would this mean for Apple Card users? Would it be shut down? How about those who have Apple Savings Accounts?[0]
[0] https://www.apple.com/newsroom/2023/04/apple-cards-new-high-...
[0] https://www.apple.com/newsroom/2023/04/apple-cards-new-high-...
Since Apple manages the whole thing through their own app and not a Goldman Sachs app, it should be fairly seamless as everything should look the same and you won't need to make a new login or worry about how to start paying a new bank. If there's new cards to be issued it's likely it will just show up in the Wallet app and they'll mail you a new physical one. Last year Apple moved the Apple Cash card from Discover to Visa and most people didn't even know that happened. There was even a button to switch it over sooner if you wanted to.
With the Savings Account I expect it will be similar as long as they can find a bank willing to offer a similar APY. Especially for people who just use it with the Apple Card and don't deposit directly to it using the routing/account number, you probably won't really notice.
source: all speculation, but I have worked extensively in payments for years and have launched banking products.
What’s left is to make Apple Cash a deposit account with FedNow instant payment rails access. Buy a distressed regional bank to get a charter if needed. Every iPhone user then becomes a potential banking customer (136M US iPhone users, compared to 66M JPMC household customers, for example). Interchange revenue will slowly decline (again, FedNow), which Apple can compensate for with the deposit spread.
https://fintechbusinessweekly.substack.com/p/evolves-problem...
Underwriting credit & customer risk, handling edge cases, maintaining relationships with ATM networks, card networks and ensuring compliance with state and federal banking rules is quite an undertaking.
Goldman Sachs did not have scale like Chase, Capital One and others to create a diversified portfolio of clients, limiting their ability to hedge against the risks of a single platform or two dominating their involvement in this market. One bad software update by Apple could flood their support queues, and they can't afford to keep significant staff on hand to keep wait times below an hour (unlike a larger company, who is already staffed up to serve their non-Apple customers).
> Costco Card: Amex -> Visa
Amex -> Citi.
Amex was both the issuer and the network (they're vertically integrated, so to speak). The shift saw Citi become the issuer on the Visa network.
That's the problem. All other banks turned Apple away because Apple was demanding some significant concessions. Goldman agreed to them because at the same time they were trying to break into the consumer business.
Apple will have to cave.
Uber progressively slashed the benefits overtime to the point where it just had some generic 1% cashback. That was through Barclays and eventually they shipped me some vanilla master card with no benefits.
I hope the Apple card doesn't follow a similar path.
I can't imagine they'll close all those accounts, so likely we'll see some sort of migration leading up.
no foreign transaction fees
What you really want to see is a combined promise. For example: No fees, plus 1% or less FX spread on major currencies. (My preferred credit card promises that.)
Honestly, it is very hard to pay a total of less than 1% on foreign transactions. Still, this is pretty cheap, given the convenience.
For a major currency pair, like EUR-USD or JPY-USD, you can see that it's less than a tenth of a cent off the 'real' rate.
The banks don't control the exchange rate, it's determined by the card network. So yes, when a card advertises 0% foreign transaction fee, it really does mean that they don't take an additional charge on top of the spread (which they don't control or profit from).
It's in fact quite easy to pay less than 100bps for a foreign currency transaction; everybody with a 0% FTF card is doing it right now (especially for high volume corridors like EUR/USD).
> No fees, plus 1% or less FX spread on major currencies. (My preferred credit card promises that.)
You bank can't promise what they don't control; Visa and Mastercard determines FX rates, and they're below 100bps because of an old settlement. So the bank is promising you something they had no role in creating; you're the one here falling for the marketing, not everybody else.
I would argue that you are not looking hard enough if you're paying 1% on FX card transactions.
All you need is a multi-currency card from one of the Fintechs, that will get you down to 0.5% or less without any effort.
Of course if you're the sort of person who likes taking cash out of ATMs on holiday then you'll have to look harder, since there is usually a surcharge on ATM withdrawls. But even then its not impossible.
High-end businesses accept Amex, because it's worth it. Major chains can probably negotiate good deals. Tiny/seasonal businesses often use middlemen like Zettle that charge high fees and accept almost every payment method imaginable. Those in the middle who use traditional payment terminals and pay list prices may still avoid Amex due to the high fees.
Visa's highest tier cards (Visa Infinite cards, such as the Chase Sapphire Reserve), already have higher fees than the Amex Platinum. The difference is, Visa won't let merchants ban single cards (you have to accept ALL Visa cards), while banning Amex meaning you are banning mostly high tier cards and losing nothing on the low end.
With Amex, Amex themselves are both the issuer and the acquirer, so there is no interchange to regulate.
https://curia.europa.eu/jcms/upload/docs/application/pdf/201...
The foreign transaction fees are steep.
The beauty if going with AMEX, if that's what they'll do, it that it's a one stop shop. No need to go through a bank to issue a credit card, just deal with the credit card company directly. Currently the card is pretty much useless, but it does fit Apples way of doing things, cutting out the middle man.
For American Express it could also help make them relevant as a card company again. If they have plans to expand beyond the US, this might be a good way to do it. Companies will want to be able to accept Apples card, even if that means signing up with AMEX. Then in a few years, AMEX can start pushing their own branded cards which will now be more widely accepted.
Edit: typo
visa and mastercard are 2-3%, amex is 5-6%. there's no upside for merchants to accept transactions where they have to pay double the processing fees
The payment processors I'd be looking at offer merchants rates of 0.125% for girocard, 1.39% for VISA/MasterCard, and 6.2% for AMEX.
https://eur-lex.europa.eu/EN/legal-content/summary/fees-for-...
https://politics.stackexchange.com/questions/48519/why-are-a...
High fees are what Apple uses to offer such “great benefits” with their existing card. If they want to expand to Europe, the only cards enabling that would be Amex, or Diners (which is even less accepted I think).
Numbers below are only looking at the percentage, not the flat per txn fee or the other fees like assessments, etc... Only apply to the US. Also assuming you do less than 1 million a year in card volume.
First let's look at actual merchant services costs:
Stripe, Braintree/PayPal (online) you pay the same fee for all cards. Around 2.90%
Wells Fargo (in-person) charges the same rate for all cards until you are high volume. Around 2.40%
Chase (in-person) charges the same rate for all cards until you are high volume. Around 2.60%
Bank of America (in-person) charges the same rate for all cards until you are high volume. Around 2.65%
Now let's look at the actual amount the card issuer charges for a restaurant to accept a card (assuming you're working with an ISO that does OptBlue, all the above do). The markup you pay your merchant services provider is added on top of this.
Amex: 1.60% - 2.85%.
Visa: 2.10% - 2.70%.
MasterCard: 1.85% - 2.00%.
https://www.mastercard.us/content/dam/public/mastercardcom/n...
https://usa.visa.com/content/dam/VCOM/download/merchants/vis...
Amex acceptance in the US is basically ubiquitous, and how would a new type of Amex change things abroad?
That upside might be Amex's uncapped EU credit card interchange, but that would very likely not apply to a co-branding scheme with Apple: https://www.headforpoints.com/2018/02/08/american-express-eu...
Not data driven, just been to a lot of countries for extended durations.
The random restauranteur or merchant that doesnt take it is just as rare and random in both environments.
(It will help you if the merchant says "we don't take Amex" but their terminal actually does, though. Surprisingly common at small shops.)
What APR is your baseline for long term savings? I'm interested in where you see significantly higher APR savings accounts because the Apple Card Savings Account is 400x my previous savings account APR.
Not sure if that counts as significant or not, but I figure it adds up.
Apple Savings: 4.15%
CIT Bank 6-Mo CD: 4.88%
CIT Bank 18-Mo CD: 4.5% I think?
So you can definitely do better than the Apple Card, but to some extent you're paying bankers to do what I do manually every 3 months. (You just pay them in "spread"; they're buying the same CDs I am, but keeping some of the profits to themselves. And letting you withdraw the money whenever you want, not just when the underlying CD matures. I get only a small amount of interest on my "what if I get fired and need to eat for 3 months until the next CD matures?" fund, sitting in my checking account.)
I never bother with actual savings accounts because in a year or two interest rates will be back down to 0.0000001% or whatever, in which case just holding the cash in my brokerage account is easier. (At least it gets swept into an overnight account that earns 0.0000015% interest! Wow!)
In the last 10 years the Costco credit card used to be serviced by AMEX but now it's Citibank. Fidelity credit card moved from FIA Card Services (Bank of America subsidiary) to Elan Financial and became a Visa. The AARP credit card went from Chase to Barclays. Those are just off the top of my head.