> https://www.wsj.com/articles/goldman-is-looking-for-a-way-ou...
The earlier story from June suggested Amex might take it over.
Pretty sure I must be misunderstanding you. Do you really mean to suggest that Apple's reaction to Goldman breaking up with them was to start briefing the press that they dumped Goldman first with the intention of somehow hiding or diluting the poor default performance of the card?
0. Do you mean charge off, or default, or delinquency? I think you mean charge off rate, so I'll address that, but let me know if not - you did say "default rate", which is almost always higher than net charge off (default is whenever a consumer fails to pay on time, net charge off is effectively bad debt hitting 6 months of arrears: after six months it's unlikely to be defrayed without debt recovery action). Anyway, assuming you meant net charge off:
1. Apple cannot possibly avoid disclosing the charge off rate of this program to potential partners during diligence. (Quite the opposite of a cover-up, the commercial agreement between Apple and any new partner will likely attempt to explicitly codify management's representations on this metric, and scope what happens if performance is not as described. Other than aggregate balance information I cannot think of a more important metric for an interested party to understand, nor one more likely to result in the demise of the agreement and fixed penalties for misrepresentation if it is presented deceptively.)
2. More importantly, the information you seem to think Apple is preoccupied with keeping out of the public eye appears to be publicly available in Goldman's SEC filings.[^1]
3. More importantly still, Apple is understood to have made several stipulations of Goldman at the outset of the deal which are likely to contribute to higher than average charge off rates: firstly, Apple and Goldman do not pursue debt recovery as aggressively as other card issuers, which is meaningful given that charge offs, unlike defaults, are judged over 6 months.
Secondly, Apple seems to have encouraged Goldman to "get to a yes" on lending to individuals who otherwise may not have qualified for a credit card. (Low credit scores, high risk demographics.)
These are likely to be points of negotiation with any new partner, but it's trivial to see why Apple card's net charge off rate (2.93%) is in line with subprime cards like Capital One (2.2%) rather than JP Morgan's 1.47% and BoA's 1.6% when you consider that they deliberately accept high risk profiles and deliberately avoid pursuing them as robustly as JP Morgan and co.
(BTW, saying "[Apple card customers] have double the default rate of other cards" seems misleading to me – I can only find one such example, and it requires me to round up to 2x, but I may not have the same data as you? I think this should at most be "some other cards", given that e.g. Discover is significantly higher than Apple at 3.5%…)
4. There's some evidence to suggest that net charge offs spike during the infancy of new lending programs like Apple card, because net charge offs spike when individual consumers get new credit cards (for a lot of reasons), before cohorts mature and a steady state performance is reached. (This is also a consideration in multiple predictive models aiming to forecast net charge-off rates.)
These are the good (to me) reasons that Apple is unlikely to be attempting to spin a yarn to the press to "save face".
Without any inside information, I can also see reasons to believe that Apple did terminate the relationship with Goldman proactively, although it seems to be indisputable that Goldman was attempting to exit the business:
a. It has been widely reported that the risk and ADM logic was so poor at launch that Tim Cook was unable to qualify for a card. This is not great for Apple's image.
b. There were multiple horror stories in the press about various forms of prejudicial evaluations: DHH's partner springs to mind. This is not great for Apple's image, particularly when they were preoccupied with making Apple card accessible to the widest possible range of consumers (i.e. high risk).
c. Goldman screwed up withdrawals so badly that Apple began issuing $100 "gifts" to people's accounts as compensation. This is not great for Apple's image.
d. Goldman's infrastructure is inflexible and Apple negotiated weird consumer-centric benefits (e.g. bills at the start of the month, not on a rolling basis: Goldman's customer support teams reportedly can't cope with this concentration of demand). Apple does not play particularly well with others on matters like this.
e. *Edit:* Totally forgot to add that Goldman's consumer credit division is literally being investigated by the CFPB "and other governmental bodies relating to investigations and/or inquiries concerning GS Bank USA’s credit card account management practices." Cool.
Finally, I'd say that Goldman's inner turmoil and urgent desire to exit its consumer businesses is another reason for Apple to want to get out early: consumer has been an unmitigated disaster for Goldman, racking up billions of losses/write-downs, prompting a very embarrassing strategic retreat and eroding much of shareholders' confidence in David Solomon.
I can't think of many reasons why Apple would want to continue the agreement through 2029, particularly given that Goldman somewhat publicly shopped the sale of the program to American Express.
Goldman Sachs is not very good at consumer banking and does not want to do it. That makes them a lousy partner for Apple's consumer banking proposition, and I suspect this story is exactly what it sounds like: Apple putting Goldman out of their misery.
[^1]: https://www.sec.gov/Archives/edgar/data/886982/0000886982230... p168, states the net charge off ratio on consumer credit cards to be 2.8%.
As anyone who has dealt with vendor integrations would tell you, when one side has a list of demands about how something should work, you know it's going to be a headache. Though I am still legit confused as to how GS ended up being the partner (beyond the cynical "every other company laughed Apple out of the room", which is not a great sign for Apple either!)
I have no inside info, but like you I know that GS is pulling out of consumer stuff in general. Let's just say that in a relationship where GS was constantly, constantly, constantly leaking complaints to the press, it's not a huge logical jump to think that GS would want to end such a relationship.
This is all just gossip of course. None of this matters, and I have no horse in the race. It's just fun to think about.
Perhaps we misunderstand each other. This is what you said:
> Apple wants to save face because "the leads we brought GS have double the default rate of other cards" is a bad look for future partners.
I believe that I demonstrated that this conspiracy theory – which is entirely unsubstantiated, and which seems to have been largely refuted given that the charge off data is public – cannot possibly be the reason.
Do you still believe that Apple is somehow trying to conceal charge off rates, having read my post?
> it's not a huge logical jump to think that GS would want to end such a relationship.
This is a very reasonable point, but it is not the one you made. It's totally fine to not be au fait with the minutiae of consumer credit reporting at Goldman Sachs, but it would help me to calibrate what your contention is if you could address specific points instead of abstracting to generalisations when it appears to me that you are entirely misinformed.
Would suck for retailers though. Amex fees among the highest when compared to other networks and issuing banks.
On the consumer side, I tend to see Amex as not widely accepted. Especially drops when traveling.
Would be much better if Apple would get with MasterCard. Based on my experience, no issues anywhere.
Supposedly this exclusively allows them to negotiate down the fee really low.
...otherwise WalMart and other major retailers (Amazon?) would have partnered with a single credit-card network to benefit too
Sure that works if you’re selling perfume or handbags, but if you’re a family restaurant then rich people and regular people eat the same quantity of food, your margins are low, why accept it?
Moreover Amex is pretty rare outside of certain markets. If only foreigners use Amex, and your business is not catered to foreigners, then you probably aren’t going to support it or in some cases even know what the hell it is.
The issue with other cards here(Germany) is, everything is fake credit, i.e. my Visa/MasterCard is just "Debit" and immediately books paid amount from my bank and some also comes with hefty monthly fees because they issue a shiny/designer "Debit" card. My bank indeed issues a real MasterCard but the monthly fees are unreasonable added on top of my already expensive checking account fees and it has very crappy app where trying to temporarily (un-)block my card needs calling their support and waiting in line while amex app gives me these features immediately on app.
Amex however gives me real credit(though they book the whole amount on start of next month) and also payback points in exchange for minuscle monthly fees but they have free same card with less sexy design which doesn't signal my ego correctly.
I think money transfer plays a big role. Germany never had a culture of cheques and switched from money to money transfers early on (before WW1), so most stuff in Germany either I pay by money transfer ("Ueberweisung") or a company takes the money from my account ("Bankeinzug") - like mortages, cars, rent, electricity, travelling etc. In the US credit cards partially replaced cheques (and added credit, duh!), which was never something in Germany. The only use of cheques in Germany were traveller cheques when travelling - and then only to get money at the hotel.
Even for the catalog business people payed by invoice and money transfer (and the catalog companies gave you credit).
What is left, like groceries, is often paid in cash.
In Europe, banks don't like you taking out credit cards. Borrowing money is viewed as a weakness and it's best to never do it.
In America it's considered a virtue to have many credit cards and shuffle them so you can be seen to pay it off. Really weird.
Steal (or mischarge) my credit card, run up 10k in charges, no problem. No money ever comes out of my bank account and I dispute the charges/report the card stolen.
Steal my debit card, run up 10k in charges...there's 10k gone out of my account until the bank resolves the situation.
Don't know about that, "Europe" is a big place. Credit cards are pretty common in the UK at least, and stuff like balance transfer cards (for shuffling) are too. Maybe not to American extents, but hardly a weakness.
In fact, looks like more people in Iceland, Norway and Switzerland own credit cards than the US: https://www.statista.com/statistics/675371/ownership-of-cred...
I don't believe this about Switzerland though. They are a very typical people that abhors spending money you don't have. But I think they may be counting debit cards there.
Get yourself an N26 account/card if it bothers you too much. It works as a Mastercard (still the "Debit" kind though), has no account fees and you can do basically everthing from within their app.
Plus, probably lower fees…
1) the backup is likely a high end rewards / corporate card whose fees are as high or higher than Amex for most categories of spend; and
2) it’s kind of weak for the last interaction with a business be them saying they won’t take your preferred form of payment because they imagine it boosts their margin by .3%.
rich people can afford adding two half strips of bacon for almost half again the price of the burger. they can also afford to leave a third of it on the table (daaaang that off-label semaglutide does magic) and then do it all over again tomorrow.
doesn’t mean they will. but they could. they have the means to do so.
that is what amex is advertising, even if it isn’t quite what they provide.
Also the damn thing never works in machines, like for public transport tickets :( Which is often a far better option than taxis.
I have to use that card for business expenses and I hate it so much.
As a B2B SaaS owner, I don't accept Amex, because they make me jump through extra hoops. I process all cards through Braintree, but Amex requires an extra agreement directly with them, and they make the process of signing those agreements really difficult and obnoxious. I have better things to do with my time.
I did a quick search, here's a partial list of what was required:
· Please provide a scanned copy of Passports for authorized signers and Beneficial Owners.
· Please provide a scanned copy of Certificate of incorporation
· Please Provide a Completed Multi Currency form, Attached
· Please provide a completed and Signed Side Letter, Attached
· Please provide a completed and Signed W8 BEN form, Attached
(BTW, I am not based in the US, so "W8 BEN" reads like Klingon to me).
...is "extra hoops" and "really difficult and obnoxious"
> (BTW, I am not based in the US, so "W8 BEN" reads like Klingon to me).
If only there were technology to look up what 'W8 BEN' means in seconds
So yeah, sometimes it fucks things up.
It just so happens that the UK is therefore an incredibly easy place to dodge tax if you are so inclined.
> ...is "extra hoops" and "really difficult and obnoxious"
Compare with how willing US citizens or businesses are to comply with similarly basic things when another country asks for them.
Even if I don't sell in the US. Even if I never go to the US. Even if I have no company in the US.
Imagine everyone in the US selling on Amazon needing to sign a German form, and a French form, and a UK form, and a Spanish form etc. with no intention to sell in these countries.
And the most incredibly annoying thing about it is that for most UK companies (dont' forget if you are a limited company you need the W-8BEN-E variant!) you probably only have to fill in about 5 short fields. So it only really needs to be half a page. However working out which fields is virtually impossible and I'm still not entirely sure I fill it out correctly.
For a lot of transaction sizes it isn't really worth the extra effort, particularly as filling in forms like the W8 BEN E is the kind of work people tend to pay their accountant - quite possibly more than the value of the SaaS subscription - to do. (As someone who happily prepares his own tax returns once a year, the W8 BEN E is not a particularly straightforward form to fill in for comparatively little benefit)
I am a B2B SaaS business based outside the US. Tax withholding is not applicable between my customers and me, or at least it is not my responsibility. VAT is solved by reverse charge.
I do have payment processing set up (with Braintree). The above AMEX requirements were on top of that — a completely separate procedure, just because AMEX feels different.
As to the W8 BEN discussion, be careful with your biases: it might seem "obvious" to you that everyone needs to comply with whatever IRS requires of US businesses, if you live in the US. But I have customers in 44 countries. If you are American, before you state that something is obviously required, take a look at this (from recent E-mail):
"Self-Certified Filled Form 10F will be required"
"Permanent Account Number or Aadhaar Number of the assessee if allotted"
"Period for which the residential status as mentioned in the certificate referred to in sub-section (4) of section 90 or sub-section (4) of section 90A is applicable"
Still looks obvious? Those are from India, and I'm pretty sure these requirements seem totally obvious to my Indian customers.
Only nutters use Amex whilst travelling (or at least non-US nutters)
The double-conversion gotcha is a real killer.
Everything gets converted back via USD.
So for example, if you have a EUR Amex card and you go to the UK, the AMEX flow is: GBP -> USD -> EUR.
And they take, IIRC 3% from you on each leg of that double-conversion.
The Swiss Amex is a bit special anyway because its operated by Swisscard which is a JV between Credit Suisse and AMEX.
The only remaining “gotcha” that I run in to is sometimes a shop will try and get you to pay for something at the point of sale in USD instead of the local currency since they can (within reason but exorbitant) set the exchange rate. Tip- pay in local currency.
Not as far as I'm aware. It certainly happens with GBP-issued and having briefly looked at some of the agreements, it happens with various Asian issued cards too.
To clarify:
- If the transaction is in your "home" currency, you get charged in that.
- If the transaction is in USD, you get charged in that.
- Everything else is subject to double-conversion
If we receive a transaction or refund for processing in a foreign currency, we'll convert it into Pounds Sterling on the date it's processed (which may be different to the date of the transaction or refund).
This means that the exchange rate used may differ from the rate that applied on the date of your transaction or refund. Exchange rate fluctuations can be significant.
If the transaction or refund is in U.S. Dollars, we'll convert it directly into Pounds Sterling. In all other cases, we'll convert it into U.S. Dollars first and then into Pounds Sterling but we'll only charge one non-sterling transaction fee.Even now with contactless and chips (Amex has discovered chips right?) the only places I see Amex logos are 4+ star hotels and very posh restaurants. So it will be kinda useless outside the US.
Can't speak for the rest of Europe.
I’ve found the main difference being cash only venues versus card+cash accepted.
I just got back from Japan and traveled to Tokyo, Kyoto, Osaka, Hiroshima, Kawaguchiko, Miyajima, and it was somewhat rare to find a business that accepted cards but didn’t accept Amex, much to my surprise!