The Goldman Sachs Apple Card is getting bigger and better, and now the co-brand will play in the BNPL market. The original Barclaycard Apple Card is on its way out as the issuer plans to convert the remaining Apple Rewards card into the new Barclays View Mastercard.
First, consider GS’ most recent operational results as shown in the Goldman Sachs quarterly report published July 13. Skip past the net revenue numbers, where 2Q21 YTD results were a whopping $33.09 billion, with net earnings at $12.32 billion, and you’ll find credit card numbers that would make any credit policy manager jealous. Credit card loan volumes advanced from $2 billion to $5 billion in a year. Credit card charge-offs were a sound 2.8%. There is still room for growth, but portfolio growth is hard to complain about. An interesting thing to watch is how deeply APL will integrate into the card. A POS option, selected at the POS and billed to the card? Or, a separate billed account?
The Apple Pay Later (APL) announcement will disrupt the disrupters. CNBC noted:
- Shares of Affirm, a company that offers lending services for retailers, dropped over 10% on Tuesday after Bloomberg reported Apple plans to offer a competing “buy now pay later” product in partnership with Goldman Sachs.
- Afterpay, an Australian company that also offers installment payments for products, fell over 7% on the report.
Competition in the space is shifting. The wild-west of payments is turning back to credit-risk-sensitive players. With PayPal’s excellent Pay-In-Four model now established in the U.S. and rolling out in other markets, Visa Installments taking over Canada, Mastercard Installments rolling out in Ireland, the fintech model of loose lending and service fees may soon feel pressure.
As we said in a recent report, traditional lenders will not easily cede the market. In fact, I would argue they are starting to play outside of their traditional comfort zone. Take a look at Citi in China, Santandar in Columbia, BNP Paribas in France. Financial institutions got the message, and they are in the game, too.
GS was shrewd with their Apple Pay Later move. With an early investment in Deserve, a Card as a Service platform (CaaS), they can now put it to good use. The digital-first platform is agile and can support BNPL or perhaps Apple Pay Later (APL).
It seems like everyone wants to be a BNPL these days. With a credit-worthy model, BNPL will have a stronger chance to become a part of the household budget and a reliable consumer credit product.
Overview provided by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
