Apple Card in the UK appeared to move a step closer following Apple’s acquisition of Credit Kudos, a British fintech specializing in open banking and credit assessment technology. Although Apple did not announce plans to launch its credit card in the market, acquiring a company with access to UK financial data infrastructure could provide useful capabilities as Apple expands its financial services beyond the United States.
A UK Apple Card, however, would likely look different from its U.S. counterpart. One of the biggest challenges is the substantial difference in interchange economics between the two markets. U.S. interchange fees help support Apple Card’s cash-back rewards, but UK and European caps on consumer card interchange leave issuers with considerably less revenue from each transaction. That could force Apple and any local banking partner to rethink the rewards and benefits offered to British cardholders.
Apple appears to be closer to launching Apple Card in the United Kingdom following their purchase of Credit Kudos, a U.K.-based open banking startup. While no public announcement has been made, which is typical of smaller acquisitions, Engadget reports that Credit Kudos terms and conditions have been updated to reflect that it is a subsidiary of Apple. Ben Lovejoy explains in 9TO5Mac that the introduction of Apple Card in the U.K. will likely have different benefits than in the U.S:
Brits shouldn’t necessarily get too excited about the prospect of a UK Apple Card. Although the rewards offered seem generous by UK standards – 2% cashback on most purchases, and 3% with Apple and other select merchants – it’s unlikely these will be matched in Britain.
Lovejoy points out that the difference in interchange fees between the U.K. and U.S. create a large disparity in the benefits Apple could potentially offer:
So how can Apple afford to offer cash rewards of between 1% to 3%, depending on how and where you use it?
The answer is through what are known as interchange fees. These are fees that card companies charge to merchants whenever they take a card payment.
In the US, interchange fees are relatively high. They typically start at around 0.8% of the transaction plus 15c, and rise as high as 2.95% plus 20c for certain purchase types made with ‘premium’ cards. And Apple Card, despite being available to most people, and charging no cardholder fees, is classified as a premium card.
European interchange fees (including the UK) for consumer cards are capped at 0.2% for debit cards, and 0.3% for credit cards. That’s it. So Apple – or its European partner banks – would only have that much margin to play with.
Apple Card in the UK could represent another significant expansion of Apple’s growing financial services ecosystem, and the Credit Kudos acquisition gives the company additional expertise in open banking and credit decisioning. Still, entering a new credit card market involves more than simply replicating the existing U.S. product.
Lower interchange revenue could make Apple Card’s familiar cash-back structure difficult to reproduce in Britain. If Apple does enter the UK credit card market, its ability to adapt the product’s economics and benefits to local conditions will be critical to creating an offering that appeals to consumers while remaining financially sustainable.
Overview by Jordan Hirschfield, Director of Research at Mercator Advisory Group
