Last May, Mercator Advisory Group published a viewpoint which covered our thoughts on a potential credit card market entry by Goldman Sachs. According to several news sources, the new product co-branded with Apple, is now on its way to market. The Apple Wallet has yet to prove its market value. It is certainly cool, but will this force top lenders to ignore the Apple Wallet in an effort to not fund their new competitor?
- Apple AAPL -0.60% and Goldman Sachs GS -1.26% Group Inc. plan to start issuing this spring a joint credit card paired with new iPhone features that will help users manage their money.
- The card will be rolled out to employees for testing in the next few weeks and officially launch later this year, according to people familiar with the matter. The companies hope to lure cardholders by offering
- The Wall Street Journal reported last year that the companies planned to launch a joint credit card. It is a major push by Apple into the financial lives of hundreds of millions of iPhone users. It is also part of Goldman’s broader strategy to appeal to rank-and-file consumers.
- The credit card is Goldman’s first, and a heavy lift. The bank is adding customer-support call centers around the country and building an internal system to handle payments.
- The Apple Pay card will use Mastercard ’s payment network, which is the second-largest in the U.S. after Visa Inc., some of the people said.
Something to watch is how Goldman will position itself. I am still fond of the American Express model as an aspirational card. Long ago and far away, when I got my first Amex card, I felt like I arrived as a consumer. Karl Malden taught me to never leave home without it. Macy’s was my first credit card, then Citi Mastercard, but once I had an Amex, I was proud to use it because not everyone qualified. Chase has positioned their card just as well. No longer the offerings of David Rockefeller, Chase is now the provider to everybody for every financial need. The question with Goldman is will Apple help socialize the investment-bank model for the general consumer?
Apple’s prior relationship with Barclaycard soured so it will be interesting to see how the new relationship with Apple will proceed. Barclaycard is certainly not a newcomer to the cards business.
The WSJ notes that Goldman’s Marcus business has hit the $4 billion book in receivables but mass marketing consumer debt consolidation loans is different than blood and guts credit cards marketing. In cards, it is one thing to brag about the newest and shiniest credit card, but it takes infrastructure and policy management to survive the business with top card lenders such as Bank of America and Citi, who have been in the business since Day 1.
More to follow. Don’t cut up your Sapphire card yet!
But, one thing I know for certain is that Goldman is likely to do some local hiring to bring in some knowledge from their uptown and crosstown card rivals. As anyone in the card business will tell you, it is the mundane features, like credit policy, exception management, and risk control that ensure profits. Goldman faces some stiff competition by top lenders that will ensure their market entry will not be a piece of cake (or apple pie).
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group