When Apple and Goldman Sachs—undisputed leaders in consumer tech and investment banking, respectively—teamed up to launch a cobranded Apple credit card in 2019, as part of Goldman’s broader strategy to enter U.S. retail banking, many expected it to be a runaway success.
“When that big Apple announcement came, it was a typical Silicon Valley deal, the new best in the world,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The attitude was, ‘This is going to beat everybody else.’”
Instead, it flopped. Fewer than five years later, Apple moved to sever the partnership. Goldman appeared blindsided by the poor credit quality of Apple’s cardholders, which fell well below industry norms. As credit losses piled up, so did tensions between the two companies.
There were also more mundane, yet critical, operational issues, including disruptions at the call center, that further strained the relationship.
“At Apple, everyone was billed on the same day, and that caused everyone to basically call on the same day,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “You’ve got to build 10 more call centers to be able to account for all these new customers that are coming in. It clearly didn’t seem like Goldman Sachs was ready for it, to be able to scale up to service the customers and abide by the contract that Apple wanted. It turned out to be a nightmare for them.”
The Airline Model
Javelin estimates that 29% of the nearly 600 million credit card accounts are cobranded. The model is simple: an issuer partners with a merchant to tap into its loyal customer base, offering targeted marketing opportunities. In return, merchants are compensated through rewards-based purchases, partner payments, and revenue-sharing agreements.
When they work, cobranded credit card alliances can last for decades, delivering value to both parties. The three major airlines—Delta, United, and American—have maintained issuer relationships (American Express, Chase and Citi, respectively) dating back to the 1980s.
So what makes these partnerships succeed, while other seemingly promising ones—like the alliance between Apple and Goldman—appear doomed from the start? Many factors play a role, but the most important one seems to be cooperation. Merchants and issuers that actively work to create mutual value tend to see their partnerships thrive.
Delta’s relationship with American Express was once so strong that, when Delta was on the brink of bankruptcy in 2004, it secured as much as $600 million in badly needed financing from American Express. Most of that came as an advance payment for miles that cardholders would eventually earn on their cobranded SkyMiles credit card.
“What keeps the airlines in business is these bank partners are spending millions of dollars to buy reward points, which then they can go back and offer to their customers,” said Danner.
Riley added: “This is a reliable income stream, and the airlines have what’s attractive to issuers, which is a very broad, loyal following of people who spend. That sets the foundation for a good relationship in the cobrand business. Within the airline industry, it’s friendly people and a process that works well.”
What Makes a Partnership Work?
There are two primary factors common to successful cobranding programs.
The first is what Riley refers to as the ability to play nice in the sandbox with your partner.” A cobranded card is, by definition, a team effort. A strong, long-lasting program must deliver benefits to both parties. The greater the mutual benefit, the more enduring the partnership is likely to be. If either the issuer or the brand is indifferent to the success of the other, the alliance is unlikely to last.
The second factor is being prepared to manage the fundamental aspects of running a card program.
“It’s critical for the issuer to take care of the small things, like posting transactions on time,” said Danner. “If you call the call enter, you should be able to talk to somebody within 10 minutes. If there’s an issue, it gets handled quickly. If the issuer is holding up their end of the bargain, the merchant shouldn’t have anything to complain about.”
As the Goldman Sachs example shows, a bank can’t just issue a card and expect the money to roll in. Customer service is a critical component—and one that becomes more challenging as the program scales.
Take Walmart, for example. When it partnered with Capital One in 2018, it brought along 10 million cardholders. By 2023, Walmart had filed a lawsuit to end the relationship, alleging that Capital One was failing to meet customer service expectations. A year later, a judge agreed, ruling that Capital One has not provided the requisite level of customer service promised in the 2018 agreement. That marked the end of the partnership.
Put Everything in the Contract
Typically, partners sign a contract that lasts between five and ten years. To ensure the merchant has a clear understanding of the service they can expect, it’s vital to document every expectation in the contract—down to the specifics like response times from the call center.
In the Walmart/Capital One lawsuit, Walmart noted that in a particular month, Capital One had mailed only 98.01% of replacement cards within five business days—falling short of the contractual requirement of 99.9%. When managing a portfolio of 10 million credit cards, a 1.89 percentage-point shortfall can have significant operational and reputational consequences.
The cobranding contract includes detailed service level agreements (SLAs) that cover all aspects of operating a credit card program. These SLAs specify conditions ranging from call center dispute resolution timelines to the chatbot technology that will be used.
“All this stuff is measured and tracked,” said Danner. “When an issuer starts to not be able to do those things, the merchant is going to have financial problems. It’s generally in the contract that if you don’t meet these SLAs, the issuer needs to pay the merchant X amount of dollars.”
Get the Right-Sized Partner
The partners have to be aligned in several key areas, and one fundamental consideration is size. Citigroup, the third-largest issuer of credit cards in the U.S., has a well-defined strategy focused on partnering with brands like Home Depot and Best Buy. That approach, however, doesn’t suit less-established merchants.
“If you’re a small business and you go to Chase and say you want a cobranded card, they are probably going to laugh,” said Danner. “You wouldn’t do enough purchase volume with customers for them to even care.”
Small and mid-sized issuers may offer a more suitable path. For small or medium-sized retailers, many fintech companies now provide end-to-end management of cobranded card programs, guiding them through the entire process of launching their own cards. These fintechs handle the complexities of working with issuing sponsor banks—relationships that retailers may not have or be familiar with.
Small and mid-sized businesses create opportunities for entities like Cardless, which works directly with retailers to launch cobranded cards. Cardless has a dedicated team focused solely on the merchant side of its credit card business, managing partnerships with banks to support these programs.
For example, a local merchant operating only in California might benefit from launching a cobranded program with a smaller, California-based bank. Similarly, Midwestern sporting goods chain Scheels has launched a cobranded card in partnership with the First National Bank of Omaha. While larger banks may not be interested in regional retailers like Scheels, the sheer number of small businesses presents a significant opportunity in this space.
“Smaller issuers have also built their infrastructure specifically around those accounts,” said Danner. “When you have a relationship with a merchant that is a substantial part of your books and a lot of money invested in that relationship, you’re going to work on that relationship.”
Understand the Structure
One of the small but critical missteps that doomed the Apple/Goldman Sachs card was Apple’s decision to issue bills on the same day each month. Issuers need to understand how merchants structure their payment processes—and adapt accordingly. Failing to do so can lead to serious operational headaches.
“The worst time to call a call center is Monday at lunchtime,” said Riley. “People have gotten through the weekend and now they’re dealing with their problems. The way the bank card business has solved that from the beginning of time is that you spread them out through the month.”
Most issuers offer a 20-day grace period for payments and stagger billing across 18 to 20 cycles throughout the month. This spreads the workload, ensuring that only a portion of the portfolio is billed at any given time. But with the Apple Card’s single billing day, that Monday became a nightmare—every cardholder with an issue flooded the call center at once.
“That’s indicative of how the card was not properly engineered,” Riley said.
Had Goldman Sachs anticipated this, it could have worked with Apple to restructure the billing cadence into something more sustainable. But as a relative newcomer to retail finance, Goldman seemingly failed to do its homework. In the end, the bank would have been wise to follow the Boy Scout motto: be prepared.
“A well-thought-out strategy is essential to make it work,” said Riley. “That’s the only way a partnership will work for both people, if it’s balanced and fair to both sides. That’s like any good relationship, right?”
