Apple Card is the subscription that pays you to use it

Posted:
in iPhone edited May 26
Apple Card works just like any other Apple Pay account, but the software experience Apple is creating around it to enhance digital banking represents both a new Services venture and also an additional reason for users to keep buying hardware. That's why Apple is paying its customers to use it.


Apple Card and the reverse subscription

Compared to the other new Services Apple announced in March -- Apple Arcade video games, News+ periodicals and TV+ original content -- Apple Card isn't a subscription. Apple Card is actually the opposite of a subscription: using it pays you back via Daily Cash rebates.

This "free money" comes from the merchants who accept credit cards. Whenever you pay with any card, the merchant accepting your payment pays the card-issuing bank a fee. It's common for card issuers to offer buyers "cash back," which returns part of the fee collected to the buyer.





The cash back idea -- along with no annual fee -- was devised by Sears in the mid 80s when it introduced Discover in an attempt to break into the card business. By offering users cash back, it could attract customers otherwise happy with their existing cards. Additionally, the cash back promotion served as an incentive to spend more.

The idea of using credit to not just finance but incentivize consumer behavior was also explored by Apple. A 1984 Byte advertisement outlined "Apple Card," a credit card exclusively for buying "Apple Computers, peripherals and software." Twenty years later, Steve Jobs proposed a vanity credit card that paid out points for use in buying iTunes songs. Today a variety of cards offer some system of rewards in the form of points, airline miles, cash back or other incentives.


A less advanced Apple Card, 35 years ago, also sought to influence buyer behavior.


Apple's original spin on the idea of cash back is to make rebates immediate and obvious, so you are aware that you are "getting money" every time you use it. But it also has a second component: rather than simply applying your cash back to your account, the Daily Cash credits are loaded onto your separate Apple Pay Cash account. That's the personal spending account Apple earlier set up with Discover to enable free person-to-person Apple Pay transactions similar to PayPal or Venmo.

Offering its vast installed base of the world's most affluent buyers a new Apple Card account is therefore a two-pronged strategy to induce Apple Pay transactions: when you make a purchase, a small rebate is applied to Apple Pay Cash, encouraging you to use that money to pay a friend or split a tab using a second Apple Pay transaction.

Apple wants to encourage NFC Apple Pay transactions, but more importantly it wants to make using Apple Pay routine. The company has previously noted that in countries where there's an NFC transit system driving a critical mass of transactions, Apple Pay is more rapidly adopted as a payment system for other purchases, too.


Apple Card's "Daily Cash" feature also promotes the use of Apple Pay Cash

Apple Pay and NFC vs the Mag Stripes

Apple Pay has been working to push the world toward more secure NFC transactions, which never expose your account number and protect the near field wireless transaction with an encrypted conversation between the terminal reader and a device's silicon "secure element."

However, much of the world -- including a lot of the United States -- is still stuck in the really old world of 1960s-era magnetic stripe transactions, which requires a physical card with a stretch of old cassette tape stuck on the back that can be read by a magnetic head in a credit card swipe machine.

That status quo at the launch of Apple Pay in 2014 informed Samsung's plans to acquire LoopPay, a company that had developed a way to fake a magnetic swipe by generating an encoded magnetic field conveying the same data recorded on physical credit cards.

Apple -- like Google -- focused entirely on NFC, meaning that if you have a card enrolled in Apple Pay and a vendor doesn't accept NFC payments, you have to pull out your physical card to either swipe it or insert it to use the card's EMV chip.


Rather than try to retain compatibility with old mag stripe readers, Apple built an NFC-only system for iOS with an archaic card to serve as a legacy shim


Apple wasn't simply trying to move all transactions to its devices; it was purely interested in promoting NFC as the payment solution. One of the benefits of only supporting NFC is that unlike Samsung, Apple doesn't have to include and support a second mag stripe reader system on its devices, now and into the future.

Apple is notorious for killing legacy and aggressively dragging its users kicking and screaming into the future. If the world were being lead by Samsung, we would never need to phase out mag stripes, and probably wouldn't. But by shifting its large, affluent base of users exclusively to NFC payments, Apple can make the future happen sooner, just as it did back in 1998 with USB, and now with USB-C.

Many pundits found it very convincing that Samsung would outperform Apple in mobile payments by offering legacy support for the once-ubiquitous old mag swipe readers. Three years after it adopted LoopPay's technology on its Samsung Pay enabled phones, however, Samsung's share of mobile wallet transactions was at 17% compared to 77% for Apple Pay.


In 2014, it looked like LoopPay was going to help Samsung Pay beat Apple Pay.


Certainly part of that disparity is due to Apple's much larger installed base of premium users. Virtually all modern iPhones in use support Apple Pay; Samsung Pay is limited to the company's higher-end Galaxy S and Note flagships, a much smaller base of users that's only about a sixth of all Samsung phone buyers. That's another example of how Samsung's impact on the future of tech is far lower than its shipments would suggest.

However, NFC use isn't simply a matter of technology availability. Google pioneered NFC support for Android long before Apple Pay was introduced, and yet despite broad support for NFC on various Androids, the same report noted that Google Pay adoption was only at 6%.

The real challenge for inducing NFC adoption wasn't merely rolling out technology. It was changing behavior, both in convincing buyers to use it and in convincing banks and merchants to support it. That's been the task of Apple VP Jennifer Bailey, the executive in charge of Apple Pay.

It certainly helped Apple that Google had spent years and tons of money trying to promote NFC. However, Bailey's group has also worked to promote Apple Pay to users. Most recently it has worked to link Apple Pay to common transactions, notably transit fares and the area of "access," which uses NFC to enable campus, hospitality and enterprise Wallet app ID cards to open doors as well as make payments.

NFC is used at Apple Park to control access. Apple has also issued NFC badges to attendees at its Worldwide Developer Conference, but these aren't loaded into Wallet because it appears there's currently no way to install a globally unique, non-transferable pass to a specific device. We will likely hear more about Apple Pay and NFC at WWDC19, which is now just over a week away.

The next article takes a closer look at the physical Apple Card that users will be issued and how even this legacy shim acts to promote Apple Pay as the preferred transaction system.
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Comments

  • Reply 1 of 33
    JWSCJWSC Posts: 438member
    I’m in the market for a new 27 inch iMac.  Doesn’t have to be the fastest processor but I do want SSD storage.  The day I get my Apple Card is the day I get my new iMac.
    lostkiwiwatto_cobra
  • Reply 2 of 33
    macguimacgui Posts: 1,262member
    JWSC said:
    I’m in the market for a new 27 inch iMac.  Doesn’t have to be the fastest processor but I do want SSD storage.  The day I get my Apple Card is the day I get my new iMac.
    It'll be a Series 4 Watch and mini for me.
    watto_cobra
  • Reply 3 of 33
    22july201322july2013 Posts: 667member
    Can the Apple Card be used by companies as their access card to let employees get into offices that are behind doors which are unlocked by cards and card readers? Just an idea.
    watto_cobra
  • Reply 4 of 33
    My only complaint is the titanium card. I mean it’s cool and all, but I don’t really want to have something in my wallet heavier than a plastic card. But I’m in Canada so it probably will be a long time before it’s available here anyways. Still waiting for Apple Pay Cash ffs.
    lostkiwiwatto_cobrajony0
  • Reply 5 of 33
    dedgeckodedgecko Posts: 96member
    The Marriot Bon Voy App seems to be doing this as well, or at least it appears to be. I open the app, tell it that I want to unlock my hotel room door, it says it’s ready, and I place my X against the door sensor - rrrrr-click!  And I’m in!  Slick shit!
    watto_cobra
  • Reply 6 of 33
    AF_HittAF_Hitt Posts: 77member
    dedgecko said:
    The Marriot Bon Voy App seems to be doing this as well, or at least it appears to be. I open the app, tell it that I want to unlock my hotel room door, it says it’s ready, and I place my X against the door sensor - rrrrr-click!  And I’m in!  Slick shit!
    The Hilton app does this too, it’s awesome! Another nice benefit is that I can check in to my hotel room the day before, even pick my room in some cases, and never have to see the front desk! Everything is done in the app. It even allows access to the parking garage through the app too!
    lostkiwistompywatto_cobra
  • Reply 7 of 33
    apple ][apple ][ Posts: 8,656member
    My only complaint is the titanium card. I mean it’s cool and all, but I don’t really want to have something in my wallet heavier than a plastic card. But I’m in Canada so it probably will be a long time before it’s available here anyways. Still waiting for Apple Pay Cash ffs.
    Maybe they'll make a special Canadian edition just for you made out of premium plastic. :#

    To be honest, one of the reasons I want one is precisely because it's made out of titanium. All of my other cards are plastic, so this one will be different.

    I'm not worried about the weight at all. It's not like it's going to weigh 5 lbs.

    According to a quick search I just did, there are a whole bunch of metal credit cards available on the market and the weights range from 10 grams - 27 grams. Not exactly earth shattering weights we are talking about here.
    netmagelolliverwatto_cobrajony0
  • Reply 8 of 33
    iqatedoiqatedo Posts: 1,599member
    In Australia, NFC is almost ubiquitous. I sometimes venture out without my wallet. Public transport uses dedicated NFC cards though which I'd be very happy to lose.
    lostkiwisteveaulolliverwatto_cobra
  • Reply 9 of 33
    apple ][ said:
    My only complaint is the titanium card. I mean it’s cool and all, but I don’t really want to have something in my wallet heavier than a plastic card. But I’m in Canada so it probably will be a long time before it’s available here anyways. Still waiting for Apple Pay Cash ffs.
    Maybe they'll make a special Canadian edition just for you made out of premium plastic. :#

    To be honest, one of the reasons I want one is precisely because it's made out of titanium. All of my other cards are plastic, so this one will be different.

    I'm not worried about the weight at all. It's not like it's going to weigh 5 lbs.

    According to a quick search I just did, there are a whole bunch of metal credit cards available on the market and the weights range from 10 grams - 27 grams. Not exactly earth shattering weights we are talking about here.
    My ultra slim wallet contains a MC, Amex, drivers license, Costco card, and maybe a $20 bill for emergencies, and that’s it. Loyalty cards, and everything else is in Apple Wallet, so I’m not interested in any added bulk or weight no matter how small it may be. I use my watch or phone for 99% of my purchases and only carry the MC/Amex as backup for the 1% of the time I can’t use Apple Pay. I look forward to the day a digital DL comes along and completely eliminates the need for a wallet at all. Ive never had, or held a titanium card, so I’m probably imagining a larger difference in weight and my concerns of extra bulk will be unwarranted.
    watto_cobra
  • Reply 10 of 33
    Rayz2016Rayz2016 Posts: 4,604member
    My only complaint is the titanium card. I mean it’s cool and all, but I don’t really want to have something in my wallet heavier than a plastic card. 
    Today’s urban youth is the target market. They want a credit card that can get them a tall skinny soya latte, but can also be used in a knife fight.  
    watto_cobra
  • Reply 11 of 33
    Rayz2016Rayz2016 Posts: 4,604member
    Well, there’s karma for you. Having made a very bad joke about today’s youth, I came across this. 

    https://m.youtube.com/watch?v=HQ1n6wok500&feature=youtu.be

    I salute you, young sir. 
    watto_cobra
  • Reply 12 of 33
    apple ][apple ][ Posts: 8,656member
    elfig2012 said:
    looks AppleInsider is sponsored by Apple....
    You probably shouldn't have used bold for your comment, because all it does is enhance the dumbness of the comment, making it twice as dumb.

    This is an Apple centric site, of course there are going to be articles and stories about one of the most anticipated Apple services to come along in a while.

    If you're looking for negative Apple coverage, then you're probably on the wrong site. I certainly wouldn't come here if this wasn't a pro-Apple site. I'm sure that there are plenty of other places to visit if you're looking for Apple bashing stories and fake news.

    I'm an Apple fan and nobody's paying me or sponsoring me.
    mwhitecharlesgresmacxpressJWSCStrangeDaysMisterKitnetmagelolliverwatto_cobra
  • Reply 13 of 33
    apple ][apple ][ Posts: 8,656member
    My ultra slim wallet contains a MC, Amex, drivers license, Costco card, and maybe a $20 bill for emergencies, and that’s it. Loyalty cards, and everything else is in Apple Wallet, so I’m not interested in any added bulk or weight no matter how small it may be. I use my watch or phone for 99% of my purchases and only carry the MC/Amex as backup for the 1% of the time I can’t use Apple Pay. I look forward to the day a digital DL comes along and completely eliminates the need for a wallet at all. Ive never had, or held a titanium card, so I’m probably imagining a larger difference in weight and my concerns of extra bulk will be unwarranted.
    I use an ultra slim wallet too, and I'm not worried about it.

    And you do know that you don't have to carry the Apple Card in order to use it. It'll be on your phone and watch wallet. You would only need the physical card if you intend to use it in a place that doesn't accept Apple Pay and you wish to use that specific card.
    netmagelolliverwatto_cobra
  • Reply 14 of 33
    macguimacgui Posts: 1,262member
     
    apple ][ said:
    My only complaint is the titanium card. I mean it’s cool and all, but I don’t really want to have something in my wallet heavier than a plastic card. But I’m in Canada so it probably will be a long time before it’s available here anyways. Still waiting for Apple Pay Cash ffs.
    Maybe they'll make a special Canadian edition just for you made out of premium plastic. :#

    To be honest, one of the reasons I want one is precisely because it's made out of titanium. All of my other cards are plastic, so this one will be different.

    I'm not worried about the weight at all. It's not like it's going to weigh 5 lbs.

    According to a quick search I just did, there are a whole bunch of metal credit cards available on the market and the weights range from 10 grams - 27 grams. Not exactly earth shattering weights we are talking about here.
    My ultra slim wallet contains a MC, Amex, drivers license, Costco card, and maybe a $20 bill for emergencies, and that’s it. Loyalty cards, and everything else is in Apple Wallet, so I’m not interested in any added bulk or weight no matter how small it may be. I use my watch or phone for 99% of my purchases and only carry the MC/Amex as backup for the 1% of the time I can’t use Apple Pay. I look forward to the day a digital DL comes along and completely eliminates the need for a wallet at all. Ive never had, or held a titanium card, so I’m probably imagining a larger difference in weight and my concerns of extra bulk will be unwarranted.
    'Ultra-slim wallet' LMAO  With all that crap in it, you may as well carry a trucker's billfold replete with rubber bands and belt chain.

    If somebody slipped out one of those plastic cards out and put in the Apple card, you'd never feel the difference.. Ever. You aren't that good. Nobody is. Read up on one of the more notable properties of Ti.

    Unwarranted bulk. That's hilarious. :D :D  :D
    StrangeDaysnetmagelolliverwatto_cobra
  • Reply 15 of 33
    knowitallknowitall Posts: 1,329member
    My only complaint is the titanium card. I mean it’s cool and all, but I don’t really want to have something in my wallet heavier than a plastic card. But I’m in Canada so it probably will be a long time before it’s available here anyways. Still waiting for Apple Pay Cash ffs.
    A titanium card weighs less than a plastic one.
    macxpressJWSC
  • Reply 16 of 33
    freediverxfreediverx Posts: 1,407member
    I was interested until I learned it doesn't offer buyer protection (extended warranties and price protection) on purchases. Seems Apple left that out since it conflicts with their desire to sell overpriced ApleCare.
    chemengin1
  • Reply 17 of 33
    freediverxfreediverx Posts: 1,407member
    knowitall said:
    My only complaint is the titanium card. I mean it’s cool and all, but I don’t really want to have something in my wallet heavier than a plastic card. But I’m in Canada so it probably will be a long time before it’s available here anyways. Still waiting for Apple Pay Cash ffs.
    A titanium card weighs less than a plastic one.
    Titanium is not lighter then plastic, lol.
  • Reply 18 of 33
    GeorgeBMacGeorgeBMac Posts: 4,506member
    Rayz2016 said:
    My only complaint is the titanium card. I mean it’s cool and all, but I don’t really want to have something in my wallet heavier than a plastic card. 
    Today’s urban youth is the target market. They want a credit card that can get them a tall skinny soya latte, but can also be used in a knife fight.  
    I appreciate the sarcasm there -- but you may be onto to something.
    The Apple Card does seem to be targeted more towards young people rather than older, more experienced card users who have access to high end cards.

    For myself, it doesn't seem to offer much more than what I already have.
    It's cash back is nice -- but is only slightly better (if any) than what I get using several cards to exploit special deals (Discover currently offers 5% at gas stations).
    And, while its reporting is nice, it can't top what I already have in Quicken.  Actually, it can't even come close.

    And, for Apple Pay, it simply doesn't seem to offer any more than I already have.

    But, all that said:  I'll probably get one anyway -- so I can dump one of my lower performing cards.

    Plus, in addition, my gut is telling me that Apple Card is not the end but the beginning of Apple stepping into FinTech in a strong and big way.  It's getting their foot into the door.   Next step:  Buy a bank and open up deposits and loans?
    designrwatto_cobra
  • Reply 19 of 33
    wood1208wood1208 Posts: 1,959member
    Future plan behind Apple Card may not be simply giving instant cashback. Part of it, Apple may provide more services like FinTech Square. By habit, I(and many of us) so used to using plastic cards at a retailer that automatically take out plastic card to pay even though I had all my cards loaded into ApplePay wallet. Now, it's other-way that I use ApplePay at every places accepted and forget that I have plastic cards in my physical wallet. What a change!!!
    watto_cobra
  • Reply 20 of 33
    StrangeDaysStrangeDays Posts: 7,625member
    elfig2012 said:
    looks AppleInsider is sponsored by Apple....
    Looks like another hater is lost and wandered to the wrong website.
    GeorgeBMaclolliverwatto_cobra
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