Apple Card expected to earn Apple $1B annually with minimal risk to Apple

Posted:
in General Discussion
Apple Card could earn Apple $1 billion dollars in revenue within a few years of its launch, analysis of the upcoming credit card suggests, with the service likely to be "almost pure profit" to the iPhone maker while partner Goldman Sachs handles the vast majority of the risk and its operation.




Arriving this summer in the United States, Apple Card aims to offer consumers an easy-to-use credit card that is managed through their iPhone. The card offers a variety of benefits, including competitive interest rates, a lack of fees, features to help customers avoid debt or pay it down faster, and same-day usage after acceptance, which may make the card an extremely attractive proposition for iPhone users.

According to estimates from Alliance Bernstein seen by Business Insider, Apple Card may not necessarily offer the greatest potential revenue compared to other services announced at the same time, such as Apple News+, Apple TV+, and Apple Arcade. However, it is suggested that Apple Card may be a highly profitable project for the company with relatively little effort or risk on Apple's part.

Despite not charging fees, the card will earn money from transaction fees and interest from consumer balances. As with other co-branded cards, Apple will take a percentage of these revenues for itself, but while the number is usually in the range of 5% to 10%, it may be higher for Apple due to being a premium brand, Goldman Sachs being new to the credit card business in general, and Apple's work to integrate Apple Card with the Wallet.

"The split is likely more in favor of Apple given its relative negotiating leverage over Goldman Sachs," the report advises. It was revealed on Tuesday that Goldman Sachs faced competition from Barclays, Synchrony, JP Morgan Chase, and Citigroup, with the latter thought to have pulled out of the running over the potential lack of profits available to it.






In terms of revenue, it is estimated the two largest rewards cards available at the moment, Amex Premium and Chase Sapphire Reserve, each draw in somewhere in the region of $4 billion in annual revenue. Apple Card has the potential to reach this level, due to the "brand cachet" and the large number of iPhone owners who could use the facility.

It is estimated there will be 935 million iPhones in use globally by the end of 2019, giving it a considerable potential customer base if it does somehow go international with Apple Card, but for the moment the catchment pool will be far less.

While US consumers are generally wealthier than other markets, the card's instant cash-back and 2% cash-back rate for digital purchases is thought could appeal to low and middle-income earners.

Bernstein thinks Apple could earn $1 billion annually from Apple Card within three to five years if all goes well, though earnings in the "hundreds of millions" is more likely.

More beneficial to Apple is that this is revenue with minimal risk or effort required on its part, aside from integrating the functionality. As Goldman Sachs is effectively paying Apple to access its customer base, and is handling all operations, managing credit exposure, collecting bills, and dealing with customers, this "should be almost pure profit to Apple," the analysts believe.

Comments

  • Reply 1 of 19
    The overall risk in using a credit card is almost entirely on the shoulders of the user, not the bank. If it were the reverse, then banks wouldn't offer them.
    cornchip
  • Reply 2 of 19
    jimh2jimh2 Posts: 159member
    The overall risk in using a credit card is almost entirely on the shoulders of the user, not the bank. If it were the reverse, then banks wouldn't offer them.
    and Apple is 1-step removed from the bank so the risk is non-existent.
    cornchipAppleExposed
  • Reply 3 of 19
    I said it in the other thread, but it bears repeating in this one.  This:
    "More beneficial to Apple is that this is revenue with minimal risk or effort required on its part, aside from integrating the functionality. As Goldman Sachs is effectively paying Apple to access its customer base, and is handling all operations, managing credit exposure, collecting bills, and dealing with customers, this "should be almost pure profit to Apple," the analysts believe."

    ↑↑  That should scare the living tish out of anyone applying for one of these cards.  If the analyst is accurate, Apple gets paid a ton with little risk. Yaaaaaaay.  Yaaaaaaaay.  Our favorite company gets to make more money.  Yaaaaay (not really sure why, but Yaaaay anyway). You howerver, Mr or Ms Cardholder, you get to deal with Goldman Sachs, a company with a proven history of financial responsibility and regard for their customers well being.  ← tee hee.  Hopefully they're no longer the Goldman Sach we've come to know an love. ← tee hee.

    Make good financial decisions people.  
    FileMakerFeller
  • Reply 4 of 19
    zoetmbzoetmb Posts: 2,469member
    The overall risk in using a credit card is almost entirely on the shoulders of the user, not the bank. If it were the reverse, then banks wouldn't offer them.
    You're forgetting about fraud and non-payment, resulting in referrals to collection agencies who buy the debt for pennies on the dollar.   Fraud is huge, although it should be less for an Apple-pay based card.    In fact, massive fraud and bad debt is what drives the ridiculously high interest rates and fees on credit card purchases (anywhere from 18% to 30%).   

    Aside from an incident many years ago in which my credit chard was charged about $30 from a bar in Texas and was probably caused by a keying error in which they happened to get the check digit correct and a credit card stolen from my daughter's house (and for which the credit card company caught the fraud immediately and called me), I've never had any fraud over decades until recently.    Aside from having numerous credit cards automatically replaced due to massive data breaches and/or security flaws at the scanners in retail, two of my credit cards have had fraudulent purchases made recently, mostly in China.  These purchases were immediately caught by the credit card companies who contacted me as soon as the purchases were made, but I'm still puzzled how my credit card account numbers with the 3-digit number on the back became available to someone else.   I think CNP (Card not present) fraud is a threat to the entire credit card system.   

    On a slightly related note, I get those crazy "I've hacked your account and have videos of you watching porn" ransom emails every day.   Some of them come with an old password of mine.   Notably, they're always passwords that I haven't used in years, so they must have come from old data breaches.   One password was used with a small publisher of music directories and I just figured that being such a small company, their website or database wasn't secure enough, but the others are more puzzling.   Since those are passwords that I no longer use, I don't know what sites I used them on because I don't keep a record of most old passwords.  

    The big NYC retailer B&H is offering their own new credit card that refunds the amount of the sales tax.   But the interest rate is 30%, so someone would be a fool not to make sure they immediately pay off the entire amount before the first due date.   For them (or their bank) to break even on the card, the average person would have to hold a balance for about 4 months and I can't see that happening.   But for big purchases, like a Mac or a camera, one can save several hundred dollars and that's far more than the rebate that the Apple Card would provide.  But this B&H "Payboo" card is only good for purchases at B&H.
  • Reply 5 of 19
    eideardeideard Posts: 394member
    I said it in the other thread, but it bears repeating in this one.  This:
    "More beneficial to Apple is that this is revenue with minimal risk or effort required on its part, aside from integrating the functionality. As Goldman Sachs is effectively paying Apple to access its customer base, and is handling all operations, managing credit exposure, collecting bills, and dealing with customers, this "should be almost pure profit to Apple," the analysts believe."

    ↑↑  That should scare the living tish out of anyone applying for one of these cards.  If the analyst is accurate, Apple gets paid a ton with little risk. Yaaaaaaay.  Yaaaaaaaay.  Our favorite company gets to make more money.  Yaaaaay (not really sure why, but Yaaaay anyway). You howerver, Mr or Ms Cardholder, you get to deal with Goldman Sachs, a company with a proven history of financial responsibility and regard for their customers well being.  ← tee hee.  Hopefully they're no longer the Goldman Sach we've come to know an love. ← tee hee.

    Make good financial decisions people.  
    Wee sleekit timrous beastie...afraid to play among the tigers, eh?
    FileMakerFeller
  • Reply 6 of 19
    Don47Don47 Posts: 3member
    I have a friend who works in the fraud department of a major bank. He told me that unless the fraud was above certain amount (multiple mortgage payments - I was surprised by the amount) the bank didn't pursue the fraud. The cost to pursue was more than the fraud, so they simply wrote it off. If Apple’s security removes even 90% of the fraud, then Goldman Sachs will not have to write off as must fraud loss, improving the bottom line.
  • Reply 7 of 19
    StrangeDaysStrangeDays Posts: 8,244member
    I said it in the other thread, but it bears repeating in this one.  This:
    "More beneficial to Apple is that this is revenue with minimal risk or effort required on its part, aside from integrating the functionality. As Goldman Sachs is effectively paying Apple to access its customer base, and is handling all operations, managing credit exposure, collecting bills, and dealing with customers, this "should be almost pure profit to Apple," the analysts believe."

    ↑↑  That should scare the living tish out of anyone applying for one of these cards.  If the analyst is accurate, Apple gets paid a ton with little risk. Yaaaaaaay.  Yaaaaaaaay.  Our favorite company gets to make more money.  Yaaaaay (not really sure why, but Yaaaay anyway). You howerver, Mr or Ms Cardholder, you get to deal with Goldman Sachs, a company with a proven history of financial responsibility and regard for their customers well being.  ← tee hee.  Hopefully they're no longer the Goldman Sach we've come to know an love. ← tee hee.

    Make good financial decisions people.  
    What rational reason are you suggesting this should scare me? Why should I be offended that Apple is leveraging it's market position and value-adding proposition in order to deliver something of value to me while also enriching itself? Really not following your teeth gnashing. "PROFIT BAAAAD!" lol. As a small business owner, I know how hard it is to be successful. I don't fault them for doing it.
  • Reply 8 of 19
    tyler82tyler82 Posts: 876member
    Steve Jobs: Think Different

    Tim Cook: Minimal Risk
  • Reply 9 of 19
    I said it in the other thread, but it bears repeating in this one.  This:
    "More beneficial to Apple is that this is revenue with minimal risk or effort required on its part, aside from integrating the functionality. As Goldman Sachs is effectively paying Apple to access its customer base, and is handling all operations, managing credit exposure, collecting bills, and dealing with customers, this "should be almost pure profit to Apple," the analysts believe."

    ↑↑  That should scare the living tish out of anyone applying for one of these cards.  If the analyst is accurate, Apple gets paid a ton with little risk. Yaaaaaaay.  Yaaaaaaaay.  Our favorite company gets to make more money.  Yaaaaay (not really sure why, but Yaaaay anyway). You howerver, Mr or Ms Cardholder, you get to deal with Goldman Sachs, a company with a proven history of financial responsibility and regard for their customers well being.  ← tee hee.  Hopefully they're no longer the Goldman Sach we've come to know an love. ← tee hee.

    Make good financial decisions people.  
    What rational reason are you suggesting this should scare me? Why should I be offended that Apple is leveraging it's market position and value-adding proposition in order to deliver something of value to me while also enriching itself? Really not following your teeth gnashing. "PROFIT BAAAAD!" lol. As a small business owner, I know how hard it is to be successful. I don't fault them for doing it.
    You should try reading to comprehend instead of skimming to defend.  My comment is obviously an admonition against trusting Goldman Sachs. It's pretty clear.  If you don't have reservations about Goldman being anywhere near your finances, more power to you.  As I said yesterday, I hope it works out for the people who get the card.   In your effort to jump in front of the bullet that you imagined I was shooting at Apple, you seemed to have abandoned any semblance of reasoned thought.  Nowhere in my comment is there an implication that profit is bad.   There's plenty in my comment that implies I think Goldman is still bad.  The portion of my comment that brought out your Apple Defense Force tendencies is actually shade being thrown at the type of person who'd celebrate a corporation's success above their own welfare.  You being a small business owner is irrelevant. Your complete misunderstanding of what you read, is relevant.  Nothing in my comment begrudges Apple's success.  Nothing in my comment assesses any fault towards Apple.  All of that is entirely in your head.
    ctt_zhFileMakerFeller
  • Reply 10 of 19
    There has to be a valid reason why Citibank backed out of Apple Card . Maybe it's Goldman Sachs, which has a checkered past or even Apple's minimal amount of risk but something smells a bit fishy. I would not trust Goldman Sachs with a roll of pennies let along my credit worthiness. Sorry, this does not sound like a good marriage. Maybe if Apple joined forces with Chase, PNC or even TD Bank, I would be a bit more secure.  
  • Reply 11 of 19
    laytechlaytech Posts: 150member
    I just want to earn frequent flyer points and they’ve got me as a customer!!!
    cornchip
  • Reply 12 of 19
    There has to be a valid reason why Citibank backed out of Apple Card . 
    If the conjecture of the analyst can be believed, it sounds like Apple wanted a percentage of the take that is higher than the "market standard." Goldman Sachs may have figured that a smaller share of the proceeds will still be more money in absolute terms given the customer base is likely a more affluent part of society, and if the reduced rate of fraud estimate is accurate then that will also add to their overall profit.

    However, given the past behaviour of Goldman Sachs, they may simply have thought "We'll just bleed the suckers dry to make up for the reduced top line."
  • Reply 13 of 19
    AppleExposedAppleExposed Posts: 1,376unconfirmed, member
    I said it in the other thread, but it bears repeating in this one.  This:
    "More beneficial to Apple is that this is revenue with minimal risk or effort required on its part, aside from integrating the functionality. As Goldman Sachs is effectively paying Apple to access its customer base, and is handling all operations, managing credit exposure, collecting bills, and dealing with customers, this "should be almost pure profit to Apple," the analysts believe."

    ↑↑  That should scare the living tish out of anyone applying for one of these cards.  If the analyst is accurate, Apple gets paid a ton with little risk. Yaaaaaaay.  Yaaaaaaaay.  Our favorite company gets to make more money.  Yaaaaay (not really sure why, but Yaaaay anyway). You howerver, Mr or Ms Cardholder, you get to deal with Goldman Sachs, a company with a proven history of financial responsibility and regard for their customers well being.  ← tee hee.  Hopefully they're no longer the Goldman Sach we've come to know an love. ← tee hee.

    Make good financial decisions people.  
    "↑↑  That should scare the living tish out of anyone applying for one of these cards."

    I'm sure most users already have a credit card and they didn't pee their pants. Luckily Apple shares less data than the cards in my wallet.

    Thanks for the laughs.
  • Reply 14 of 19
    I said it in the other thread, but it bears repeating in this one.  This:
    "More beneficial to Apple is that this is revenue with minimal risk or effort required on its part, aside from integrating the functionality. As Goldman Sachs is effectively paying Apple to access its customer base, and is handling all operations, managing credit exposure, collecting bills, and dealing with customers, this "should be almost pure profit to Apple," the analysts believe."

    ↑↑  That should scare the living tish out of anyone applying for one of these cards.  If the analyst is accurate, Apple gets paid a ton with little risk. Yaaaaaaay.  Yaaaaaaaay.  Our favorite company gets to make more money.  Yaaaaay (not really sure why, but Yaaaay anyway). You howerver, Mr or Ms Cardholder, you get to deal with Goldman Sachs, a company with a proven history of financial responsibility and regard for their customers well being.  ← tee hee.  Hopefully they're no longer the Goldman Sach we've come to know an love. ← tee hee.

    Make good financial decisions people.  
    "↑↑  That should scare the living tish out of anyone applying for one of these cards."

    I'm sure most users already have a credit card and they didn't pee their pants. Luckily Apple shares less data than the cards in my wallet.

    Thanks for the laughs.
    Wait. Hold up.  Please tell me you didn't read my quote and come away with the conclusion that I was talking about people should be afraid of having a credit card.  Please tell me that.  Even if you don't mean it, please tell me that wasn't the conclusion you drew.  I mean, I even bolded the main point for you and you still came away with "Oh no, he's talking bad about Apple"    You're welcome for the laughs btw.  We're all laughing after reading your comment.
  • Reply 15 of 19
    iOS_Guy80iOS_Guy80 Posts: 194member
    I said it in the other thread, but it bears repeating in this one.  This:
    "More beneficial to Apple is that this is revenue with minimal risk or effort required on its part, aside from integrating the functionality. As Goldman Sachs is effectively paying Apple to access its customer base, and is handling all operations, managing credit exposure, collecting bills, and dealing with customers, this "should be almost pure profit to Apple," the analysts believe."

    ↑↑  That should scare the living tish out of anyone applying for one of these cards.  If the analyst is accurate, Apple gets paid a ton with little risk. Yaaaaaaay.  Yaaaaaaaay.  Our favorite company gets to make more money.  Yaaaaay (not really sure why, but Yaaaay anyway). You howerver, Mr or Ms Cardholder, you get to deal with Goldman Sachs, a company with a proven history of financial responsibility and regard for their customers well being.  ← tee hee.  Hopefully they're no longer the Goldman Sach we've come to know an love. ← tee hee.

    Make good financial decisions people.  
    Please elaborate.
  • Reply 16 of 19
    To quote W,O.P.R. from War Games: Strange game. The only winning move is not to play.
  • Reply 17 of 19
    macwisemacwise Posts: 78member
    The overall risk in using a credit card is almost entirely on the shoulders of the user, not the bank. If it were the reverse, then banks wouldn't offer them.
    Thank you. Best if glossy advertising isn't allowed to dominate the conversation and obscure this significantly relevant point. 
  • Reply 17 of 19
    macwisemacwise Posts: 78member
    The overall risk in using a credit card is almost entirely on the shoulders of the user, not the bank. If it were the reverse, then banks wouldn't offer them.
    Thank you. Best if glossy advertising isn't allowed to dominate the conversation and obscure this significantly relevant point. 
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