Goldman Sachs spends $350 for every Apple Card signup

Posted:
in General Discussion
Goldman Sachs is spending somewhere in the region of $350 to acquire every new customer of Apple Card, analysts claim, with the investment bank not expected to make a profit on the user until they have been a customer for four years on average.




To set itself up for Apple Card, Goldman Sachs has already spent considerable sums preparing itself for the influx of consumers, including approximately $275 million from the start of 2019 until mid-July on public-facing initiatives including Apple's credit card and the bank's Marcus savings and loans service, and $1.3 billion on consumer services in general. According to Nomura, the bank may not necessarily see a profit from the Apple Card enterprise anytime soon.

In an investor note seen by CNBC, it is believed Goldman Sachs is spending in the order of $350 to acquire each user. Nomura believes that this is an outlay that will take at least four years for the bank to earn back based on average usage.

The benefits of Apple Card, including no fees and a competitive interest rate range for comparable cards, leads Nomura to believe "The Apple Card portfolio may generate lower revenues and face higher loss content relative to the industry average."

The policy of Goldman Sachs approving as many customers as quickly as possible, including those with low "subprime" credit scores can also count against the bank's ability to earn revenue over the years. Customers with FICO scores below 660, generally considered to be the level for "subprime" financial products, have been accepted for the service, even in its preview state.






Further making the future uncertain for Goldman Sachs is the prospect of a recession, with warnings on Wednesday of potentially higher loan losses for banks and lower profit margins causing bank stocks to plunge. Nomura believes Apple Card is "highly sensitive" to rising net charge offs, with Goldman Sachs losing money if losses reach around 8%.

The four-year period to make a profit is a major problem, as Nomura advised credit card issuers tend to experience peak losses on credit card loans two years after they originate. Goldman's lack of "historical data and experience that lenders obtain when underwriting through a credit cycle" will also hurt the bank, but over time it should improve.

As for the next move, it is speculated Goldman and Apple could offer a debit card to go alongside the credit card in the future, as it would be likely customers would pay off their Apple Card balances via bank accounts, and it may be advantageous to do so from a debit account on the same platform.

Debit cards are also less of a risk for financial services, and generated $15 billion in revenue for US banks in 2018 alone.
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Comments

  • Reply 1 of 94
    Not trying to be negative on this, really asking.  Why would anyone want this card?  The rate is pretty high, the integrations are interesting but don't really add that much value IMO, and I can use Apple Pay with my existing card.  What is the draw?
    chemengin1zroger73flyingdpdavgregITGUYINSDmike54dysamoria
  • Reply 2 of 94
    red oakred oak Posts: 673member
    The actual cost to sign up new users is actually close to $0.   The on boarding is right there in the Wallet.  All it takes is notifying the user it is there

    This $350 estimate tells me this analyst does not know WTF he is talking about
    anantksundaramrandominternetpersonITGUYINSDaustinbaze
  • Reply 3 of 94
    Not trying to be negative on this, really asking.  Why would anyone want this card?  The rate is pretty high, the integrations are interesting but don't really add that much value IMO, and I can use Apple Pay with my existing card.  What is the draw?
    I don’t understand why people are wild for credit cards in general.
    flyingdpracerhomie3davgregcanukstormlollivermike54dysamoria
  • Reply 4 of 94
    Not trying to be negative on this, really asking.  Why would anyone want this card?  The rate is pretty high, the integrations are interesting but don't really add that much value IMO, and I can use Apple Pay with my existing card.  What is the draw?
    There is none (being serious). 
    davgregcanukstormmike54MplsPsandordysamoria
  • Reply 5 of 94
    mwhitemwhite Posts: 205member
    I just want them to offer it to me then I can delete the email :smiley: 
    zroger73davgreg
  • Reply 6 of 94
    Gold-man Sucks.

    No thanks.
    davgregmike54dysamoria
  • Reply 7 of 94
    wood1208wood1208 Posts: 1,988member
    Those asking question if Apple card is better than rest in which areas of cash back,flexibility,benefits,charges, etc should read plenty analysis available on internet. Put some efforts than asking others.
    superklotonlolliverJWSC
  • Reply 8 of 94
    zroger73zroger73 Posts: 718member
    Not trying to be negative on this, really asking.  Why would anyone want this card?  The rate is pretty high, the integrations are interesting but don't really add that much value IMO, and I can use Apple Pay with my existing card.  What is the draw?
    I don’t understand why people are wild for credit cards in general.
    Um. Because not using one at every opportunity and paying the balance in full each month is throwing away money?

    I crave most things Apple, but my existing bank credit card pays 2% cash back on all purchases. The Apple Card only pays 2% when using Apple Pay.

    The Apple Card pays 3% on purchases made from Apple, but Apple charges me 8.25% sales tax. I buy most of my gear from Apple Authorized Resellers that don't charge me sales tax and often sell for less than Apple.
    WgkruegerStrangeDaysITGUYINSDmike54sandor
  • Reply 9 of 94
    There is a level of security and ease of use with the Apple Card, your interest rate depends on your credit rating as does your credit limit. It's up to you whether you want to get one or not, assuming you qualify. Course nothing is perfect, there are pros and cons to everything. Are there better cards? Perhaps, but they don't have the ease of use or some of the security features of having an Apple Card as I see it. your mileage may vary..
    rob bonnerlollivermacgui
  • Reply 10 of 94
    zenwaves said:
    Gold-man Sucks.

    No thanks.
    If this is your position you should get one then throw it in the trash. Cost Goldman $350.
    anantksundaramzenwavesviclauyyc
  • Reply 11 of 94
    rogifan_newrogifan_new Posts: 4,147member
    Not trying to be negative on this, really asking.  Why would anyone want this card?  The rate is pretty high, the integrations are interesting but don't really add that much value IMO, and I can use Apple Pay with my existing card.  What is the draw?
    My current card is 1.5% cash back. If I get approved I’ll use the Apple Card for iTunes purchases/subscriptions, Apple Pay and iPhone upgrade program and use my existing card for everything else.
    anantksundaramrandominternetperson
  • Reply 12 of 94
    emoelleremoeller Posts: 453member
    Not trying to be negative on this, really asking.  Why would anyone want this card?  The rate is pretty high, the integrations are interesting but don't really add that much value IMO, and I can use Apple Pay with my existing card.  What is the draw?
    There is none (being serious). 
    This is only the third credit card I have ever had (the other two are AMEX and Visa).  Here are the reasons I chose to sign up:

    1)  Extremely secure.  There is no fixed card number, and if the physical card is used and a card skimmer or waiter steals your card number and pin, a number can be created instantly.  So there is no interruption in use of the card.

    2)  No Tracking.   You are not identified by the retailer by name or by card number.  They only receive meta-data, they cannot track you (unless you want them to by signing up for some "deal" in which you have control over what information you give them)

    3)  Having instant info on spending is very handy, and provides for instant recognition if charges are incorrect, thus allowing for immediate corrections.

    4)  Reasonable interest rate (mine was a high limit with a 12.99% interest rate).   Not a big deal of me as I pay off my balance every month.

    5)  Complete control over payments.  I simply set mine up to auto pay from my bank at the end of each month.   I don't incur any interest charges and I'm sent notifications well in advance so I can balance my bank statements.

    6)  Very detailed (and very Apple designed) infographics on spending by category and retailer.   Also the info on the retailer is in plain english with business name, address, map, and contact info.  Very handy for looking back at what I purchased and from whom.

    7)  There are no fees, and no late fees, or currency fees.

    8)  Ties to my Apple Cash account, and of course there is the instant cash back features

    9)  So far so good, I've made a couple of transactions and set up auto pay.  I will evaluate how this works for me (about 65% of all retailers in the US now accept Apple Pay/Card) to see if this is something I want to use long term.  But I know from experience that Apple Pay works extremely well and fast at checkout, especially using my Watch, so all of my Apple Pay will be done using this card going forward.

    10)  Longer term I can see using this card (or something like it) to manage all of my payments (retail purchases, mortgage, other credit card balances (not available now), utilizes etc, etc) from a single source while I am mobile.



    doctwelverandominternetpersonrob bonnerlolliverviclauyycdysamoriaJWSCaustinbaze
  • Reply 13 of 94
    zroger73 said:
    Not trying to be negative on this, really asking.  Why would anyone want this card?  The rate is pretty high, the integrations are interesting but don't really add that much value IMO, and I can use Apple Pay with my existing card.  What is the draw?
    I don’t understand why people are wild for credit cards in general.
    Um. Because not using one at every opportunity and paying the balance in full each month is throwing away money?

    I crave most things Apple, but my existing bank credit card pays 2% cash back on all purchases. The Apple Card only pays 2% when using Apple Pay.

    The Apple Card pays 3% on purchases made from Apple, but Apple charges me 8.25% sales tax. I buy most of my gear from Apple Authorized Resellers that don't charge me sales tax and often sell for less than Apple.
    I’m not saying that people shouldn’t use them I just don’t understand how excited people get about them.
  • Reply 14 of 94
    red oak said:
    The actual cost to sign up new users is actually close to $0.   The on boarding is right there in the Wallet.  All it takes is notifying the user it is there

    This $350 estimate tells me this analyst does not know WTF he is talking about
    The $350 is most likely based on a per customer average estimate of the money they've spent getting the initiative going.  From the article:
    To set itself up for Apple Card, Goldman Sachs has already spent considerable sums preparing itself for the influx of consumers, including approximately $275 million from the start of 2019 until mid-July on public-facing initiatives including Apple's credit card and the bank's Marcus savings and loans service, and $1.3 billion on consumer services in general. According to Nomura, the bank may not necessarily see a profit from the Apple Card enterprise anytime soon. 

    The costs you're referencing have nothing to do with Goldman.
    muthuk_vanalingamsandorGeorgeBMac
  • Reply 15 of 94
    zroger73 said:
    Not trying to be negative on this, really asking.  Why would anyone want this card?  The rate is pretty high, the integrations are interesting but don't really add that much value IMO, and I can use Apple Pay with my existing card.  What is the draw?
    I don’t understand why people are wild for credit cards in general.
    Um. Because not using one at every opportunity and paying the balance in full each month is throwing away money?

    I crave most things Apple, but my existing bank credit card pays 2% cash back on all purchases. The Apple Card only pays 2% when using Apple Pay.

    The Apple Card pays 3% on purchases made from Apple, but Apple charges me 8.25% sales tax. I buy most of my gear from Apple Authorized Resellers that don't charge me sales tax and often sell for less than Apple.
    You understand that it isn’t Apple that charges you sales tax, right? It’s the state you live in. Apple collects that tax and turns it over to the state for you. When you purchase from a business that doesn’t collect sales tax you are still responsible for paying the state the taxes you owe on that purchase.
    StrangeDaysrandominternetpersonsuperklotonlollivergenovelleviclauyycdysamoriaJWSCaustinbaze
  • Reply 16 of 94
    MintzMintz Posts: 17member
    If this was Chase (offered) card - I would sign-up immediately... and then transfer my limits from other Chase Cards Cashback is good - but not the greatest cashback either for most (common) purchases... Might still do it - just to have MasterCard in the wallet - but purchase history, categorization, etc. are already available from other Credit Card providers...


    If online shopping adds Apple Pay (to get 2%) it'll help great deal

    For the foreign-transaction-fees - my experience is - that the exchange rate provided by credit-card (or banks) is far more important than than 1% transaction fee

    My Chase card has excellent rates - thought they charge 1% - but I'm still ahead overall instead of using Debit card - or simply converting currency to local...

    edited August 14
  • Reply 17 of 94
    mobirdmobird Posts: 220member
    wood1208 said:
    Those asking question if Apple card is better than rest in which areas of cash back,flexibility,benefits,charges, etc should read plenty analysis available on internet. Put some efforts than asking others.
    This is the INTERNET! ;)
    FileMakerFellerviclauyycfranklinjackconsandorJWSC
  • Reply 18 of 94
    The analyst a simply speculating. The story about "sub-prime" is also speculation.

    Here's mine: We'll hear from Tim Cook in 10 weeks, when he'll confirm that the card has taken off like a rocket; like no other card, ever.
    FileMakerFellerlolliverviclauyycJWSCaustinbaze
  • Reply 19 of 94
    StrangeDaysStrangeDays Posts: 8,244member
    Not trying to be negative on this, really asking.  Why would anyone want this card?  The rate is pretty high, the integrations are interesting but don't really add that much value IMO, and I can use Apple Pay with my existing card.  What is the draw?
    2% cash back on NFC, 3% on all Apple products and services, no annual fee. Why wouldn’t I want to use it for my Apple Pay and Apple ID/iTunes card?

    That doesn’t mean I’ll use it for everything, of course. 

    The interest rate is quite poor (24% for good credit), but I don’t plan to carry a balance. 
    edited August 14 lolliverJWSC
  • Reply 20 of 94
    mdriftmeyermdriftmeyer Posts: 7,291member
    red oak said:
    The actual cost to sign up new users is actually close to $0.   The on boarding is right there in the Wallet.  All it takes is notifying the user it is there

    This $350 estimate tells me this analyst does not know WTF he is talking about
    It tells me Goldman Sachs is fabricating a cost investment for this new business venture so they can write down and lower their total taxable assets.
    FileMakerFellerdysamoria
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