Goldman Sachs continues to bleed cash from Apple Card operations

AppleInsider

Goldman Sachs has reported more losses from its credit card operations, mostly attributable to Apple Card, and it's not clear when or how the bleeding will stop.

Goldman Sachs posts more losses from its credit card business

The investment bank has released its financial results for the second quarter of 2023, revealing ongoing challenges with the Apple Card and other portfolios. The document indicates a decrease in revenues for the bank's consumer business, Platform Solutions.

The division enables clients to integrate financial products and solutions into their offerings, using application programming interfaces (APIs). The Apple Card is a part of the Platform Solutions division, and it has been a significant factor in the financial performance of the segment.

Platform Solutions experienced a net loss of $667 million during the June quarter. Despite a rise in revenue within the division, there was a significant provision of $615 million for credit losses overall.

The $615 million provision includes amounts set aside for potential losses from their credit card business and point-of-sale loans. Goldman reduced the reserve after repaying a term deposit with the First Republic Bank.

The credit losses and operating expenses for Platform Solutions amounted to $544 million and $987 million, respectively, surpassing the quarterly revenue of $659 million.

To date, Goldman Sachs has lost over a billion dollars, mostly because of the Apple Card. Although CEO David Solomon called the partnership with Apple "the most successful credit launch ever," the bank is reportedly trying to end its deal.

The executives overseeing Goldman Sachs' assortment of businesses, referred to as Platform Solutions, revealed that their consumer division might achieve a break-even point in 2025. This target was originally set to be accomplished by the end of 2022.

Read on AppleInsider

eightzero

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

mayfly

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

eightzero

mayfly said:

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?

I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?

applepoor

Somehow GS's lack of proper planning  for any and all potential issues with the Apple Card is whose fault? To the best of my knowledge, GS set the credit limits. My credit limit was initially $2,500 and is now $32,500.

Their greed for the possible 20+ %  financing interest blinded GS into giving too much credit to those who could least afford it. I am sure the GS lenders were licking their chops the last few months as the charges crowded $5,000 on my account, But these balances were paid in full on the 2nd of the month following. 

So GS got no penalty interest and instead had negative cash flow for the cash discounts given on the purchases.

GS may have signed a multi year contract for this business and may find it difficult to extricate themselves.

Sympathy is between two other "S..." words in the dictionary.

edited July 2023

rivertrip

"The credit losses and operating expenses for Platform Solutions amounted to $544 million and $987 million, respectively, surpassing the quarterly revenue of $659 million."

One-third of operating expenses is due to credit losses? Accounting trickery?

chasm

The article is talking about combined losses that *include* the Apple Card but are not *exclusive* to the Apple Card. The short version is that GS has very badly miscalculated their ventures into the *consumer* lending market, though they have been very successful with their *business* lending, There have been other problems that may have contributed to the losses they’ve seen on Apple Card.

But the reason Apple Card is popular with users is the same reasons it is unpopular with GS executives: there are no fees associated with the Apple Card, even late fees. Interest rates are around the industry standard, but as pointed out AC users tend to be affluent, and Apple actually reminds users how much of the payment will go to interest, which further spurs paying it off quickly.

The $350 figure only refers to initial costs with setting up an AC account; GS is probably also paying at least partially for the advertising/promotion of the card, and also working with merchants to arrange promotional deals as well. Some of the money GS is reporting as a loss is also anticipated rather than actual, based on other factors like the cost of money from the fed.

In short, GS has decided they suck at consumer lending and want out of all of it, which includes AC. Really nothing here any user should pay much attention to.

applejacs

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Yep, pretty much sums up my take on it, too.

twolf2919

eightzero said:

mayfly said:

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?

I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?

The $350 "customer acquisition cost" is the cost of acquiring the customer - not the amount GS paid Apple.   These costs include advertising, sign-on incentives, etc.

The "swipe fee" consists of three things: a fee paid to the issuing bank (GS), a fee paid to Apple,  and a fee paid to the credit card company (Mastercard) for use of its network.

I suspect GS, which has never really been in consumer banking, has a lot of overhead that hasn't been optimized away yet and, as the original comment to you indicated, the users of Apple Card are more affluent than the average Joe and, likely, more financially savvy - especially with the help Apple Wallet gives them to keep on top of their spending - and, less likely to go into debt.  Add to this the other card benefits - Apple Cash, interest free repay on Apple products, etc. and I can see where a novice bank like GS ends up in the red.

appleish

Getting a card was a no-brainer for me. Zero interest, 3% back on Apple purchases, 2% back on Apple Pay, plus special offers. The only other credit card I use is my American Express Blue Cash Preferred card for some offers and returns that exceed those benefits. 

I pay my balance every month. They only get the swipe fee from me and that's paid by the business.

mayfly

eightzero said:

mayfly said:

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?

I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?

Really. All you have to do is look at their latest form 10-K for the granular particulars. Even GS doesn't have the guts to fake those numbers. That's a felony.

ios_guy80

I certainly hope Goldman Sachs can get their act together and figure out how to solve this issue. I enjoy using the Apple wallet, the Apple Credit Card, the rewards program and the savings account. Everything works seamlessly and the user interface is simply Apple perfect. I can see this program crumbling if another financial institutional gets involved.

vtvita

eightzero said:

mayfly said:

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?

I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?

eightzero, you "understand" nothing. mayfly did not say "GS pays Apple $350 for each new account." Go back and start over.
BTW, this card from GS is the most miserable credit card experience I've ever had, for many reasons, which I've written about before. I've simply made it dormant, seldom—if ever—to be used again.

eightzero

mayfly said:

eightzero said:

mayfly said:

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?

I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?

Really. All you have to do is look at their latest form 10-K for the granular particulars. Even GS doesn't have the guts to fake those numbers. That's a felony.

Fake isn't the same as incompetence. They seemingly spent way, way more than was obvious they would take in. The CEO or VP that approved this still has a job?

eightzero

vtvita said:

eightzero said:

mayfly said:

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?

I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?

eightzero, you "understand" nothing. mayfly did not say "GS pays Apple $350 for each new account." Go back and start over.
BTW, this card from GS is the most miserable credit card experience I've ever had, for many reasons, which I've written about before. I've simply made it dormant, seldom—if ever—to be used again.

It is clear I understand nothing, hence the question mark at the end of the sentence. Go back and read again. I am very confused about what is being reported and how it happened. I'm not clear on that $350. Is it some sort of overhead estimate? Licensing to Apple? In any case, it seems like someone majorly blew this. A GS shareholder should be outraged...and this is clearly not of Apple's doing.

mpantone

vtvita said:

eightzero said:

mayfly said:

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?

I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?

eightzero, you "understand" nothing. mayfly did not say "GS pays Apple $350 for each new account." Go back and start over.
BTW, this card from GS is the most miserable credit card experience I've ever had, for many reasons, which I've written about before. I've simply made it dormant, seldom—if ever—to be used again.

This was my experience as well. Goldman Sachs sucks rocks at running a consumer credit operation. I applied for the Apple Card when it was released (August 2019), used it twice for two very small purchases and ended up dealing with Goldman Sachs for an hour because of a bill payment snafu. Since then I have never used the card. That's right, nearly four years of being a cardholder without a single transaction.

And Goldman Sachs can't just kick me to the curb. I have something like $0.12 in Apple Cash credit (I do not have a linked bank account). Due to US consumer banking laws, that's MY property. They're not "miles" or "points". If GS wanted to close me out, they are legally obligated to mail me a check for $0.12. Hell, closing an account probably costs them $20-30 in administrative fees, salaries, etc. 

Goldman Sachs can suck it.

If Goldman Sachs gets out of the consumer lending business, they will sell off my account to some other financial institution or more likely close me out, mail out a check and write me down as a loss, taking a direct hit off their bottom line. They can't sweep those twelve cents under the rug. And yes, if they filed for bankruptcy, they would still be obligated to contact me about it and include me in all of their administrative procedures as a creditor.

mayfly

eightzero said:

vtvita said:

eightzero said:

mayfly said:

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?

I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?

eightzero, you "understand" nothing. mayfly did not say "GS pays Apple $350 for each new account." Go back and start over.
BTW, this card from GS is the most miserable credit card experience I've ever had, for many reasons, which I've written about before. I've simply made it dormant, seldom—if ever—to be used again.

It is clear I understand nothing, hence the question mark at the end of the sentence. Go back and read again. I am very confused about what is being reported and how it happened. I'm not clear on that $350. Is it some sort of overhead estimate? Licensing to Apple? In any case, it seems like someone majorly blew this. A GS shareholder should be outraged...and this is clearly not of Apple's doing.

So a $350 per customer acquision cost could described this way: GS spends $3.5 million dollars advertising the Apple Card. One out of every 10,000 people get the card, making the per customer acquision $350.

mpantone

mayfly said:

eightzero said:

vtvita said:

eightzero said:

mayfly said:

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?

I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?

eightzero, you "understand" nothing. mayfly did not say "GS pays Apple $350 for each new account." Go back and start over.
BTW, this card from GS is the most miserable credit card experience I've ever had, for many reasons, which I've written about before. I've simply made it dormant, seldom—if ever—to be used again.

It is clear I understand nothing, hence the question mark at the end of the sentence. Go back and read again. I am very confused about what is being reported and how it happened. I'm not clear on that $350. Is it some sort of overhead estimate? Licensing to Apple? In any case, it seems like someone majorly blew this. A GS shareholder should be outraged...and this is clearly not of Apple's doing.

So a $350 per customer acquision cost could described this way: GS spends $3.5 million dollars advertising the Apple Card. One out of every 10,000 people get the card, making the per customer acquision $350.

It's not just advertising.

GS has their own processes in approving applicants. Credit reports aren't free. And credit reports don't reflect other financial aspects of an applicant's life. Time at current employer, salary, time at current residence, court records, whatever. GS isn't just pulling a VantageScore from a database and rubber stamping the application.

Even the physical card mailout costs money. A new customer acquisition is more than some ads on social media.

mayfly

mpantone said:

mayfly said:

eightzero said:

vtvita said:

eightzero said:

mayfly said:

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?

I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?

eightzero, you "understand" nothing. mayfly did not say "GS pays Apple $350 for each new account." Go back and start over.
BTW, this card from GS is the most miserable credit card experience I've ever had, for many reasons, which I've written about before. I've simply made it dormant, seldom—if ever—to be used again.

It is clear I understand nothing, hence the question mark at the end of the sentence. Go back and read again. I am very confused about what is being reported and how it happened. I'm not clear on that $350. Is it some sort of overhead estimate? Licensing to Apple? In any case, it seems like someone majorly blew this. A GS shareholder should be outraged...and this is clearly not of Apple's doing.

So a $350 per customer acquision cost could described this way: GS spends $3.5 million dollars advertising the Apple Card. One out of every 10,000 people get the card, making the per customer acquision $350.

It's not just advertising.

GS has their own processes in approving applicants. Credit reports aren't free. And credit reports don't reflect other financial aspects of an applicant's life. Time at current employer, salary, time at current residence, court records, whatever. GS isn't just pulling a VantageScore from a database and rubber stamping the application.

Even the physical card mailout costs money. A new customer acquisition is more than some ads on social media.

mpantone said:

mayfly said:

eightzero said:

vtvita said:

eightzero said:

mayfly said:

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?

I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?

eightzero, you "understand" nothing. mayfly did not say "GS pays Apple $350 for each new account." Go back and start over.
BTW, this card from GS is the most miserable credit card experience I've ever had, for many reasons, which I've written about before. I've simply made it dormant, seldom—if ever—to be used again.

It is clear I understand nothing, hence the question mark at the end of the sentence. Go back and read again. I am very confused about what is being reported and how it happened. I'm not clear on that $350. Is it some sort of overhead estimate? Licensing to Apple? In any case, it seems like someone majorly blew this. A GS shareholder should be outraged...and this is clearly not of Apple's doing.

So a $350 per customer acquision cost could described this way: GS spends $3.5 million dollars advertising the Apple Card. One out of every 10,000 people get the card, making the per customer acquision $350.

It's not just advertising.

GS has their own processes in approving applicants. Credit reports aren't free. And credit reports don't reflect other financial aspects of an applicant's life. Time at current employer, salary, time at current residence, court records, whatever. GS isn't just pulling a VantageScore from a database and rubber stamping the application.

Even the physical card mailout costs money. A new customer acquisition is more than some ads on social media.

All that is true, and more besides! Goldman Sachs made the mistake of thinking they could enter the consumer market and run things the way they did their big business clients.

danox

So what………………… after what they did in 2008.

sunman42

eightzero said:

mayfly said:

eightzero said:

mayfly said:

eightzero said:

OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching? 

Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."

Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.

OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?

I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?

Really. All you have to do is look at their latest form 10-K for the granular particulars. Even GS doesn't have the guts to fake those numbers. That's a felony.

Fake isn't the same as incompetence. They seemingly spent way, way more than was obvious they would take in. The CEO or VP that approved this still has a job?

Probably a very well paid one, which I suspect may be part of losses GS is seeing in that division. Their managers’ total compensation is scaled to the stratospheric heights of merchant banks, not to the low-margin world of consumer credit.