Mastercard may be in for a fight to stay Apple Card network provider
There's been a quiet battle between banks to be the next Apple Card issuer as Goldman Sachs moves on, but another battle is brewing between networks to take over from Mastercard.
Apple Card could go with Visa for payment network
Apple is set to move Apple Card from Goldman Sachs at some point soon, but Apple could switch payment networks in the process. Goldman Sachs previously suggested it wanted to rid itself of Apple Card in 12 to 15 months as of November 2023 -- so the move is past due.
Before the card issuer changes, however, Apple may choose to sign a new contract with a different payment network. The current network is Mastercard, but according to a report from The Wall Street Journal, Visa and American Express are fighting for the position.
Visa has even reportedly offered Apple about $100 million to take over as the payment network. That's a large sum it has reserved for its biggest clients, like Costco.
American Express is also reportedly attempting to take over as both issuer and network for Apple Card. The Amex CEO has previously seemed uninterested in Apple Card, but throwing in the ability to be the network provider may sweeten the deal.
Apple can't move from Mastercard until that portion of the contract expires sometime in 2026. However, even if Goldman Sachs finds a new issuer, it'll take time to make the shift and may be able to include some negotiation into who the new network provider is.
Nothing official has been said publicly, and there is still no sign of what company will take over from Goldman Sachs or when. It could be several months before it all shakes out, but if Goldman Sachs is so pressed to be free of Apple, expect moves to be made soon.
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We also have CostCo City Bank and Apple Pay that I carry daily. We usually get more than $1k back annually for each of these accounts.
We have Wells Fargo accounts at a local branch used for cash access with our debit cards and handling the "Old Folks" accounts.
Amex worked okay for CostCo for us and was still accepted in the UK CostCo last time we were over there.
So having the three top Financial flavors in hand is okay with us. Really have no preference which way Apple goes as it will be transparent to us, the users.
Personally, I really don't care what multinational payment network Apple picks. I have several MC, Visa, and Amex cards. The only one I don't have is Discover. It'll all work out. If you have a local vendor that still hasn't signed up to accept to Amex I would wager that will change down the road if Apple coverts to Amex if that merchant has already been seeing a lot of Apple Card business in the recent years.
PS: This isn't the first time Apple has switched multinational payment networks in a Wallet card they control. The Apple Pay Cash card originally used Discover and now it uses Visa. I think this switched about 5 years ago and it wasn't everyone at once. I remember being able to go into Wallet and change it from Discover to Visa.
Amex holds 1-2% of the market in Europe and is far from universally accepted. Personal cards from Visa and Mastercard have no processing fees while Amex is a 3rd party card under EU regulation allowing merchants to add a processing fee. The fee is often 4% making Amex more expensive. Apple can't use Amex if the plan is to expand beyond U.S.
AMEX acceptance has also accelerated in post-pandemic international travel. Anyone who owns an AMEX card has other plastic as well so it's not like it's much of a barrier these days. If Apple and American Express negotiate to some sort of agreement I don't expect that to much impact on most purchases for most people.
I already have a VISA card that gives me back 2% everywhere and another one that gives me back 3% at a merchant category of my choice (I picked restaurants). So if Apple switched from MC to AMEX as payment processors, it really won't affect me. I have been an AMEX cardholder since the Nineties anyhow.
Because I shop at Costco, I have a Costco Visa card that easily pays for itself in any of the first 3 categories.. In fact, I use it for fuel, restaurants, shopping at Costco, and sometimes travel if that's better than, say, the airline's CC or Amex Travel.
Right now Apple Card is still a US-only card. Apple has never found a suitable issuing bank elsewhere to partner with. For sure the local regulations might make it prohibitive in some countries and Apple's list of demands might be too onerous for some market's lenders.
Of course, Americans overrepresent in terms of number of credit card transactions and total volume but there's still a very large percentage of prosperous countries who don't have Apple Card. I'd guesstimate that 10 countries on this planet account for 98% of the world's credit card transactions (in total sales and number of transactions).
That might be why American Express is still in the running. For sure, Apple would know how much is coming from Costco transactions and would have to weigh the loss of that specific revenue stream versus the possibility of expanding abroad.
It's important to reiterate that there are other cards that provide 2% or 3% cash back (the VISA issued by my brokerage offers 2% back for all merchants).
https://www.wsj.com/finance/banking/visa-wanted-a-vast-empire-first-it-had-to-beat-back-its-foes-3b3067f3