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Goldman Sachs regrets Apple Card, and is trying to escape the deal
Seems like GS did not do good risk management on this.gatorguy said:
Early on it was said that Apple and Goldman Sachs were working closely on the program development, even that it was mostly Apple's design. We don't know if that extended to what Apple users credit score requirement would be. If Apple was pressuring GS to approve as many accounts as they could then Apple would be at least partially at fault. GS of course shoulders most of it since Apple wasn't covering 'em if they guessed wrong and the defaults exceeded expectations. It's also possible that Apple's involvement was puffed up a tad, and this was all Goldman Sachs doing.hmlongco said:
So why were they approving the cards??? They didn't have to accept them.gatorguy said:
Apple Card accounts have a higher write-off rate, meaning the account holder hits the trigger point of at least 6 months behind on payments, than the industry average which is 2.93%. That rate of card write-offs is worse than even sub-prime lenders experience.
Now couple that with the fact a whole lotta' Apple users have credit scores under 660...
Oh, and chalk me up as another happy card user.
But it is for this reason I don't think Apple wants to take on the danger of offering a credit card themselves. Let a partner shoulder the risk and Apple's contribution will be the prestige of Apple's name attached to it, and a list of Apple account contacts to make offers to.
The last part of the story on the cancellation of a trading platform also seems like a huge mistake on the partnership. I also think apple is willing to lose money initially to make lots of money later. GS is not the right partner for this. I think Amex might be a better partner but they should segment the cards business based on credit worthiness. Like so many other cards families they should have limited benefits for higher risk individuals to offset the higher default rates. Or simply use another credit model. Also, they can afford to have a slightly lower interest savings account return (3.5% vs 4%) on the fact that the cash back is automatically deposited). Then they can make back more money on purchasing short term treasuries. Lastly, they should have also tried to get into the apple care business or sole other insurance products.
GS is missing out due to short term thinking. But also shows how shrewd Apple is at safeguarding its own interests.
