mpantone

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mpantone
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  • Apple and Goldman Sachs to part ways on Apple Card, no successor named

    blastdoor said:

    mpantone said:
    blastdoor said:
    mpantone said:
    Apple:  Just buy a/the bank.
    Nope.

    Consumer banking is one of the most heavily regulated industries. Apple has zero interest becoming a bank. If this weren't the case, Apple would have started a bank a long time ago (before they partnered with Barclay Bank for the Apple Card predecessor), decades ago.

    This is also why many companies have divested their consumer loan divisions. And with each passing year, there are more banking regulations, not less.

    Apple doesn't want consumer debt as a liability.

    And as it turns out, neither does Goldman Sachs.

     :D 
    I'm highly skeptical that consumer banking regulations are any more of an obstacle than the wide range of other obstacles Apple faces across their product lineup. For example, I'll bet the challenges of navigating the patent minefield of the cellular landscape is significantly harder (and explains the challenges Apple has had making a competitive 5g modem). I'm sure entering the TV/movie production business was no walk in the park either, what with the various union contracts and entrenched players. Getting approval for health related features of the Watch is also a challenge, but Apple is up to the challenge. If somebody were to give a detailed explanation of the challenges of EUV, you'd likely conclude that's impossible, too. The bottom line is that if you want to create any competitive product in the modern economy it is going to be "hard" and you can always come up with a long list of costs and obstacles to explain why nothing is possible. Quitters never win. 

    I think it's quite possible that Apple will buy or start a bank on their own. I suspect the real issue with the GS partnership is that GS just doesn't have the long term vision and patience that Apple does. Apple was willing to run the App Store for a loss or at break even for a long time before turning a profit -- now 'services' are a huge profit center. I suspect Apple is perfectly happy to do the same thing with banking, realizing that once the volume is high enough and the business model refined enough, it will be profitable. And in the meantime, it creates more platform stickiness and customer good-will. 
    Apple isn't going to buy/start a bank. They've had plenty of opportunity (and cash) for the past 10-15 years. There are easier ways to make money. Hell, Apple would be better off selling life insurance than running a consumer bank. 

    They aren't going to buy or start a mobile network either.
    Apple had plenty of time, cash, and motivation to develop their own silicon for Macs. Some people predicted it -- or at least yearned for it --  for years. Many said it wouldn't happen because it's just sooo hard, or if they were going to do it they would have already done it, or that they don't have the scale to do it profitably, etc etc. And now, guess what, they did it. 

    ApplePay and AppleCard are very clear indicators that Apple is interested in participating in the market for financial services. Funny how so many people can't see what's right tin front of them. 
    Remember, Apple does not jump into every industry they dabble with. And they have abandoned some markets. How many iPod MP3 players do they sell today? XServe computers? AirPort wifi routers? Pippins? 

    There is a *LOT* of liability involved with consumer banking. So much so that Goldman Sachs themselves are bailing out of it (not just their Apple Card operations).

    Is there a full-fledged Apple TV (i.e., with a large screen display) sitting in a lab somewhere in Cupertino? Probably. There are probably heaps of prototypes sitting in a warehouse earmarked to get recycled. Macbooks with cellular data modem chips?

    Just because Apple can doesn't mean it will.

    Apple's march to M-series SoCs and their liberation from Intel was pretty clear ages ago.

    Remember that Apple faces many challenges concerning Apple Card. It's still a USA-only product. Their demands from their issuing bank partners is probably stifling their ability to expand to new markets because no one wants to make such great concessions. Look at what happened to GS.

    One thing for sure, there will be more regulation in the consumer finance marketplace in ten years than today.

    It will be interesting to see what happens to the Apple Card. I doubt any currently operating financial institution will agree to the same terms as Goldman Sachs did for the Apple Card launch. Too many concessions in revenue generating activities (late fees, interest, foreign transaction fees, etc.). Apple was fortunate to find a naive partner in Goldman Sachs (who were itching to dive into the consumer finance market five years ago). GS's exit will be a warning flag to other issuing banks about the perils of this particular setup.
    muthuk_vanalingam
  • Apple and Goldman Sachs to part ways on Apple Card, no successor named

    Xed said:
    Apple ran ads claiming the Apple Card wasn’t issued by a bank?
    I'd like to see these ads.
    There were none.

    Apple has never claimed that the Apple Card didn't have an issuing bank. Goldman Sachs USA, NA was buried in the fine print in the original announcement, I spend a few minutes tracking down the service agreement because that's where all the important details are.

    Apple couldn't claim there was no issuing bank, that would have been fraudulent and deceptive. That would also invite a huge amount of liability and potential future legal action. They just said "visit this URL to learn more" and the fine print was lurking somewhere in a hyperlink.

    As is so typical of any consumer finance discussion on the Internet these days, this thread is full of inaccuracies and incorrect assumptions by many participants.

    It's worth pointing out that Apple has repeatedly stated that they are not an issuing bank and thus Apple Pay should not be subject to the same scrutiny as consumer financial institutions and payment networks. Even Apple Cash is operated by Green Bank NA.
    muthuk_vanalingamwatto_cobra
  • Apple and Goldman Sachs to part ways on Apple Card, no successor named

    blastdoor said:
    mpantone said:
    Apple:  Just buy a/the bank.
    Nope.

    Consumer banking is one of the most heavily regulated industries. Apple has zero interest becoming a bank. If this weren't the case, Apple would have started a bank a long time ago (before they partnered with Barclay Bank for the Apple Card predecessor), decades ago.

    This is also why many companies have divested their consumer loan divisions. And with each passing year, there are more banking regulations, not less.

    Apple doesn't want consumer debt as a liability.

    And as it turns out, neither does Goldman Sachs.

     :D 
    I'm highly skeptical that consumer banking regulations are any more of an obstacle than the wide range of other obstacles Apple faces across their product lineup. For example, I'll bet the challenges of navigating the patent minefield of the cellular landscape is significantly harder (and explains the challenges Apple has had making a competitive 5g modem). I'm sure entering the TV/movie production business was no walk in the park either, what with the various union contracts and entrenched players. Getting approval for health related features of the Watch is also a challenge, but Apple is up to the challenge. If somebody were to give a detailed explanation of the challenges of EUV, you'd likely conclude that's impossible, too. The bottom line is that if you want to create any competitive product in the modern economy it is going to be "hard" and you can always come up with a long list of costs and obstacles to explain why nothing is possible. Quitters never win. 

    I think it's quite possible that Apple will buy or start a bank on their own. I suspect the real issue with the GS partnership is that GS just doesn't have the long term vision and patience that Apple does. Apple was willing to run the App Store for a loss or at break even for a long time before turning a profit -- now 'services' are a huge profit center. I suspect Apple is perfectly happy to do the same thing with banking, realizing that once the volume is high enough and the business model refined enough, it will be profitable. And in the meantime, it creates more platform stickiness and customer good-will. 
    Apple isn't going to buy/start a bank. They've had plenty of opportunity (and cash) for the past 10-15 years. There are easier ways to make money. Hell, Apple would be better off selling life insurance than running a consumer bank. 

    They aren't going to buy or start a mobile network either.
    watto_cobra
  • Confusion reigns about the future of Apple's 5G modem project

    Are there any estimates on how much Apple continues to annually expense on the effort?
    Apple knows exactly how much. But they won't divulge it. Just like they won't divulge how much they spend on autonomous driving research, future wearables, etc. Remember that Apple spent years and years working on the Apple Watch before it was launched.

    It's all bundled up in the R&D line item in their cash flow statement. For sure, what they spend on any given initiative is very important to them internally but it's really none of anyone's business outside the company. Well, at least not with current accounting standards. The catchall "R&D expenses" line item is enough for the SEC.

    Even guessing the figure might be stupid. We don't know how long Apple has been working on this and whether the expense has changed over time (most likely it has). Also, it is highly likely that Apple is funding R&D on projects that no one here has an inkling about. We don't know what percentage of the R&D budget is going to those.

    Hell, Apple's senior management scoffs at third party iPhone COGS estimates. And that's for a finished good.

    This whole "we give up the modem project" rumor is very fishy. It shouldn't be a engineering impossibility, it's probably likely due to navigating the Qualcomm patent minefield more than anything else. In the same way, the key NFC contactless chip patents are held by one Dutch company, NXP.
    muthuk_vanalingamdanoxAlex1Nwatto_cobra
  • Apple and Goldman Sachs to part ways on Apple Card, no successor named

    dewme said:
    mpantone said:
    dewme said:
    What happened with Apple’s relationship with Barclays?  I seem to remember using Barclays relationship with Apple to get interest free financing to purchase a couple of my earlier Macs and possibly iPads. 

    Perhaps partnering with a non-US based bank may make it easier to roll out support for Apple Card more globally. 

    Ultimately, shouldn’t we expect that Apple Card would be supported by multiple partners, similar to Mastercard and Visa?
    You have made a common error by someone not familiar with the basics of the consumer credit card industry.

    Mastercard and Visa aren't credit cards: they are payment networks. American Express is both a credit card company and a payment network.

    Technically, the Apple Card is a Mastercard issued by Goldman Sachs USA, NA. It says so in the fine print of the service agreement that any Apple Cardholder accepted (by clicking "Accept"). In that way, it's similar to a VentureOne Mastercard issued by CapitalOne.

    Barclays Bank would be the issuing bank. It's almost certain that Apple had discussions with Barclays Bank about the Apple Card (before it debuted) before Apple selected Goldman Sachs as a partner.

    Apple would have to partner with banks from other countries to service customers in those areas. But those banks have to have a business in the country and follow the banking regulations of that country as well. It's not like an random American can apply for a JCB card (a Japanese card) or a UK card.

    To have American cardholders, Apple needs to find a bank located in the USA (which would be subject to US consumer banking laws, not those of the UK, Japan, Nigeria, wherever.
    Excellent insight and enlightenment. Thank you, You are correct, my exposure to credit card payment systems is solely as an end user. Barclays previous relationship with Apple lasted several years and was a benefit to me on a few occasions. That is why I was surprised when they were not part of the Apple Card deal.

    Despite being a newbie when it comes to the credit card industry, I actually use credit cards extensively as a means to avoid carrying excessive cash. I never use debit cards. My go-to card has long been Discover because they have always had exceptional customer service when I’ve had to deal with them. But when I travel outside of the US, they have not been well supported so I have to carry either a Visa or Mastercard too. Perhaps I’d be better served with an Apple Card with it being a Mastercard and having some Apple related benefits. 

    The only other exposure I’ve had with credit cards is company issued credit cards. Things may have changed over time, but I recall that unlike Visa/Mastercard, American Express was often a struggle to use outside of the US, at least for some expenses. I’m curious whether the Apple Card is widely used for company issued credit cards? Speaking of Japan, at least in the late ‘90s, business travel there was a struggle with any credit card, regardless of the issuer or sovereignty of the issuer. Everything was cash-only, even hotels. Hopefully that’s improved.
    For you and others who don't know how credit cards work, here's a basic explanation. When you visit a Merchant X and decide to pay with Credit Card A, they will swipe your card. Through a payment network (Visa, MC, AMEX, Discover, JCB, etc.) they will contact the card issuing bank. Customer wants to pay, authorize charge? If the payment is authorized, Credit Card issuing bank A pays the merchant (or technically the merchant's bank). Now Credit Card issuing bank A has paid for your purchase with their cash. From the service agreement, you are responsible for paying that debt back to Issuing Bank A. That's the agreement you signed with Issuing Bank A, the fine print you have never bothered to read. You don't owe Merchant X anything more, they got paid by Issuing Bank A. You OWE Credit Card Issuing Bank A, that's why you get a statement from them. To Bank A there's a liability associated with you as a creditor. That's why there are interest charges, late fees, etc.

    And your credit score is partly related to that debt. Remember that a credit score is a numerical figure that represents the likeliness that you will pay your debts. 

    My credit score is around 825-830. That means that I have an extremely high chance that I will pay off my debts. Guess what? I haven't paid any credit card fees or interest in probably 25 years. I'm what the consumer credit industry calls a "deadbeat" -- someone who pays off their entire balance due immediately, generating no additional revenue.

    Forget to make the required minimum payment? Credit card issuing bank will tell a credit reporting agency, "Hey, this guy is a slacker. He missed a payment" (it's called a derogatory). Credit agency sees this as recalculates a lower score: you are less likely to pay off your debts based on payment history.

    When you use a debit card, the merchant's bank uses the payment network (Visa, Mastercard) to contact your personal bank. That's why a debit charge will hit your checking account immediately. Your bank looked at the authorization request and said, "Yes, our client has the funds for this transaction." This is why debit card transactions don't affect credit cards scores. There's nothing owed. You buy something and if the charge is authorized, you have less cash. There's no debt, you have fewer funds.

    The Apple Card is a decent card to consider for international travel because it incurs no foreign transaction fees. Of course, there are other cards that predate the Apple Card that offer the same benefit. The Visa card issued by my credit union is one. There's at least one MC card issued by CapitolOne that also waives foreign transaction fees. Some (but not all) of the American Express cards offer this benefit.

    Things have changed. More of the world accepts credit cards including American Express (which was hard to use in the late 20th century). Also, policies for company related travel have changed. Compared to 20 years ago, it's far more common for companies to not issue company cards to employees. Employees who do travel for the company use their own credit cards and fill out expense reports to be reimbursed. There are modern ways to do this with apps and services (like Concur) to automate the expense reporting workflow.

    As for Japan, yes, they accept credit cards more these days. All travel can be done with credit cards. They have also gone nuts for touchless payment. Initially it was JR's Suica card (an NFC touchless transit pass) that started the trend. More and more vendors started adding the Suica card as a payment option. Then it went crazy. This happened around 2005 with the invention of the pre-smartphone "osaifu keitai" (literally "wallet phone"). Now people could use their phones as transit passes, movie & event tickets, payment for convenience stores, etc. Eventually other transit agencies and companies launched payment cards (Tokyo Metro has their well accepted Pasmo card).

    These days traveling in Japan, I can pay for most things with my phone using the Suica express transit pass or via a credit card linked to Apple Pay. You can even ride Kyoto buses with a Tokyo Metro Pasmo card. The USA is maybe ten years behind Japan in NFC contactless payment integration, especially when it comes to transit.

    It's amazing how little many people know about the consumer credit world despite the fact that most daily transactions by Joe Consumer in the USA are transacted on credit cards. And yes, it's worth learning the basics. Consumer credit scores aren't just used for setting mortgage eligibility anymore. They are now used in an ever increasingly wide variety of applications. In the long run, having a higher credit score will save you money in interest payments for things like mortgages and vehicle loans even if you pay off your credit cards every month. Who wouldn't want to knock off $100 of their monthly mortgage payment? Over a thirty-year mortgage, that would be $36,000 in savings.
    muthuk_vanalingameightzeroApplejacsdewme