Rolphcast #6: What the Apple Card means for banks and retail

| April 1, 2019 | By

With Apple taking a giant leap into the world of financial services, Yoyo CEO Michael Rolph gives his take on what impact the Apple Card will have on banks and retailers.

Two pretty big announcements came out of Apple last week. First we heard about the launch of its new streaming TV service, which the likes of Netflix and Amazon have been so successful in deploying over the last few years – so it’s going to be interesting to see how that pans out.

But more interestingly, Apple unveiled its new no-fee credit card – the Apple Card. For a tech company of its mammoth size, Apple has been very quiet in this space until now, having launched Apple Pay more than four years ago. So the first question to ask is why now?

Well, first and foremost, if you are Apple, you’ll recognise that the hardware you’ve been providing over the years has effectively run to the end of its growth cycle. Nowadays, everyone has smartphones and laptops.

So moving into financial services can only be seen as a natural next step – over half a billion people on the planet have an Apple account, which means they already have a colossal ready-made marketing base to provide these new services to.

Also remember, Apple doesn’t do product in the way that most other companies historically have done product. Apple does experiences that happen to have product features.

While we’ve yet to see the Apple Card in real action, Apple’s demo revealed, for the first time, a beautiful user-designed experience around a card product. It looks to me that they’re view is that it’s the user experience around the relationship with credit that they’re looking to fix.

What does this mean if you are an existing lender of credit – i.e. a bank? In short, I think it should make them sit up!

With the launch of the Apple Card, the tech giant is creating a new type of consumer psychology around credit in a way that no other bank has been able to do before.

More interestingly, Apple’s relationship with financial services is actually built on the back of bank enablement. Apple Pay launched back in 2104 because banks welcomed it with open arms as they jumped onto the innovation of mobile payment.

However, since then Apple has not opened up its environment to enable other banks to use its API SDK that relates to an Apple Pay transaction.

Apple remains a closed loop system that partners and benefits from an open loop environment. It’s taking that benefit from the financial services companies, but it’s not performing the quid pro quo back to those partners that are enabling it.

So from a bank’s point of view I would imagine a fair few of them are feeling pretty sore about that right now.

The next level of this thinking is around the scheme level, noticing that it’s a Mastercard they’re issuing.

As a scheme, I’d be pretty interested about Apple’s step into this environment, when you consider that it’s technology players like Apple, Netflix and Amazon that have significantly grown the use of card products over other forms of payment.

The likes of Apple have been at the forefront of enabling an ever-increasing consumer base to purchase via a card ecosystem, so I think the Apple Card is a great partnership from a scheme perspective, but it’s not such a great announcement if you are a bank.

Now what if you’re a retailer or merchant? Fundamentally the Apple Card is going to be a piece of plastic, and you already take card payments. And yes the card will also be virtual and sit within Apple Pay, but you already take Apple Pay transactions, as well as Google Wallet-type transactions. So in short, the Apple Card is not really going to revolutionize anything for you.

The only way that this could change is if Apple decided to open up its ecosystem and enable retailers to directly advertise to the digital wallets of its 500 million+ identified consumers.

However, this is not the road that Apple is going down – and I think if you’re Apple that’s a pretty good dividing line to keep.

When you have such a dominant market position and you have a relationship with so many consumers, the minute you start to play the game of selling hardware and then providing a set of financial or entertainment services, you turn the consumer into the product – like Facebook has done. Go down that path and you’ll come up against a backlash – again, like Facebook.

All in all, if you’re a merchant or retailer, not much is going to change for you on the back of this announcement from Apple.

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