CUPERTINO, Calif.–As many had been predicting/fearing, Apple is expanding its presence in payments with a new credit card called Apple Card that one card analyst said is actually three cards in one.
The company said the card, which can be instantly issued and has Goldman Sachs as the issuing partner and Mastercard as the network, will launch this summer in the U.S. Apple’s CEO called it the biggest change to credit cards in five decades, and others agree.
“Apple Card is disruptive–it is to banking what the iPod was to the music industry, what the iPhone was to wireless carriers and iPads were to the laptop industry, or what Uber is to taxis,” said Richard K. Crone of Crone Consulting, which specializes in payments. “This is a seminal moment in consumer credit history. Every financial institution will be forced to compete and collaborate with Apple.”
Announced during a live event in the Steve Jobs Theater in Apple’s headquarters at which the company also introduced a series of other subscription services, such expanded Apple News and a new Apple Arcade, the Apple Card is part of an expanded Apple Pay ecosystem.
“We want to take the Apple Pay experience even further,” said Apple CEO Tim Cook. “We see a way to transfer another way to pay: the credit card.” Cook said the card is built on the things Apple stands for, such as simplicity and transparency.
Cook said the Apple Card will have a simple application, no fee, a “lower” interest rate, a clear rewards program that pays out daily, and will be more secure and private than other payments options.
“We are going to do so much more and change the entire experience,” said Cook.
Predictions Swirling
Predictions that Apple would be expanding into payments have been made for years within the credit union and financial services communities. Hundreds of credit unions have already partnered with Apple Pay, with credit unions fighting to be “top of wallet.” But the new Apple offering seeks to push other providers’ cards from their perch as the consumers’/members’ first option.
Apple CEO Tim Cook outlining benefits of Apple Card.
Krone, who was at Apple’s headquarters for the announcement, said the company is really introducing “three cards in one,” as when consumers open an Apple Card credit account, Apple also activates Apple Pay Cash and pays the Apple Card reward daily so that it stimulates the instant usage of Apple Pay Cash. That creates a credit, debit and prepaid account with P2P functionality, he said, adding Apple is following the footsteps of PayPal and Venmo, with a slicker user interface.
Discover provides the prepaid account behind Apple Pay Cash.
‘Happier Financial Life’
Jennifer Bailey, VP-Apple Pay, said the company has “completely rethought” the credit card, saying it is designed to create a “happier financial life” as well as bring new levels of privacy and security.
According to Bailey, Apple Card will bring instant-issuance to credit cards, saying that once a person applies, if approved, the card will appear in the user’s Apple Wallet within “minutes.” The card can be used at any place ApplePay is accepted and will be available across Apple devices.
Ease Of Use
Throughout Cook’s and Bailey’s remarks, the Apple executives stressed ease of use and simplicity. Among the Apple Card’s features:
Apple's Jennifer Bailey describes new features.
- Users will be able to see all transaction history in Apple Wallet, including payment trends.
- Cardholders needing any help can ask questions using the iPhone’s Messages app.
- Bailey said Apple Card is designed to make it easier to understand credit card statements, saying the typical statement has “cryptic merchant names that are hard to decipher. We are using machine learning and Apple Maps to transform transactions into something you will recognize. It will total your purchases, keep track by category and you where you spent.” Each category is color coded.
Rewards
As CUToday.info has reported, the card rewards space has become increasingly competitive, with consumers now expecting some sort of reward with purchases.
“Most rewards programs use points and with points you’re never quite sure what they are worth and where you can use them,” said Bailey. “When you spend with Apple Card, you get cash back, and you get it every day. Not a month from now. It’s my favorite feature.”
The cash is added every day to the Apple Cash Card in the Apple Wallet, Bailey said. For each purchase using the Apple Watch, Apple Pay or the Apple Card, there is 2% cash back, 3% on purchases of Apple products.
“The amount of daily cash you can receive every day is unlimited,” said Bailey.
Other Benefits
According to Bailey, “another area where we can make a really big impact in improving your financial health” is in a move away on the statement from emphasizing minimum payments, which she said are “designed to keep you in debt.” Using a dial/wheel feature in the Apple Card app, the user can adjust payments and see how much they are paying/will pay in interest in real time.
Apple said the card will have no annual fees, no late fees and no international fees.
“Our goal is to make it easier to get you to pay down your balance, not harder,” said Bailey.
Apple Card's payments interface allows cardholder to see different scenarios..
Bailey said the company chose to partner with Goldman Sachs, which has only recently moved into retail financial services, because the bank was “up for the challenge of doing something new and more innovative.”
Privacy and Security
Bailey said Apple Card will bring a “new level of privacy and security” and is totally integrated throughout the hardware and software. With each transaction a unique card number will be created, with that data stored on a special security chip in the device. Each payment will use one-time dynamic security code, and every purchase will be authenticated with Apple’s Touch ID or facial recognition.
“It’s designed with privacy in mind. It has unique architecture, so Apple doesn’t know what you bought, where you bought it, or how much you paid. It all takes place on the device, not on Apple servers,” said Bailey. “Goldman Sachs will never share or sell your data to third parties for marketing or advertising.”
Physical Card
For those locations where Apple Pay is not yet accepted, Bailey said the company/Goldman Sachs are also rolling out a titanium card on which the cardholder’s name will be laser-etched. Bailey called it the “most beautiful card” ever. The card will not include a card number, CVV, expiration or signature line.
Apple's new physical card.
The physical card will offer 1% cash back.
“We think Apple is uniquely positioned to make the most significant change in credit cards in 50 years,” said Cook.
Other Payments Announcements
Cook said Apple Pay is now on target to pass 10-billion total transactions this year. He said the transit systems in Portland, Chicago and New York this year will also begin accepting Apple Pay.