The Apple Bank

Note: this post was adapted from my newsletter published last week. Those interested can sign up here.

I’m still fascinated by last week’s scoop in The Wall Street Journal by Tripp Mickle, Liz Hoffman, and Peter Rudegeair that Apple is on the verge of launching a credit card product alongside Goldman Sachs. The report is an extension of one from last year, but with some intriguing new details. And, of course, it’s an intriguing new time for Apple. As the mantra these days seems all about three things: services, services, and services.

I’ve long wondered if Apple wouldn’t have to become a bank eventually. The logic is pretty simple: the iPhone is one of the — if not the — best business of all time. Just another product in the typical Apple mold, no matter how insanely great, is unlikely to match it. Instead, Apple would likely have to look to some of the other biggest industries in the world. Industries like oil, cars, and yes, banking.

To be clear, this isn’t the launch of the Apple Bank (lawyers, rev those lawsuit engines!), but it is a first step in that general direction. Or really, a second, more tangible step, after the launch of Apple Pay. And while the WSJ dismisses that product as not interesting, my instinct continues to be that this is incorrect. While Apple Pay perhaps hasn’t been a rocket out of the gate like some other products, I feel like it has really come into its own over the past year or so. I now see it accepted basically everywhere, and more importantly, used constantly while out and about.

Anyway, this supposed Apple credit card is all about getting better service fees while at the same time increasing the utility of their payment services, with monetary health equations similar to the ones they give us on the physical health side. Makes sense.

What doesn’t make complete sense is the Goldman part of the equation. Beyond the current brand risk, it’s just a weird partnership. But taking a step back, it might make some sense if you view it as similar to the one Apple struck with AT&T (then Cingular) around the initial launch of the iPhone. AT&T needed Apple as much as Apple needed AT&T. And here, Goldman seems to need Apple in an attempt to jumpstart their fledgling “Marcus” banking business aimed at young folk.

The general “newfangled banking” space is insanely competitive right now with startups galore, many of which are interesting, doing well, and growing very fast. But this type of partnership provides a unique entry point into hundreds of millions of potential pockets.

And, for both sides, it gets around going overboard with the all-important perks of credit cards these days. Such perks seem to be eating banks alive — here, there’s a simple cash-back component, maybe augmented by deals on Apple products themselves. Questions remain, but the card, if successful, should make Apple (and Goldman) a lot of money. Service money.