Goldman Sachs’ Apple card business has been facing an unexpected subprime problem, with approximately 28 percent of their loans being extended to individuals with FICO scores below 660. This has resulted in customers living paycheck to paycheck, often struggling to decide whether to pay off their Apple card. As a result, there have been reports suggesting that Goldman Sachs is in discussions with Amex to transfer the Apple credit card and high-yield savings account. While Goldman Sachs has been experiencing significant financial losses since the card’s launch in 2019, a potential partnership with Amex could lead to several improvements and upgrades for the Apple card.
Upgrade Opportunities with Amex
Should the deal between Goldman Sachs and Amex go through, there are several key upgrades that only Amex can bring to the Apple card. Firstly, Amex could offer the Apple card in different colors and materials, addressing concerns about its fragility and delicate nature. Additionally, Amex’s expertise in producing metal and plastic cards in various designs could enhance the visual appeal of the Apple card. This includes options for titanium cards with improved scratch resistance, as well as offering the card in black and gold variations.
Expanding Apple Pay Acceptance
One of the challenges faced by the Apple card is the limited acceptance of Apple Pay at certain retailers. While Apple Pay is available in a significant number of stores, there are still notable exceptions like Walmart, Kroger, Home Depot, Amazon Fresh, and HEB in Texas. However, Amex has a global network and established relationships that could facilitate the acceptance of Apple Pay at more locations. By leveraging their connections and negotiating deals with large retailers, Amex could expedite the widespread adoption of Apple Pay, making it more accessible for customers.
Enhancing Signup Bonuses and Interest Rates
The Apple card’s signup bonuses and interest rates have been underwhelming compared to competitors. Currently, the signup bonus is $75, which is significantly lower than what many other cards offer, such as the Blue Cash Everyday Card’s $200 bonus. Amex’s competitive nature could lead to higher signup bonuses, potentially reaching $200, and even introduce zero percent interest on purchases and APR for a limited period. Amex’s Everyday Card, for instance, provides a 15-month zero percent APR period, allowing cardholders to save money on interest and consolidate debt.
Revamping Bonus Categories
The Apple card’s limited number of bonus merchants has been a drawback for cardholders. By expanding the bonus categories, Amex could provide a more beneficial structure. Instead of focusing on specific merchants, a bonus category approach would encompass a broader range of purchases from tens of thousands of merchants. For example, introducing a bonus category for dining could be highly appealing to cardholders, as it aligns with their spending habits and offers attractive rewards for eating out or using food delivery services.
Improving Peer-to-Peer Transfers
While Apple’s peer-to-peer transfer feature through Apple Cash is useful, it is limited to transferring cash back rewards to other Apple users. Amex’s collaboration with Venmo and PayPal enables sending and splitting money with any user of these platforms. By leveraging this partnership, Amex could expand the functionality of peer-to-peer transfers, making it more accessible to a wider user base and allowing cardholders to send money to anyone within the United States.
Adding Purchase Protection
Another area where the Apple card falls short is purchase protection, which is a valuable benefit for cardholders. Amex already offers purchase protection on their cards, allowing customers to receive refunds for defective, stolen, or lost purchases within a specific timeframe. By incorporating this feature into the Apple card, customers would have an added safety net and greater peace of mind when making purchases.
Conclusion
Goldman Sachs’ Apple card business has encountered challenges with a high percentage of subprime customers, resulting in financial losses. The potential partnership between Goldman Sachs and Amex offers an opportunity for significant improvements to the Apple card. Amex’s expertise in card design, expanded acceptance of Apple Pay, competitive signup bonuses, enhanced rewards program, peer-to-peer transfers, and purchase protection features could elevate the Apple card and address customer concerns. With Amex’s backing, the Apple card may become a more appealing and robust offering in the credit card market, providing an improved experience for cardholders.
