Goldman Sachs Group Inc. (NYSE: GS) and Apple Inc. (NASDAQ: AAPL) have teamed up to issue credit cards that will be paired with iPhones later this year, The Wall Street Journal reported. The idea of the card is to have a deeper integration with the Apple Wallet App, so that users can manage their balances, track rewards, and set spending goals.
The joint card will utilize Mastercard’s payment network and will offer a 2% cash back on most purchases. Some people told WSJ that more cashback can be earned on Apple product purchases. The Wall Street bank could eventually offer other financial products, such as Marcus loans and wealth management services, to Apple customers, WSJ said. The deal will benefit both Apple, which has been focusing on increasing its services business which includes the App Store, mobile payments, and music streaming, as well as Goldman, which is looking to increase its consumer loans.
However, the deal does come with a few risks for both companies.
The WSJ notes that Apple risks angering its existing banking partners, who won’t see the same level of integration as the Company is providing the new credit card and Goldman Sachs has already started adding customer-support call centers, and building an internal system to handle payments, a project that could cost the bank USD 200 Million.
According to the Chicago Tribune, MoffettNathanson analyst Lisa Ellis said, “It would be “odd” for Apple to offer a jointly developed credit card with Goldman and not with Synchrony Financial, since Synchrony dominates the market for co-brand offerings.”
“Goldman must be offering Apple a very good deal,” Ellis said by email. She added that the Goldman partnership “makes the card more risky for Apple,” as it would be “Goldman’s first foray into a consumer credit card.” The card “could blow up on them, particularly if we head into a macroeconomic slowdown.”
Ellis also said that “there’s nothing about what Apple is launching that makes it look like it will be particularly successful.”
She goes on to say, “If those features are good, and are available across any/all cards stored in the Apple Wallet, not just the Apple co-brand, then it would make the Apple Wallet, in conjunction with Apple Pay, potentially more threatening to PayPal,” she said.
“The overall ongoing trend is that the wallets” — PayPal, Apple Wallet, and Amazon Pay — “continue to look for ways to provide ‘bank-lite’ services to get consumers to spend more time in their wallets, and less in their banking apps,” Ellis said.
The new cards are rolling out for testing by employees within the next few weeks and will be launched later this year.