Banks – are you ready to compete with the Apple Card?

Mehmet Sezgin, CEO and Founder, myGini

“This is Apple Card, created by Apple not a bank.” It is set to arrive in summer 2019 and is a co-branded credit card issued by Goldman Sachs under the license of Mastercard.

Does this mean banks should expect Apple to reinvent the wheel? No – traditional financial institutions with an established cardholder base still hold the advantage in banking. But could Apple’s unique and successful understanding of what constitutes a good user experience lure away cardholders unsatisfied with the mobile solution offered by their current banking provider? Possibly.

This two-part series looks at how Apple is changing the game for banks and credit unions. First, to understand why the Apple Card poses a threat to traditional financial institutions we ask: What exactly is the Apple Card trying to achieve? 

1. It’s a card promising “no nasty surprises”

“No hidden fees and interest rates among the lowest in the industry” – that’s the promise of the Apple Card. Apple wants to be seen as the ultimate customer-friendly company, so this is a great position to take. There is also reason to believe they can fully deliver on these promises.

The Nilson Report shows the percentage of people who revolve their balances and pay an interest rate has been declining over the years and is now about 28%. This means more people pay off their balances each month and less people are subject to those interest rates. The Apple Card could get rid of card fees or international fees, but some not-so-hidden charges such as late fees could still apply. These promises will make an overall strong first impression among prospective cardholders.

2. It’s an app with a modern user experience

The single biggest lesson Apple is teaching traditional banks is that going forward, they will need far better customer interfaces for effective cardholder engagement. Cardholders in the U.S. have been long suffering from dull mobile banking apps with limited card functionality. Now, the Apple Card is sending banks a strong wake-up call.

Apple’s design merges in-demand card functionality with sophisticated visual interfaces. Functionalities such as payment schedules, spending categories, instant notifications and location services will prove great tools for cardholders to gain better control of their finances. It’s not hard to see why the Apple Card is eventually going to push banks to improve their own apps.

3. It’s a mutually beneficial business partnership 

Apple has been looking to create additional revenue streams as it shifts its brand from products to services. Goldman-Sachs – an investment bank at its core – has entered the consumer business for the first time with their recently established Marcus brand, but lacks the experience. Both parties understand a credit card is an excellent way to engage with customers, so partnering made sense.

It looks as if the benefits will be mutual and significant. As many mobile banking services require monthly payments, Apple will have countless opportunities to offer additional promotions and engagement options. Goldman, while not in the driving seat of this partnership, will be doing the operational and banking heavy lifting and have the chance to build a credit portfolio with a household brand such as Apple. 

Banks and credit unions will have to work harder to compete
Apple has certainly raised the stakes in banking. The promises it makes signals that the company is showing customers that it is listening to what modern consumers want, and its business decisions are paving the way for success. Banks and credit unions will have to work harder to match and exceed the user experience the Apple Card promises.

So Apple Card will not necessarily have a smooth journey ahead. It will have to overcome many challenges – one of which will be increased competition from established financial institutions. How can they ensure they are taking the right steps? Where should they begin? Part two of this blog series explores these questions and explains how financial institutions can beat Apple at its user experience game.