{"id":4653,"date":"2019-04-09T07:22:52","date_gmt":"2019-04-09T12:22:52","guid":{"rendered":"https:\/\/reformingretail.com\/?p=4653"},"modified":"2019-04-09T07:22:59","modified_gmt":"2019-04-09T12:22:59","slug":"apple-launched-a-credit-card-and-nobody-should-care","status":"publish","type":"post","link":"https:\/\/reformingretail.com\/index.php\/2019\/04\/09\/apple-launched-a-credit-card-and-nobody-should-care\/","title":{"rendered":"Apple Launched A Credit Card And Nobody Should Care"},"content":{"rendered":"\n

Apple has struggled with innovation since Jobs relinquished the helm at the company. There’s no doubt that current-CEO Tim Cook is a better operator – that’s why Jobs promoted him to serve as his COO – but entrepreneur and savant he is not.<\/p>\n\n\n\n

Apple’s new foray into the credit card space is just another example showing us how little innovation<\/a> they apparently have left.<\/p>\n\n\n\n

Let’s first talk about what Apple has at its disposal.<\/p>\n\n\n\n

Apple has current payment information on an estimated 800 million people. Per a 2014 article<\/a>, Tim Cook revealed that Apple had 800 million iTunes subscribers, most with ties to a credit card on file. Associated with the credit cards are contact information for nearly 1B consumers.<\/p>\n\n\n\n

Apple has built massive merchant distribution in its drive to make Apple Pay happen. Apple keeps a list of major retailers<\/a> that accept this payment method but there’s obviously a really long tail of merchants who don’t have flashy logos. Industry analysts estimate that more than 4 million merchants<\/a> accept Apple Pay. Just to give that number context, First Data, the largest merchant acquirer, accepts payments on behalf of 6 million merchants globally<\/a>. In other words, getting to 4 million merchants is no small feat.<\/p>\n\n\n\n

Apple has an absurd amount of cash on their books. $245B to be exact<\/a>. If we look at the top-15 banks in the country<\/a>, Apple would come in at number 14 with their own balance sheet<\/em>. That’s absurd: the assets banks claim are the deposits of their members, not their own<\/em> deposits. Apple could be the country’s 14th largest bank without any customers – crazy!<\/p>\n\n\n\n

Now that we’ve gotten those points out of the way it should be obvious where we’re going with this. Apple has access to a large number of consumers. Apple has access to a large number of merchants. Apple has copious capital to underwrite the two sides in any sort banking initiative they desire.<\/p>\n\n\n\n

But they didn’t do that.<\/p>\n\n\n\n

Instead what we got was another shitty credit card with zero value. Apple can market it however they desire, but the reality is that it’s a glorified Mastercard with an Apple logo<\/a>.<\/p>\n\n\n\n

Imagine if the people at Apple had any balls. <\/strong><\/p>\n\n\n\n

First, they’d start the process of becoming a bank. They would secure all the (useless) certifications required to be in the lending and credit business.<\/p>\n\n\n\n

Second, they’d go to their Apple Pay merchants and explain that they would be launching a new credit card that came with drastically reduced interchange – let’s just call it a flat 1%. Merchants would sign up for this immediately, especially since we’ve discovered that consumers will actually use<\/strong> credit cards as opposed to mobile payment apps. These merchants would be glad to co-market the card at their stores since it would decrease their needless processing costs overnight.<\/p>\n\n\n\n

Third, Apple would launch the credit card directly to consumers, leveraging the contact information they already have stored in iTunes. As Apple would already be a bank, they would be able to directly underwrite consumer risk themselves, being the issuing bank, acquiring bank, and network all in one stop.<\/p>\n\n\n\n

Over time Apple would be able to watch the data it’s collecting to create a myriad of financial products which would far outweigh the revenues from interchange, and the card rate would drop to 0%. Boom. <\/p>\n\n\n\n

And just like that, actual value is created, and an industry is transformed for the better.<\/p>\n\n\n\n

There are numerous companies<\/a> trying this approach with cryptocurrency, but they don’t have the distribution to pull it off. Apple has an opportunity to really change an industry for the better.<\/p>\n\n\n\n

Will they?<\/p>\n