Report: Apple to end partnership with bank that backs Apple Card, savings accounts::Goldman Sachs has lost billions of dollars on its consumer-focused businesses.

  • @[email protected]
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    277 months ago

    people with Goldman-backed credit cards like the Apple Card are actually making their payments less often than people with credit cards from other banks

    Who could have possibly seen this coming?

    • MacN'Cheezus
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      7 months ago

      That’s interesting, because delayed payments are generally where credit card companies make most of their money.

      People paying ON TIME and in full are credit card companies’ worst customers because they never pay any interest on their charges.

      • cyruseuros
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        67 months ago

        True, but the business still pays them plenty. It’s not so much that they lose money, it’s they they earn less.

          • cyruseuros
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            67 months ago

            That’s just mismanagement and inflated input costs. The average cc company is happy either way. Idk what it is with Goldman but they mucked up consumer banking too.

            • MacN'Cheezus
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              67 months ago

              I’ve heard rumors that the reverse is actually true, and too many people ARE paying on time because Apple purposely designed their app to encourage people not to carry a balance.

              • cyruseuros
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                37 months ago

                That could be true, I don’t know honestly.

                But then it’s an issue of bad fee structures, or rather overestimating defaulter numbers. It’s not like the amount of money you make from fees reduces as your interest earnings go up, so - if this is indeed the cause - the only thing I can conclude is that to meet their total projected earnings they assumed people would default en masse. Bad long term business and slim margins if you ask me.

                At the same time I have a hard time not drawing a parallel between this and GS Marcus. Apple had nothing to do with the latter and both went under (effectively), with both being forays into regular consumer services for GS.

                Then again I’m just an armchair general. What do I know.

                • MacN'Cheezus
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                  7 months ago

                  Well, just take a look at the terms of the Apple Card and compare them with any other offering out there.

                  There are literally zero fees. No annual fees, no transaction fees, no late payment fees, not even foreign transaction fees. None. And this isn’t just advertising. I’ve had the card for a few years now and I have indeed never paid any fees whatsoever.

                  On top of that, they give you anywhere between 1-3% cash back on your purchases, meaning whatever transaction fees the bank collects is likely all going straight to the consumer. Interest payments are literally the ONLY opportunity here for the bank to make any money at all.

                  Goldman likely made a bet that Apple customers wouldn’t be able to resist splurging on frequent purchases at Apple (since those get 3% cash back) and end up carrying a balance for those, but perhaps not enough of them did for them to make up for the cost of all their overhead (processing cost, support staff, etc.)

                  Again, that’s just a theory, I don’t have any proof that this is the case, but it seems to make more sense than the explanation given in the article, that too much of the debt became uncollectable, which seems to imply that either a lot of their customers went bankrupt or there was a massive amount of fraud.

                  Unless they were lazy on vetting the applications and did in fact hand them out like candy (probably not something they would like to admit in public), I don’t see how that could have happened. The stereotypical Apple customer is likely at least upper middle class and financially literate. If those people are going broke in record numbers, the economy might be in a worse shape than everyone thinks.

                  Goldman were greedy for access to Apple’s customer base, and they took a huge gamble by betting they’d be able to make their money on interest alone. Apple literally dictated the terms in this deal and insisted on this fee structure. They likely don’t care about making any money on it at all, for them it’s just a nice bonus they like to extend to their customers in lieu of a loyalty program (the card is the only way to get a consistent rebate at Apple, and yes you can charge your iCloud subscription on it). It’s free advertising basically, every time you use the card, you think of your friends at Apple for giving you such a sweet deal compared to the nonsense fees you have to put up with at other banks.

                  • cyruseuros
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                    27 months ago

                    Didn’t know they were so generous with the terms. But I meant the fees they charge merchants. At least that’s how the business usually works if I’m not mistaken. Biggest cut of the merchant fee goes to the issuer bank, a smidge to the payment network, and a smalish portion to the merchant bank. Apple usually takes a portion of the issuer bank’s cut (in this case GS)

                  • cyruseuros
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                    27 months ago

                    Of course what could have happened is that that cut was way bigger then the usual Apple Pay deal.