Among the most tangible ads in the Apple service event yesterday was also its most interesting: a credit card, aptly named the Apple Card, with a physical and digital version that offers up to 3 percent of refund. The product is, on the surface, a way for Apple to sell its brand in another everyday object that it probably already has. But under the sheet of a titanium credit card with the Apple logo, the company is clearly plotting its future after the iPhone, one in which the services reign, following a formula that we had never seen before.
In this case, Apple has decided that it needs a traditional product, even one with the dubious moral luggage of a credit card, to promote Apple Pay. While the digital wallet and payment platform are growing rapidly, it is still used by less than half of all iPhone owners (and even less in the US). So, just as Apple sees competing with Netflix and the big cable companies as part of their future by creating their own television shows and paying the dollar for Hollywood talent, the company no longer sees the possibility of canceling the status quo. in payments as a viable way for Apple Pay. .
"I think the strange optic here is that credit cards are not necessarily an innovation in payments, even with better rates and loyalty," says Rivka Gewirtz Little, director of global research at analyst firm IDC who specializes in payments. "Therefore, seeing a great technology company, which sticks to innovation, follows such a traditional route, that's what I think is a bit strange here." I'd like to see Apple become more innovative by transforming the way we pay. "
For years, the iPhone It has become ubiquitous, and sales have begun to decline, Apple has tried to emulate the paradigm-changing success of the App Store and iTunes before making its way to television and film, mobile payments and news. and again for the past half decade, Apple has come up against the harsh economic and logistical reality of trying to change industries that are much less malleable than mobile software and music.
And while Apple Pay may be a vision Audacious of the future, it is likely that years will pass before contactless digital payments become the mainstream of the United States.Meanwhile, Apple wants to sell you the benign and the boring (a credit card). revenue, a cable package, a subscription to a magazine) in the hope that your software and services are as intrinsic to everyday life as your smartphone. Changing industries from scratch is no longer Apple's playbook, especially because it is catching up with companies like Netflix and Spotify.
Apple's strategy reflects that of Amazon. The e-commerce giant began selling genuinely new and best-in-class products, such as the Kindle and then the Echo speaker powered by AI. But since then Amazon has used consumer goodwill and the power it exerts over its digital store to sell everything from microwaves and wall clocks to white-label clothing brands, household items and AA batteries from Amazon Basics.
Apple is doing the same, using the iPhone as the definitive gateway to transform each iOS and Mac user into a series of multiple recurring revenue streams of products manufactured first and, in some cases, improved by other companies, whether Apple Music, Apple News, iCloud or the new TV application. Apple fails to make its own version of Prime, in which all these services could be grouped, but the company seems to be following the example of Amazon's subscription approach to further lock up iPhone owners in a broader ecosystem.
With the Apple Card, the company is going a step further and is trying to capture not only what it consumes, but also the financial means it uses to do so. Apple is not reinventing the wheel: the card, as reported by CNET has no contactless capabilities as the newest cards from competing banks, so you must slide it or insert the chip. in a reader to use it every time. Instead, Apple is giving users a low-cost credit card that is a skillfully disguised way to improve the adoption and use of Apple Pay.
Unlike the subscription services you plan to sell, the Apple Card does not have an annual fee, nor delays, and a interest rate supposedly lower than the industry average. On top of that, it has a fairly simple rewards program that encourages consumers to use Apple Pay to buy Apple products, with the highest cash back at 3 percent, thanks to the fact that Apple no longer has to deliver a Processing fee as high As it does with a third party card. If you have to use the Mastercard physical card, you will get a 1 percent refund. (Of course, when it is released, the Apple Card will be one of the only cards in the market without a registration bonus, the main incentive mechanism that banks use to open up new lines of credit).
To get customers To sign up, Apple relies heavily on its privacy approach first. Indeed, Apple wants to be the only technology company you really trust. In yesterday's scenario, CEO Tim Cook said the card will not collect data about his transactions, and Apple will not allow its associated bank, Goldman Sachs, to sell any data to third parties. But, of course, that raises the question: how does it generate money and, without these usual stipulations, Apple is not limited to users getting into debt and keeping the insurance money they are required to pay over the next few years?
The goal may not be to make a profit, at least not in the service itself. Everything goes back to Apple Pay. The reason why Apple created a credit card is, first, to stimulate the adoption of Apple Pay and create a digital wallet that can be used not only in the real world, but also within an iOS ecosystem that every time It is more peppered with news. Payment services.
"Mobile wallets are still a small part of the market, so it is understandable that there should be a big boost if your goal is more adoption," says Rasha Katabi, CEO and co-founder of credit Card and digital payments of the launch company Brim Financial. "As the adoption of electronic commerce increases, and we have seen that at an exponential rate in recent years, the relevance of having a physical card or the lack of it will closely follow the adoption and migration of the purchase. physical to the whole, online shopping. "
The only online purchase that Apple really cares about what happens within its ecosystem: in-app subscriptions for its new services, microtransactions in mobile games like Fortnite point-to-point Venmo payments with Apple Cash and Apple hardware purchases from the Apple Store mobile application. All this qualifies for the 3 percent cash back bonus, Apple confirmed to The Verge . And that arrangement throws an interesting light on the whole focus of the Apple Card.
Through its incentives, Apple is creating a system where to buy in the real world with Apple Pay partners for an extra refund bonus, change your credit card from the App Store to an Apple with an even better bonus, and just rely on the physical card for when you have to. And everything is backed by Apple's commitment to privacy and its relatively strong security record, as well as the luxury status symbol provided by an Apple-branded titanium piece, with a non-coincidental numberless design that makes it easier to brag on social networks.
Apple should not be underestimated by pushing people to keep cash within the Apple ecosystem!
You are playing a long game here. If you succeed, this is very bad for card networks.
– Peter Berg (@peter) March 26, 2019
That may be attractive enough to get younger users, especially those without large reserves of reward points and years of credit created with banks and existing cards, to use Apple as its main credit provider. Credit cards, especially those subscribed by Goldman Sachs and backed by dinosaurs like MasterCard, are not the most innovative products. Neither are television packages or magazine subscriptions.
But Apple's service strategy, similar to its hardware strategy in the Tim Cook era, is not about being the first, but about providing an Apple-centric option that is good enough to keep it connected and no interest in the game.
Shannon Liao contributed to this report.