Among the most tangible announcements in Apple's service yesterday, it was also the most interesting: a credit card, called the Apple Card, with both a physical and digital version that gives you up to 3 percent cash back. The product is on the surface a way for Apple to sell its brand on another everyday item you probably already own. But under the veneer of a titanium credit card with the Apple logo on it, the company clearly shows its future future iPhone, one where services reign supreme, following a formula we've never seen that attempt before.
In this case, Apple has decided that it needs a traditional product, one with the dubious moral baggage of a credit card, to promote Apple Pay. As the digital wallet and payment platform grows rapidly, it is still used by less than half of all global iPhone owners (and even less so in the United States). As Apple sees competition with Netflix and large cable companies as part of its future by creating its own TV shows and paying the top dollar for Hollywood talent, the company no longer sees the status quo in payments as a viable way forward for Apple Pay.
"I think the strange optics here are that credit cards are not necessarily innovation in payments, even with better prices and loyalty," said Rivka Gewirtz Little, a global research director at IDC analyst firm Paying Payment Specialization. "So to see a big-tech company hanging on the hat of innovation, go to such a traditional route ̵
For years, as the iPhone has become ubiquitous and sales have begun to slow, Apple has attempted to imitate the paradigm-shifting success of the App Store and iTunes before hitting it into television and movies, mobile payments, and news. And again over the last half decades, Apple has entered the harsh economic and logistical reality by trying to change industries that are far less vulnerable than mobile software and music.
And while Apple Pay can be a bold vision of The future, it will probably be years before contactless digital payments become really common in the US Meanwhile, Apple wants to sell you benign and boring – a credit card, a cable package, a magazine subscription – hoping it can make the software and services a natural Part of everyday life as his smartphone. Changing industries from the ground is no longer Apple's playbook, especially since it plays recordings to companies like Netflix o g Spotify
Apple's strategy reflects that of Amazon. The e-commerce giant started selling sincere new and premium products like the Kindle and saw the AI-powered Echo speaker. But Amazon has since used the consumer's goodwill it achieved and the power it drives over its digital store front to sell you everything from microwaves and wall clocks to white label brands, home items and AmazonBasics-branded AA batteries.
Apple does the same, using iPhone as the ultimate gateway to transform all iOS and Mac users into a series of multiple recurring revenue streams from products made first and in some cases better done by other companies whether it's Apple Music, Apple News, iCloud or the new TV app. Apple stops short of making its own version of Prime, where all these services can be assembled, but the company seems to take its signs from Amazon's subscription access to lock iPhone owners into a wider ecosystem.
With the Apple Card, the company goes one step further and tries to capture not only what you use, but also the financial resources you use to do so. Apple does not detect the wheel card, as reported by CNET does not have contactless features like newer cards from competing banks, so you have to slip it or insert the chip into a reader to use it every time . Instead, Apple provides a no-frills credit card that is a cleverly hidden way to freeze Apple Pay adoption and use.
Unlike the subscription services it plans to sell, the Apple card comes with no annual fee, no late and an interest rate likely lower than the industry average . In addition, it has a fairly straightforward reward program that incentivizes consumers to use Apple Pay to buy Apple products, for most money back at 3 percent, thanks to the fact that Apple no longer has to hand over such a processing fee as it does to a third card. If you need to use the physical Mastercard-branded card, you get 1 percent back. (Granted, when it starts, the Apple card will be one of the only cards on the market without a sign up bonus. The primary incentive mechanism the banks use to get people to open new credit lines.)
To Get Customers To Actually Sign Up itself, Apple leans heavily on its privacy-first approach. Effectively, Apple will be the only technology company you actually trust. Onstage yesterday, CEO Tim Cook said the card will not collect data on your transactions, and Apple will not allow its partner bank, Goldman Sachs, to sell data to third parties. But of course, it asks the question: how does it make money, and without the usual provisions, is Apple not only knocking on users who fall into debt and pocketing the insurance money they are forced to pay in the years to come?
The goal may not be to win, at least not on the service itself. Everything comes back to Apple Pay. The reason why Apple made a credit card in the first place is to encourage the adoption of Apple Pay and to create a digital wallet that can be used not only in the real world but also in an iOS ecosystem that is increasingly peppered with new ones, for -Pay services.
"Mobile wallets are still a small part of the market, so it's understandable that there must be a lot of pressure if your goal is more adoption," says Rasha Katabi, CEO and co-founder of credit cards. and digital payment startup Brim Financial. "As e-commerce decisions increase and we've seen it with an exponential rate over the last few years, the relevance of having a physical card or lack thereof will track very closely to the adoption and transition from physical trading to full online shopping . "
The only online store Apple really cares about happens in its ecosystem: subscription subscription for its new services, micro transactions in mobile games such as Fortnite Venmo-style peer-to-peer payments with Apple Cash, and Apple Hardware Purchases from the Apple App Store app. All this qualifies for a 3 percent cash back bonus, Apple confirmed The Verge . And that event provides an interesting light on the entire Apple Card approach.
Through an incentive, Apple creates a system where you want to shop in the real world with Apple Pay partners for an extra cash back bonus , change your App Store credit card to an Apple with an even better bonus and rely only on the physical card for when you absolutely need to. And everything is backed up by Apple's privacy laws and relatively sturdy security tracks, as well as the luxurious status symbol provided by an Apple-branded titanium piece, with its numberless design that doesn't accidentally make it easy to flip on social media.
Apple is pushing people to keep money in the Apple ecosystem, should not be underestimated!
They play a long game here. If successful, this is very bad for the card network.
– Peter Berg (@peter) March 26, 2019
It may be tempting enough to get younger users, especially those without large stocks of reward points and years of credit built with existing banks and cards, to Contact Apple as their primary credit provider. Credit cards, especially those guaranteed by Goldman Sachs and backed by dinosaurs such as Mastercard, are not the most innovative products. Neither are TV bundles nor magazine subscriptions.
But Apple's service strategy, similar to the hardware strategy in the Tim Cook era, is not about being first, but about providing an Apple-centered option that is good enough to keep you stuck and uninterested in leaving.
Shannon Liao contributed to this report.