Digital & Innovation

Apple Card, the reference for banks going forward?

3-minute masterclass

Apple has always been one to challenge the status quo of technology. iMac, iPhone, iPad. These were groundbreaking inventions and with the launch of Apple Pay, they took their first steps into the financial sector. Was this to be expected? Probably. But launching another finance product so quickly after? This, we didn’t expect.  

Next summer, Apple releases the Apple Card in collaboration with Goldman Sachs (only in the USA for now). This payment innovation brings user-friendly interfaces and functionality to the financial industry and this will most definitely change customer expectations. By now you’ve already read a massive amount of articles on this subject so we’ll be brief.

Why choose this card over the traditional credit cards 

In short, the Apple card is a mobile first credit card. This means that you’ll be rewarded more (2-3%) when paying with your mobile device than with the actual titanium card (1%). This is an incentive Apple uses to motivate the digital use.  

It’s safe  

The card won’t show your account number, doesn’t have a magnetic strip, signature, expiration date nor CVC. Instead these details can only be retrieved online. This increases the safety given that the above mentioned attributes are often used to hack bank accounts. Additionally, you’ll quickly receive notifications when suspicious activities are carried out prompting Apple to immediately allow or stop those transactions from going through. These measures are a response to the high amount of (cyber) attacks encountered in the past years.

source: Apple Insider

No fees 

Yes, you’ve read this correctly. Apple wants to create a friction-free, low cost experience that puts customers first. The payer’s benefit consists of no annual fees, no late payment fees, no international fees and no over-the- limit fees.

Combining transactions under 1 tag 

One of the unique features of the experience that Apple is providing, is the ability to “check your spend”. They combine transactions under one simple interface and enriches   them with additional information. For example, you always go to a specific grocery store. Apple will label your amounts spent at this store under 1 tag and the amounts spent at the gas station under another. This is very useful but not new. Other players such as Monzo, ING and ABN AMRO were already doing this. One might think this is a win-win for everyone, but this could also prove to be a Trojan horse for banks. The risk of disintermediating the user from the bank account and online banking platforms is real. 

Will this be an easy adoption?  

From our own experience in payments innovation across Europe we’ve seen that this brings compelling opportunities but also threats which differ per market. In markets such as the US and UK, which have a high adoption of challenger banks plus Google- and Apple Pay, this card will be a competitor in a crowded but innovation friendly consumer base. They are used to credit card benefits like free international payments such as Starling’s and Monzo’s, and well-developed incentive schemes backed up by hotel chains or airlines. Markets similar to The Netherlands’ and Germany’s are slower in adoption of above-mentioned innovations and prefer debit over credit cards. Therefore, the Apple Card might be just what they need in order to accelerate the adoption of payment innovation.  

What about the ‘traditional’ banks? 

It’s clear that traditional banks have to adapt or they’ll sink. Now more than ever, the financial industry is facing the threat of being reduced to a backend facility. Substantial revenue and earning pools are at stake. Especially when we look at the low interest revenues from the last decade. Additionally, customer value adding services and products become more and more important. In order to deliver the paradigm shift from fee and interest income towards a “provision operational payments business model”, banks need to redesign their service and product portfolio.

Over the last few years, we’ve been guiding banks to the right answers and solutions for them and their customers. With the rise of such kinds of payment innovations banks are at risk of becoming superfluous. But no need to panic; credit card innovations, open banking and PSD2-enabled solutions could compete with these products and offer different and interesting benefits. 

So, don’t let the innovation wave crash over your business, let us help you to surf it and fend off the Silicon Valley sharks. 

Are you interested in our teams’ capabilities in Digital & Innovation, Operational Excellence, Delivery Excellence and Regulatory & Compliance? Don’t hesitate to drop us a message.