Citigroup rejects Apple Card
Citigroup decided not to move forward with Apple as a partner and their Apple Card project, according to CNBC. CNBC reported that Citigroup bailed over concerns that:
...it wouldn’t earn enough of a profit from the partnership.
Dear CitiGroup - which profit do you mean? The one which you have now from interests? The one which you make when customers are not repaying on time? Are you afraid that innovative solution will decrease the number of people who are falling into the "late repayment" bucket?
I will leave those questions for now, and come back to it on the end of this post.
Was Citi Group the only one who negotiated with Apple? Of curse not!
The report noted that JPMorgan Chase, Barclays and Synchrony were also in the running to partner with Apple on the credit card.
Apple already went with Goldman Sachs, announcing in March the new credit card that will be available in the summer.
While the credit card is expected to appeal to consumers thanks to zero in the way of fees, a mobile app that encourages consumers to avoid debt and to pay it off promptly and what Apple said will be lower interest rates than are available today, the bank partner isn’t expected to make much. For Goldman Sachs, the report said, it will be a test to see if the endeavor is profitable at a time when the economic growth in the U.S. is in the late innings.
“There’s a danger for any bank entering deals like this from a profitability standpoint,”
Forrester analyst Peter Wannemacher said in the report.
“Increasingly, they’re wary of co-branding deals when it seems likely that the partner firm is the ‘cooler’ brand. They’ll consider making a deal with a company like Apple or Uber, but the danger is that the economic gains underwhelm.”
The move on the part of Citigroup to back out of partnering with Apple underscores the fact that U.S. credit card issuers make money when customers rack up debt and remain in debt. Let's here come back to my rhetoric questions from the beginning of this post.
According to CNBC, U.S. consumers paid $113 billion in credit card interest last year. That’s up nearly 50% from 5 years ago.
If more consumers embrace the FinTech’s promises of no fees and lower interest rates the credit card industry stands to lose. It definitely can be the reason why banks don't want to partner with the company which plans to take people out from debts, not to keep them in constant debt. How unmoral it is it should be answered by the banks themselves, but since I do not know all the details of the deal, I do not want to make any judgments
Good think is that at least Goldman Sachs decided to give it a try. Andrew Williams, a spokesman for Goldman Sachs, told the news outlet the bank is thrilled to be a partner with Apple.
“Goldman Sachs seeks to disrupt consumer finance by putting the customer first,”
Williams said in a statement.
“We are excited for customers to use Apple Card, which is designed to help people take control of their financial lives.”
I have to say that I am really curios what will be the final offer within Apple Card and can't wait to have it available also in Europe. I am slightly afraid though, that European banks can be even more sceptic and will not want to lose the profits from interests. The EU partnership will not be easy to find for Apple. On the other hand - we have in EU so many disruptive banks in FinTech industry, then maybe one of those, will start and the rest will follow. As A. Williams said, there is time to put consumer first!
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