FINTECH SNARK TANK OBSERVATIONS
If there is one thing I have learned as a technology analyst for more than 20 years, it is this: when companies have good news to report, they do not back down on the publication of indicators performance indicators.
When they do not do have good news to report, however, there is no shortage of excuses as to why they cannot make the numbers public.
Which brings us to the Apple card.
In November 2019, Goldman Sachs declared via regulatory documents that – just six weeks after the launch of the Apple card – it had issued around $ 10 billion in credit to cardholders. The company also said consumers with the new credit card had already accumulated $ 736 million in loan balances during the period.
Sounds like a resounding success, right?
However, Apple itself has not revealed any key metrics, particularly the number of cardholders.
Well, if Tim Cook doesn’t tell the world how many Apple Card holders there are, I will (based on consumer research from Cornerstone Advisors).
How many Apple Card customers are there?
About 3.1 million Americans, or 2.2% of all American adults with a credit card, already own the Apple card. Who they are may surprise you.
But first, it habit surprise you to learn that most are younger consumers – 70% are millennials (almost evenly split between young millennials in their twenties and older millennials in their thirties). By the way, only 3% are baby boomers.
However, speculation that Apple card customers are primarily low-income consumers is not true. Only a third of households have an annual income of less than $ 50,000 (compared to 55% of the total population) and a third have an income of more than $ 100,000.
This is a highly educated group: 56% have a university degree (many with a master’s degree or more), compared to about a third of the general population.
And more than half of them do business with one of the three mega banks: Bank of America, JPMorgan Chase or Wells Fargo. But that shouldn’t surprise you since I already told you that 44% of Millennials bank with one of these three banks.
The biggest overlap between Apple Card and other issuers concerns American Express and Bank of America. About a third of Apple cardholders have an Amex card and almost three in 10 have a BofA credit card.
Sharing the main card of the Apple card
3.1 million cardholders is a lot? For a whole new credit card, of course, but not relative to the number of cardholders of its competitors. However, calculating the market share on the basis of cardholders is unnecessary, since credit cardholders have, on average, three cards.
One relevant measure that we can examine, however, is the status of the main card. Here, the Apple card overlays incredibly well for a whole new card on the market.
Six out of 10 Apple Card customers view the card as their primary credit card, roughly equal to the primary card status achieved by Bank of America and JPMorgan Chase, and slightly higher than Wells Fargo and Capital One.
It’s not an apples to apples comparison, however (sorry, I couldn’t resist). Half of Apple Card holders have only one card: the Apple Card.
In contrast, among Bank of America and Capital One cardholders, only a third have only one card (that is, the card of these issuers). And among JPMorgan Chase cardholders, only a quarter have a single card, that of Chase.
What future for the Apple card?
If there is one other thing I have learned as a technology analyst (and consumer researcher), it is that consumers do not always do what they say they do in surveys.
Cornerstone Advisors surveyed consumers in 2019 after the Apple card was announced (but before it was launched). At the time, I wrote:
“When Apple launches its new card, 24% of millennials and 22% of millennials plan to apply for it. Among these potential candidates, just over half of young millennials and two-thirds of older generations said they would make the Apple card their primary credit card. ”
Clearly, far from these percentages of millennials have applied for the card, although many of those who have done so have made it their primary card.
In the 2020 survey, Cornerstone again asked consumers about their intention to apply for the Apple card. The new figures are more discreet than last year, but still encouraging for Apple: about 10% of millennials said they would apply for the card.
Could Goldman Sachs be the real winner here?
The best news, however, may be for Goldman Sachs, who teamed up with Apple to launch the Apple card (though you never know that listening to Apple brags about how they did it all without a bank).
An August 2019 article on Market Realist speculated that the Apple card could harm Goldman Sachs. Specifically, he feared that Goldman: 1) could see huge losses if the economy moved south, and 2) would cost around $ 350 to acquire customers per card.
Fast forward to today, and the demographics of actual cardholders mitigate the prospect of huge losses in the event of a slowdown.
And correct me if I’m wrong, but Apple (and Goldman) didn’t spend a lot of money on direct mail to support the Apple card or offer the huge incentive points that other issuers generally offer.
In addition, Market Realist was not aware at the time of Goldman Sachs’ plan to offer a Marcus checking account.
In a recent article on Fintech Snark Tank, I mentioned that 8% of consumers surveyed intended to open a Marcus checking account when Goldman Sachs opened one.
The percentage of Apple Card holders expressing interest in a Marcus checking account is astronomical compared to other consumers: half said they would open the account when it was launched, split equally between those who closed their checking account and those who would leave their checking account open.
Oh, if consumers were only doing what they said they were doing in the polls.
Apple Creates New Competition Base In Card Space
When Apple first announced the Apple card, I was pessimistic about its prospects. I didn’t think: 1) The rewards structure was good enough to compete; 2) Consumers would care about PFM tools; and 3) Apple had sufficient data and analytic capabilities.
I missed the boat on the real story.
Established issuers compete for rewards (which can offer the most, tailored to the preferences of cardholders).
Apple is competing on the ecosystem. Instead of offering 3% (or other) on travel, restaurants, grocery stores – like the rest of the market – Apple offers 3% on spending with selected partners (Uber, Uber Eats, T-Mobile).
And by offering rewards in the form of Apple Pay funds, which contributes to fueling the volume of these payments.
No other market issuer can pursue this strategy.
And unlike other issuers, which offer different cards targeting different market segments, Apple has acquired a grip on two very different segments: the low end. and the high end – with a single card.
It took Apple Pay a number of years to get the payment volume that some experts thought it would have in a much shorter time. Despite consumers’ stated intentions to apply for the card, it will likely be the same for the Apple card.
But this will give Apple time to continue developing its ecosystem and pose a formidable threat to the large emitters on the market.