Apple is saying farewell to Goldman Sachs and taking its Apple Card and Savings business elsewhere.
According to the Wall Street Journal, Apple is terminating its partnership with Goldman Sachs. The tech giant recently sent a proposal to Goldman to exit from the contract in the next roughly 12-to-15 months, according to people briefed on the matter. It’s not a surprise, given that Goldman Sachs has publicly expressed its desire to exit the consumer lending industry. This is a significant change in direction for Goldman Sachs, as they had previously aimed to transition from being a global investment bank to becoming a consumer lending firm.
If Chase and American Express could do it, why not Goldman Sachs? It turns out it’s not as easy as it seems.
Goldman Sachs made several mistakes in its expansion into the consumer market. The primary mistake was assuming that everyone would pay their bills. Their practice of signing agreements that forced them to accept credit applications from customers whom other banks would typically reject also contributed to their downfall.
In January 2023, Goldman Sachs disclosed that the bank had lost a billion dollars on the Apple Card deal.
The Wall Street Journal and CNBC reported that Goldman was “looking for a way out” of the Apple Card and was talking with American Express. However, it wasn’t easy for the bank to sell the Apple Card and Apple Savings program. Any agreement would need Apple’s blessing.
Well, it appears that now Apple wants out of the deal with Goldman Sachs. As for that, Goldman’s talks with AMEX has issues as there are concerns about several aspects of the Apple Card program, including its loss rates, and it isn’t clear if those discussions have continued.
According to the Doctor of Credit, there may be additional problems with the Apple Card leaving the Mastercard payment network. That has led to rumors about a partnership with Synchrony Financial. There are reasons why this deal would make sense, as highlighted by the WSJ.
Synchrony, the largest issuer of store credit cards in the U.S., lends to a wide spectrum of consumers, including those with lower credit scores. Synchrony, which originally bid against Goldman for the Apple credit card program, for years has been trying to position itself as an issuer with close ties to tech companies.
Since Synchrony has experience offering credit to customers with substandard credit scores – the same customers that have caused problems for Goldman – it makes sense for them to take over the Apple Card.
There shouldn’t be any difference for current Apple Card customers as all card functions are run through Apple iOS. You pay your bill through Apple Wallet and check your bill on your phone. If the processor of your payments changes, I doubt many people would notice.
However, for the customers who don’t pay their bills on time, I’m sure the experience dealing with the collectors from Synchrony will differ from the messages received from Goldman Sachs.
But since Apple has a while to unwind the deal with Goldman Sachs, who knows what other banks will want this business? If Goldman is forced to keep all the delinquent accounts, Chase or Citi might want to swoop in and pick up all the remaining Apple customers with good credit.
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