Apple has created a new branded credit card, announced this week. The new Mastercard is expected to launch in Summer 2019.
It comes without a card number, expiration date, or CVV code. The card is a simple piece of titanium with the Apple logo, the cardholder name, and an EMV chip.
Almost overnight, this card has turned into a new status symbol.
Enhanced Security and Rewards
In true Apple fashion, their new Mastercard (sponsored by Goldman Sachs) attempts to simplify the more cumbersome aspects of having a credit card. The first area considered is security. As mentioned above, the card comes without a card number, CVV code or expiration date. All of that information is housed in the iPhone’s Wallet app, which hides that highly sensitive information from merchants and Apple, in favor of having Apple Pay process the information itself.
Apple makes all of your card information extremely accessible in the iPhone Wallet app. So, forget having to download a proprietary bank app from the card’s supplier, Goldman Sachs, to look at balance and transaction information. Everything is in Wallet, including detailed transaction information, such as the location of the merchant that you used your Apple Card at in the Maps app.
What’s more, Apple has also created an interesting cash back rewards structure for the card. Instead of typical spending buckets with most cash back credit cards (i.e. 3% for gas, 2% for groceries, etc.), Apple has divided cash back rewards based on how you use your card. The highest cash back tier (3%) is reserved for any purchases made directly with Apple. 2% cash back can be earned by processing transactions through Apple Pay, and 1% will be earned for any transactions made with the physical credit card.
Uniquely, Apple’s cashback is rewarded daily, based on purchases made in the past 24 hours. Apple Cash is put directly on to the Apple Cash Card (standard in the Wallet app) for immediate use with Apple Pay.
All of this sounds pretty fun and exciting, right? At least from a techie perspective?
But, what does it mean for us…the financial institutions?
Simplifying “Pain Points”
At first blush, the Apple Mastercard is yet another entrant into the competitive cash back rewards credit card market. And that assessment is absolutely true
The rub here is that Apple is doing what they do best: finding seemingly unsubstantial pain points and simplifying them or making them go away altogether. Remember when Apple Pay was launched, and no one thought it would take off, because reaching into your wallet for a credit or debit card wasn’t a consumer pain point?
Yeah. Well, adoption rates of mobile wallets (including Android and Samsung Pay) have continued to increase quarter-over-quarter for the past four years. It’s becoming more of the norm to pay with a smartphone because, well, consumers ALWAYS have their phones with them. Always.
What community financials need to be vigilant about is continued innovation of the experience our consumers have with our card products. If we continue to make things like mobile apps, statements and reward redemptions cumbersome, consumers will ultimately gravitate away from our products in favor of those that remove these hurdles.
The other elephant in the room, in my opinion, is watching out for similar tech companies to launch similar products. The big threat that comes to mind is Amazon. Sure, Amazon already has a branded credit card. But imagine if they created an in-app payment experience just like Apple has done with Wallet? That could spell big trouble for payment processing as we know it.
While the Apple Card in and of itself isn’t groundbreaking or a sign that the sky is falling, it is something worth paying attention to. Because the innovative model they have created will likely dictate our future for our consumers.