Originally published at: Apple Takes One More Step into the World of Banking - TidBITS
Apple will soon be offering savings accounts for Apple Card users, in partnership with Goldman Sachs. Is Apple steadily becoming a bank?
My guess is that Apple will do a better job than Google did with Plex. Google put the kibosh on their banking project just about a year ago, before it even got off the ground:
I think you hit it squarely at the end of the article:
One thing is certain: Apple is one step closer to being a bank. Or at least a consumer front end to Goldman Sachs.
Apple isn’t a bank. Apple doesn’t really want to be “a bank”. They would have a lot of hoops to jump through to become a bank. Federal banking law and regulation is complicated and restrictive.
By partnering with an existing financial institution, Apple gets all the benefits of having their brand name on a collection of financial products without any of the headaches of dealing with banking regulations. Goldman Sachs already knows how to handle the legal requirements—they’ve been doing this for a long time.
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I think the key difference between Apple’s ventures and Google’s is that Google was trying to partner with everyone at once, and the biggest banks were reluctant to abet the creation of that kind of competitor. Among other things, that breadth of partnerships risks triggering antitrust alarms.
Apple is partnered with a single financial institution and putting their name on products backed by that solitary partner. There’s no new competitor or coalition of competitors entering the marketplace, just a new name partnered with an existing competitor, so other financial institutions don’t see this as the kind of threat Google Plex was perceived as.
Goldman has a consumer arm under the Marcus brand, so I’d guess that, at least behind the scenes, Apple Savings will look a lot like a Marcus savings account.
Apple might not have an official banking charter at the moment, but recently adding BNPL along with its other financial services like Apple Card, Wallet, and now Daily Cash does make it look like it wants to also be a bank.
If it looks like a duck, quacks like a duck and swims like a duck…
I think Apple is pretty unlikely to enter one of the most highly regulated sectors worldwide, banking and financial services, by owning and operating its own bank. The amount of secrecy and information paranoia baked into Apple’s DNA will make an in-house bank, credit bureau, stock brokerage, money transfer service, or retail lender extremely difficult to operate anywhere other than frontier or possibly emerging markets.
Further, Goldman Sachs brings two very important things to the the table from Apple’s point of view: a fully chartered bank and access to massive amounts of capital. Apple’s balance sheet, and consequently its stock price, would look very different if Apple internally funded and operated the Apple Card. This is due to both regulatory requirements and to the huge number of Apple Card credit lines. In addition, Apple may have had a lot of leverage with GS because Marcus, GS’s retail bank, was launching right around the same time as Apple Card. GS, in order to jump start Marcus–and to potentially help its investment bank get Apple business–may have given Apple very favorable terms.
Yes, exactly, but remember that this is how Apple tends to break into new markets: they partner with experienced players to learn the ropes before jumping all in. They partnered with Motorola on the ROKR before introducing the iPhone. They’ve been partnering with automakers for years to add CarPlay while also working on their own car (which may never see the light of day). Even Jobs’s visit to Xerox PARC was sort of a partnership (they wanted to buy Apple shares early on).
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Project Titan just keeps rolling along:
I think the difference with those markets is that they are lightly regulated and don’t have many mandated capital requirements compared to financial services. Yes, autos and mobile phones are subject to government oversight but the level of disclosures, mandates, worker licensures, and financial directives is much less onerous.
Further, take how Apple is handling regulators in the EU and individual EU countries of its current products and services. Apple would have to radically change its long standing corporate strategy and internal culture to even attempt offering financial services without an established partner.
Having said that, if Apple did bring a banking or Wallet feature in-house, I believe it would be something that, at least in the US, has very minimal regulations, is regulated only at a state level by industry-friendly regulators, and does not require material amounts of capital reserves. That points to payday loans, pay-in-four type loans, and P2P money transfers.
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US consumer protection and product liability laws are very strong among the auto industry for both new and used vehicle sales. Apple will have a lot to address when and if they do enter the car market. And new and used automotive sales are a totally different ball game than any other industry Apple sells products and services in.
What might also be interesting interesting is that Apple could be considering an auto loans division like General and other manufacturers have been doing for over a century:
Here’s just a few examples:
https://gmauthority.com/blog/2021/02/gm-expected-expansion-into-traditional-banking-what-we-know/
I agree, of course, that car manufacturing and car sales are highly regulated. My point, though, is that financial services are even more highly regulated both at the 30,000 foot level and at ground level. As well, the level of disclosure and transparency demanded by financial regulators far outstrips anything the auto industry has to deal with.
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“ U.S. banks looking to get in on a booming market for financing new-car sales have run into a formidable competitor: the auto manufacturers themselves.
Financing arms of car companies, including Toyota Motor, Honda Motor, and Ford Motor, made half of all new U.S. car loans in the first quarter, up from 37 percent a year earlier and the largest percentage of the market in four years, according to credit data firm Experian.”
There’s also this:
“According to a November 2020 report from the WSJ, GM was planning to apply for a banking charter that would allow GM Financial (GMF) to hold deposits and make loans outside the auto sector. The initial report stated that GMF had been in talks with federal and state banking regulators in recent about forming an industrial loan company.”
https://gmauthority.com/blog/2021/02/gm-expected-expansion-into-traditional-banking-what-we-know/
Automotive loans could be a very lucrative market if and when Apple Car becomes a reality. It might be another reason why a potential move into Apple banking is still generating interest in the press. And Apple has plenty of cash in its pockets.
The AppleBank, or iBank or macBank or whatever it will be called, is just another Apple service that I won’t use. Yawn. I wish they’d go back and work on their software.
In much the same way that PayPal acts like a bank but manages to somehow convince governments that they are not a bank and are not subject to banking laws.
Which becomes painfully obvious if you’ve ever tried to resolve a dispute with PayPal.
I think it is very much in consumers’ best interests for Apple to partner with a real bank (like Goldman), since you will automatically get all the legal protections you expect from the banking industry. I doubt Apple will want to establish themselves as a bank, because that’s far far too much regulation for a tech company to want to deal with. And I think if they follow PayPal’s lead to create a not-quite-a-bank, consumers like you and I will end up very unhappy with the result as soon as anything goes wrong.
If Apple wants to become a bank outside the US, then it will need to face nations imposing a diverse range of banking regulations, compliance requirements, monetary withholding reserves, taxation laws and regulations, country banking and financial policies and the rest.
As a non-American with exposure to US banks, let me say that US banks are different - just to localisation of US banks is strange. Besides who uses cheques (aka checks) these days? Oh yes Americans do - weird.
I like the Apple Card but I hate that I can’t screen scrape it’s data into eMoney, like I can with other credit cards. That’s why I hardly use it. I want to be able to see all my card purchases in one place. Every other card (except Chase, which is why I gave up my Chase/Whole Foods cash back card) allows eMoney connection. Why not Apple? Does anyone know if this is being worked on?
Apple provides monthly statements in PDF, CSV, OFX, QFX, and QBO formats. Can eMoney work with any of those? I use the QFX (Quicken) format for downloading all my credit cards to Moneydance and only need to make corrections to substitute some of my own custom categories for the default ones downloaded.
Clearly all this banking-style activity is in the US. As far as I can see, there’s no mention of Europe or the UK so far. As a Brit, I wouldn’t be totally averse to using Apple to deposit some savings, but the service and the interest rates would have to be competitive. Savings accounts can be complex, in that financial institutions tend to offer better rates in exchange for a commitment to keep the money in the bank for a specified time, making it necessary to choose between different offers. Incidentally, with my UK bank (Barclays) it is possible to pay in cheques (checks) by photographing them via their personal banking app. Works well.