Since the advent of Apple Pay back in 2014, Apple has slowly but surely rolled out a number of other financial-related products: Apple Cash (née Apple Pay Cash) in 2017, the Apple Card in 2019, the recent Apple Pay Later service, and just this past week, the new Apple Card savings account.
It’s a lot of interest–if you’ll pardon the expression–in the financial realm for a company that tends to be focused on cutting-edge technology, especially given that, in the U.S. at least, the banking system is anything but.
Nevertheless, with all of these various offerings, Apple seems well poised to become something a bit like a bank in its own right. Why would Apple want to be a bank? Well, in the apocryphal words of famous bank robber Willie Sutton: “That’s where the money is.” But to zoom out and take the 35,000-foot view, there may be even more of a long game playing out here.
The more you spend, the more you save
The recent announcement of the Apple savings account is, on the face of it, a puzzling one. Like many of the other Apple financial products, there’s no obvious way that money flows to the company: it’s not requiring a minimum balance and there are no fees. Moreover, by offering a very competitive 4.15 percent interest rate, the company is actually giving money back to the consumer. (It’s worth noting that Apple savings does have a maximum balance: $250,000. And if that number sounds familiar, it’s probably because you’ve been paying attention to the details of recent bank collapses: $250,000 is the maximum amount insured by the FDIC.)
But that’s looking only at the tactical situation. From a strategic standpoint, an Apple savings account with an attractive interest rate encourages consumers to leave more of their money in Apple’s hands, in order to benefit from the return. Not only is that money that’s within Apple’s ecosystem (albeit under the auspices of their banking partner, Goldman Sachs), but it’s money that isn’t going elsewhere–specifically, being transferred out to another account.
That encourages users to keep making Apple Pay and Apple Card purchases since they can in turn shovel more funds into this high-interest account and earn even more money. That’s good for the user–they earn money–and it’s good for Apple because more money begets more money.
Two’s company
Attentive Apple watchers may also have noticed one other interesting detail in the company’s recent announcement of its Pay Later feature. Unlike the Apple Card and the savings account, the Pay Later system isn’t backed by a financial partner, but rather by a subsidiary of Apple: Apple Financing, LLC. That company handles the loan aspects of Pay Later, such as performing credit checks, providing the funds to make purchases, and handling repayment by the consumer.
Creating an entirely new company to specifically deal with these kinds of tasks may not be a particularly surprising move for something that is this far out of Apple’s core competencies, but it is a significant one. If nothing else, it makes clear that this isn’t some passing fancy for Apple, but an effort that it’s putting significant time and resources behind. It also seems to hint at future Apple developments in the financial technology realm.
Apple
But if Apple isn’t done with its moves in this market, it still raises the question of whether there is a larger strategy at stake, something that plays more into Apple’s actual business strengths.
A bank, but not as we know it
You don’t have to look very hard hard, in fact, to see how these markets of finance and technology intersect. Apple Pay is a stellar example: while it didn’t originate contactless payments, it did go a long way to popularizing them–to the point that I now run into way fewer places that don’t take Apple Pay than that do.
But as I mentioned above, here in the U.S., “banking” and “technology” often feel at odds. I know many people who still deal in paper checks, and bank transfers are still clumsy and slow compared to other places around the world.
And part of me wonders if Apple sees this same dysfunction and thinks, “Hey, what if we could improve that experience?” in the same way that Apple Pay has improved retail purchasing. By slowly rolling out financial products, the company gives itself a foothold in the industry, and some skin in the game to boot.
What that might look like is anybody’s guess, but Apple’s proved before that it can make compelling arguments for its ecosystem improving on a standard (iMessage, for one example). And with the massive e-commerce system the company already has in place via the App Store or its many subscription services, there’s certainly an argument to be made that Apple knows quite a bit about the financial business already.
I, for one, would be delighted to see Apple becoming a significant enough player in the financial industry to wield that influence in improving my banking experience. What if transferring funds was as easy as Apple Pay? What if I never needed to write another paper check in my life? All of those feel like pain points that Apple could help solve if it bent its will to the task; and maybe, based on what it’s done so far, it’s got just such an idea in mind.
