What Would A Bank Account From Apple Look Like?

OBSERVATIONS FROM THE FINTECH SNARK TANK

What would an Apple bank account look like if the Big Tech company were to offer one?

That was the question that well-known technology analyst Benedict Evans posed recently on his Twitter account.

Apple already offers financial products like the Apple Card and Apple Pay. But Evans’ question is likely more oriented towards a potential Apple checking account.

Two Views on an Apple Bank Account

Alex Johnson, author of the Fintech Takes newsletter, took up the challenge and speculated that an Apple bank account would:

“Utilize a combined checking & high-yield savings structure, with automated savings capabilities that can intelligently shuttle money back and forth. It would have a physical debit card with virtual one-time and subscription token capabilities and built-in BNPL financing for larger purchases. It would allow for direct deposit, and it would provide two-day early access to customers’ paychecks.

It would refund 100% of out-of-network ATM fees and would have a limited amount of PFM functionality (modeled after the Apple Card UI). I do not think that it would feature overdraft protection or paycheck advance services (that’s not Apple’s target market) and I doubt that it would include any investing capabilities (feels like a bridge too far for Apple right now).”

Itai Damtai, CEO of Unit, a banking as a service platform provider, also weighed in on Evans’ request and wrote:

In Apple’s banking suite, we expect the following features would be included:

• Interest-earning, FDIC-insured checking accounts. This is the foundation on which all of Apple’s other banking products would be built: a checking account offered through one or more bank partners, insured by the Federal Deposit Insurance Corporation, with a unique set of account and routing numbers.
• Direct-deposit switch. If Apple wants to become their customers’ financial mission control, they should make it ridiculously easy for their customers to switch their direct deposits.
• Custom metal debit cards. Apple has already produced one well-reviewed metal card, so expectations for the design of their new debit card would be high.
• Mobile wallet integration. Apple popularized the mobile wallet, so a seamless integration between its banking suite and Apple Pay is de rigueur.
• ACH, wires, and in-network payments. This may be the single most compelling reason for Apple to get into banking. By leveraging ACH, wires, and book payments (fee-free transfers between accounts held at the same bank), Apple has the potential to become a payments network. Apple could dramatically simplify transferring money to friends, family, or merchants, whether they are other Apple users or not.
• Fee-free ATM access. Because Apple lacks bank branches, they would need to provide fee-free ATM access so their customers can get cash. Rather than negotiate access agreements with hundreds of regional ATM operators, they would likely prefer to go through a network like Allpoint or MoneyPass.
• ‍Connectivity to financial apps and services. Plaid Exchange is a way for financial institutions to help their customers connect their bank accounts to financial apps and services. By integrating with Plaid Exchange, Apple can ensure that their logo pops up when customers are searching for their Apple bank accounts.

Damtai also goes on to predict that an Apple bank account would include additional financing options, multiple accounts per customer, cash back rewards, on-demand virtual debit cards, and earned income access.

Would Apple Even Launch a Bank ‘Account’?

Johnson’s and Damtai’s visions of an Apple bank account are compelling—but both seem to have taken every possible checking account feature available, thrown them into a kitchen sink, and called it an Apple checking (or bank) account.

This is anathema to the Apple design ethic which abstracts away the complexities involved with doing the things someone is trying to do.

One complexity in banking that Apple could abstract away is the “account” construct.

The idea (and reality) that we need an account for every financial function—storage (e.g., payroll deposit), payments, savings, investing, international money transfer, etc.—makes managing money a real pain.

An Apple “bank account” would just get the job done.

Because financial services customers have preferences for different financial products and product features—which Apple can’t provide by itself—an Apple bank account would be a seamless front-end to the back-end product providers consumers choose to do business with.

If an Apple “banking” customer had the need to get a job done and didn’t already have a pre-chosen provider for that job, the Apple bank account would suggest various options and help that person make a choice of provider and establish the back-end connection without the customer having to create and manage another “account.”

Because there are often various ways to get a job done, an Apple bank account would present those options—with recommendations for an “optimized” outcome—with fees associated with particular options. Apple would take care of the economics of how to bundle JBTD (jobs to be done) for specific customer segments and preferences.

But an Apple “bank account” wouldn’t be a “high-yield checking” or “high-yield savings account”—it would be a product that offered a range of yield alternatives that imposed cost or behavioral requirements on customers in order to earn a particular yield level.

How Would Apple Get the Job Done?

Evans asked how the rails might work with an Apple bank account.

Initially, an Apple “bank account” would predominantly utilize the existing payment rails because that’s still how most of us make transactions.

Over time, however, as transaction volume on Apple “bank accounts” grows, Apple would be able to divert transactions away from the traditional payment rails and keep more of the transaction fee for itself.

This is why Plaid could be a great acquisition candidate for Apple.

Apple Will Challenge What it Means to Be a Bank and Have an Account

As long as there are regulatory requirements preventing just any company from being a “bank,” only banks will be banks. But that doesn’t mean we can’t do our banking with non-banking companies.

In a world where physical cash was dominant—and digital banking wasn’t a reality—the banking industry needed the account construct to keep track of who owned what.

In a digitally-transformed banking industry, however, we won’t need accounts—we’ll only need rules that apply to the digital representation of money to determine how to treat that money, e.g., what interest rates to apply to savings, what transfers have to be made for purchases and bills, what ownership of stocks or other investments are represented, etc.

There are few—if any—(real) banks who are moving towards this vision. An Apple, Google, or Amazon would be a more likely provider of the new reality. The (real) banks don’t go away—they just play a very different role—but this new potential reality does challenge the question of who is the “bank” and who has our “accounts.”