Speaking on stage on Monday night, Apple CEO Tim Cook announced what many in the fintech space have long worried about: Apple was launching... a credit card. Working with issuing bank Goldman Sachs, the technology giant launched a physical MasterCard product to complement Apple Pay, called Apple Card.
This being the Cupertino company though, this wasn't your normal credit card, combining "the most beautifully designed card ever", made of titanium with just your name laser etched on it.
This integrates with your Apple Pay account and native iOS Wallet app, has no card or CCV number (courage?) and pays 2% cash back daily on all purchases, or 3% on Apple products. Combined with the Wallet app it also includes spending categorisation and payments tagged by retailer and location.
Apple Card is launching this summer in the US, with no news of an international rollout yet.
"We want to take the Apple Pay experience even further and we saw the opportunity to transform another fundamental method of payment, and that's the credit card," Cook said on stage on Monday.
"With Apple Card we have completely rethought the credit card. A new kind of card that takes advantage of everything the iPhone offers, is designed for a healthier financial life and sets a new level for privacy and security," Jennifer Bailey, VP of Apple Pay added.
Bailey also spoke about the current system of paying off credit cards, which focus on minimum payments and "seem to be designed to keep you in debt". Apple instead displays a range of flexible payment options. "With Apple Card our goal is to help you save on interest," she added. Apple Card also has no late, annual, international, penalty or over limit fees.
Should UK banks be worried?
As Megan Caywood, managing director at Barclays and former chief platform officer at challenger bank Starling tweeted: "Love seeing @Apple nail the challenger bank playbook: Apple Card includes easy sign up, no fees, works worldwide in Wallet app, 2% daily cash back, in-app chat for customer support, enhanced transactions with maps & merchant logos, plus cards laser etched in Titanium."
So, should the challenger banks be worried by one of the most valuable companies on the planet entering their patch?
As David Brear from fintech consultancy 11:FS tweeted: "This isn't a drill banks. This is the moment you've worried about."
??? Apple launch #AppleCard— David M. Brear (@davidbrear) March 25, 2019
This isnt a drill banks. This is the moment you've worried about.
?? Great UX
?? Rewards encourgaging daily usage
?? Hardware / Software integration
?? Baller card
?? P2P integration
?? Debt management
Say bye to your customers.
Brear also told Techworld that he believes "Apple has been looming over the banking battlefield for over a decade now but with their recent announcement regarding Apple Pay conducting more transactions than PayPal, and now the reveal of the Apple Card, they might finally be living up to the hype.
"Apple have used their ability to control both the hardware and software in their handsets to do something very different moving forwards. They have the capability to compete in one swoop with not only credit card companies but challenger and incumbent banks, loyalty programmes and P2P firms in the US such as Venmo."
Peter Hewlett, partner at global management consultancy A.T. Kearney says that "digital banks are challenged by Apple’s credit card announcement to a far greater degree than incumbents".
"There has been a race going on in the background for a while between digital and traditional retail banks," he added. "Apple has now shown that it can supercharge the latter’s capabilities with its own customer interface, so incumbents have a choice of competing with the new rival, positioning themselves as the leader in non-US markets, or trying to persuade Apple to make the Apple Card a decoupled proposition, which can be attached to any bank account as a funding source."
Redesigning the credit card
It's worth noting that Apple isn't the first to offer a premium looking credit card. German challenger bank N26 launched its premium metal card in 2017, and Revolt has long dabbled with the 'credit card as status symbol' marketing approach with its metal card for premium users in August 2018.
Revolut's premium card pays 1% cashback on card transactions made outside the European Economic Area (EEA) and 0.% within, for example.
Aside from the flash metal card, Apple is expanding the functionality of its Wallet app to include digital banking features - like spending categorisation - that will look very familiar to users of Monzo, Revolut and their fintech peers over the past few years.
As Monzo's chief marketing officer Tristan Thomas put it:
"A competitor for Monzo"— Tristan Thomas (@trstnthms) March 25, 2019
Well, this is a weird feeling. https://t.co/cqz1vE7URI
A spokesperson for Starling bank said: "Easy set up, minimalist card design, digital wallet, in-app chat, merchant logos - that will sound familiar to Starling customers.
"We've been doing this, and more, for two years. It's good to see Apple following the digital bank playbook, pioneered by Starling. It shows that others are embracing our mission to make money management better, even if they don't offer full banking services and have a full banking licence like we do."
That being said, Sven Schindele, banking products director at Tandem focused on the lack of geographic reach for the Apple Card, telling Techworld that, "the Apple Card is an American product for the American market. The cashback and other financial perks on offer are sustainable with the US market interchange, but not in the UK market where interchange income is limited to 0.3%. Should this card launch in the UK it would not boast these same rewards without Apple making a considerable loss".
Apple's partner Goldman Sachs has since told CNBC that it is already thinking about expanding the product internationally, however.
"The card boasts some compelling features and supporting tech, from Apple Maps integration to an interest calculator, but overall I don’t think it’s the biggest innovation in cards in 50 years – at least taking a European view," Schindele added.