Apple’s announcement that it was entering into credit cards in the United States this winter was one of the most unexpected turns for the tech company. Equally unexpected was who they were partnering with, Goldman Sachs, who traditionally have not had a consumer focus. While to those in the tech industry it wasn’t an overly exciting announcement, in the finance industry it raised a lot of questions. Will other tech companies follow suit? Could their entry prove incredibly disruptive to the current status quo? Apple and other tech companies have a history of causing major disruptions to existing industries with new technological innovations. Generally, this causes a lot of short term pain, but a big improvement overall in the long term. But at this point other tech companies entering into credit cards is pure speculation. The focus is currently on this new Apple Card and what it is, what new conveniences it brings, and what precedent it sets for the future.
Pushing Apple Pay
One thing that is very clear when it comes to the Apple Card is that Apple really loves Apple Pay. Apple had already entered the payment market with Apple Pay providing consumers with a new, innovative way to pay. While it has been taking the world by storm, Commonwealth Bank saw digital wallet payments triple when they introduced Apple Pay, there have still been some non-cooperative banks. Becoming a credit card provider themselves therefore seems like a natural extension. Now Apple can use their brand power and consumer trust to bring its users onto the Apple Card allowing them to use Apple Pay for even more purchases. This also cuts out the negotiation time over Apple’s cut on each transaction that it currently must negotiate with banks, potentially allowing them to take a bigger piece of the pie. All of these combined pushes Apple Pay use and increases Apple’s profits, continuing their move to a services-based company.
This push to Apple Pay is all well and good, but, what extra conveniences does the card offer that could actually entice people away from traditional banks?
The first big convenience ties back into Apple Pay. Everything about the card is designed to push you to use Apple Pay instead of a physical card. Everything about the card is in the Apple Wallet app, even the application form for the card in the first place! This is the next big step for tech companies in their aim to get rid of the physical wallet. Apple accompanied this announcement by announcing increased support for transit cards within Apple Wallet so their agenda is clear, the physical wallet must cease to exist.
One major point that the card totes is how easy it has become to track your spending. Within the Apple Wallet App are all your expenses, neatly laid out for you, you can even click on them and see their exact location. Each expense is laid out in a category based on the type of expense, whether this is food, entertainment, travel, or shopping. You can then see your daily expenses in graph form helping you compare each day. Apple is focusing on a feel-good set-up for their card to entice users. By actively encouraging users to watch their spending Apple clearly feels that it can entice users away from traditional banks. This focus could prove quite effective in a world of rising distrust in traditional credit card providers as discussed in our previous article.
A point that is quite contentious in the tech industry is privacy. If tech companies begin to control your credit cards too, where does this leave your financial privacy? Could your credit card debts be blasted to advertisers or employers? There are legitimate concerns surrounding privacy especially when tech companies have been blatantly exploiting their users’ privacy, see Facebook and Google. Apple has a good history with emphasising privacy when it comes to their products and the Apple Card is supposedly no exception. Every time the Apple Card is mentioned by Apple they are quick to tote the increased privacy offered. Things like a lack of card numbers or expiry dates, unique codes secured on your devices in a secure chip, and assurances that Apple will have no knowledge of your expenses are constantly pushed. This is all well and good, and increased security for credit cards is important and will continue to pressure banks to improve security. But, if Apple’s entry into the credit card game signals the entry of all the tech giants, what will their policies on privacy be? A world where our credit card information is easily accessed by everyone sounds dystopian.
Locking Consumers In to Apple
Now you see the big advantage towards Apple. They want to do everything they can to lock you into Apple products, and why not? It provides them a guaranteed iPhone sale when you go to upgrade your phone, or an Apple Watch sale when you go to buy a smartwatch. Apple’s business model relies on a built ecosystem that encourages you to buy deeper into, then once you are into it make it difficult for you to get out. From the consumer end there isn’t necessarily anything wrong with it. Plenty of people are happy to stay with Apple. There are features and benefits that you simply cannot get from using any other devices. Now the Apple Card is one of those features. If you are considering getting an Apple Card when it arrives in Australia, make sure that you are sure you want to be locked further into Apple’s ecosystem.
What Could Happen Next?
It is almost impossible to predict the future so there is no telling whether this card will be a huge success or a massive flop. Maybe it will encourage other tech companies to bring out their own equivalent, the Google Card or Amazon Card. As consumers what we need to ask ourselves into the future is how important is privacy? That is the big issue surrounding this potential tech disruption into credit cards, our personal privacy. How popular do you think the Apple Card will be?
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