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The Apple-Goldman Sachs partnership: the birth of a global fintech giant

Last month, Apple made a further push into financial services with the launch of a new savings account (Apple Card Savings) for its credit card (Apple Card) users in the US. Apple Card is used with Apply Pay on an Apple device such as an iPhone, iPad, Apple Watch or Mac.

The savings account, which is managed by Goldman Sachs, is FDIC insured and offers a remarkably high annual percentage yield (APY) of 4.15%. According to Apple, this is more than 10 times the national average. Moreover, there are no fees, no minimum deposits, and no minimum balance requirements, making it an attractive option for its users, who can set up and manage the savings account directly from Apple Card in Wallet (built-in digital wallet).

"Savings helps our users get even more value out of their favorite Apple Card benefit — Daily Cash — while providing them with an easy way to save money every day”, said Jennifer Bailey, Apple’s vice president of Apple Pay and Apple Wallet.

Bailey added, “Our goal is to build tools that help users lead healthier financial lives, and building Savings into Apple Card in Wallet enables them to spend, send, and save Daily Cash directly and seamlessly — all from one place.”

As per Apple, “Once a Savings account is set up, all future Daily Cash earned by the user will be automatically deposited into the account.” Users can deposit additional funds into their savings account through a linked bank account or from their Apple Cash balance. In addition to parking cash in a savings account that will earn that high of a return, Apple Card users can also withdraw funds at any time through the dashboard in Wallet by transferring them to a linked bank account or their Apple Cash card with no fees.

Apple-Goldman partnership may create America’s mightiest fintech

With the national average yield for savings accounts being 0.24 percent APY, as per Bankrate’s April 26 weekly survey of institutions, this new enticing product offering by Apple comes at a time when regional, midsize and small banks in the US are witnessing a migration of deposits to the nation’s largest banks.

This high-yield savings account launch, along with other announcements in the recent past, is an indication that Apple has its sights set on disrupting financial services, while Goldman aims to attract and retain deposits from Apple’s savings accounts that can then be deployed or loaned out within its own client base.

This influx of new savings accounts and deposits was confirmed by Forbes, which reported that Apple’s recently launched high-yield savings account brought in nearly US$1 billion in deposits in its first four days. Roughly 240,000 new accounts were opened by the end of launch week. “On launch day alone, the savings account drew nearly $400 million deposits”, Forbes added. The Apple Card savings account’s attractive 4.15% annual return is likely one of the major reasons for the influx of deposits for Apple – and consumer funds for Goldman.

Following Apple and Goldman’s partnership to lure depositors with high rates, the Kobeissi Letter, which is a weekly commentary on the global capital markets, observed in a Twitter thread, “The era of large banks paying 0.01% interest is ending. Large banks must raise interest rates to remain competitive.”

According to Kobeissi, “The average savings account in the US pays under 0.50%. Over the last month, more than $500 billion has been withdrawn from US banks.” It believes that the US Federal Reserve (Fed) raising interest rates at the fastest pace in history is challenging the banking system.

Against this backdrop, Ted Rossman, a senior industry analyst at Bankrate, remarked, “The interest payout on Apple’s savings account is about 415 times more than the 0.01% that Chase and Bank of America offer their basic savings customers and could incentivize customers to move money from the big banks and into the Apple ecosystem,”

While Apple doesn’t have an official banking charter, it has played a shrewd hand with its quiet and deeper push into the fintech sector, leaving much of the financial legwork to its bank partner Goldman Sachs. This has allowed it to increase its financial services footprint without the accompanying banking regulatory restraints.

“Technically Apple doesn’t have a banking license”, stated Emily Mason, General Assignment Reporter, Money & Markets, in her recently published article in Forbes. “It is fronting for Goldman Sachs Bank USA, otherwise known as Marcus, which has a state charter and is FDIC-insured. In fintech parlance, Apple is a neobank like Chime, Revolut and Monzo – except its brand strength is unparalleled given that there are more than two billion iPhones globally, now serving as Goldman’s branch network.”  

“As trust in traditional banks falters, the two most iconic names in tech and finance are joining together to create what might become America’s mightiest FinTech”, Mason added.

Apple’s next big move: become a financial super app

Apple’s move into the world of banking and payments formally began in 2014 when it made a foray into mobile payment and digital wallet services with Apple Pay. The year 2017 witnessed the launch of Apple Cash, which enabled quick, easy and secure person-to-person payments.

In 2019, Apple debuted its credit card (Apple Card) in association with Goldman, and in 2022, it introduced Tap to Pay to empower millions of merchants to turn their iPhones into card readers by seamlessly accepting Apple Pay, contactless credit and debit cards, and other digital wallets through a simple tap to their iPhones. In March 2023, a month before rolling out the savings account, Apple extended its partnership with Goldman to create a buy now pay later (BNPL) service in the US. The BNPL product, introduced as Apple Pay Later, allows users to split purchases into four instalments spread over six weeks with no interest or fees.

By combining savings, credit, payments and mobile wallets with scale, data capability, increased customer loyalty, enviable cash reserves, creativity and technology prowess, Apple is continuing its big tech march into accessible and alternative financial services. 

Given Apple’s penchant for adding finance products to its arsenal, the next offering is likely to be in the investment management services space. This is expected to be a part of its plan to transform itself into a financial super app like China’s Alipay, fully bundling integrated financial services product offerings (savings, credit, insurance, payments and transfers, and investing services) with broader and interactive commerce functionality – all without leaving its app.

To conclude, banks and fintechs ought to be watchful as Apple seeks to expand its dominance by “Integrating itself into every aspect of its customers’ lives while collecting swipe fees and cross-selling its own products”, advises Mason in her recent Forbes article.

In the US, “More than half of American smartphone owners use an iPhone, giving Apple a large and loyal customer base to pull from. The world’s most valuable company also has an entire ecosystem built around it that no other American company can match”, writes Sara Morrison in her recently published article in Vox Media. And when Apple’s suite of financial services products are available globally, it’s easy to imagine a new era of fintech and banking potentially taking away significant profitable market share from traditional banks.

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