Apple Card: Background on JPMorgan's takeover
Apple's credit card goes to the US major bank JPMorgan. This ends an "unhappy marriage" with Goldman Sachs, say insiders.
Use of an Apple Card in retail.
(Image: Apple)
The Apple Card has a new issuing bank: instead of Goldman Sachs, the iPhone giant's credit card will soon be marketed and managed by the US major bank JPMorgan Chase. The partner change took several years: Goldman Sachs had wanted to get rid of the offering for a long time, especially since it is said to have led to billions in deficits. The Wall Street Journal published various new details last week about the background of the back and forth surrounding the financial product. It shows that no one really came out looking good, but Apple ultimately got what it wanted.
Contract extended again
Goldman will completely withdraw from the consumer lending business, it is said. It is “a chapter that [they] want to forget.” In total, it concerned around 20 billion US dollars in outstanding credit card debt, which JPMorgan will gradually take over. The full sum cannot be paid; Goldman gave a discount to compensate for potential defaults for JPMorgan. Whether a deal would even come about was said to be unclear until the end. The issue was discussed at the highest level in December – Goldman CEO David Solomon and JPMorgan boss Jamie Dimon. Analysts considered the length of the negotiations to be embarrassing. After all, Goldman is the leading “dealmaker” in the industry.
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Apple is said to have succeeded in obtaining “unusual” conditions from Goldman when the credit card program, which is still only available in the USA, launched in 2019. Other banks would have refused. For example, the Apple Card was reportedly offered to “practically everyone” as a customer, which led to a higher number of credit defaults and so-called subprime clients, i.e., those with low creditworthiness. In addition, there were no fees even for late payments and the switch to a monthly term, which is unusual in the industry. The latter then led to statements sometimes being incorrect or issued late, which brought Apple and Goldman trouble with US authorities, up to and including hefty fines. Interestingly, in 2022 there was an extension of the partnership until 2029. So Goldman had tied itself to Apple longer than necessary.
Mastercard remains partner
Now the switch is to take place within a transition phase of 12 to 15 months. Apple marketed its service at JPMorgan with a proud presentation. They want to offer the best credit card and reach almost every US household. Hardly any figures were mentioned. JPMorgan was primarily attracted by Apple's brand.
According to the report, American Express and Barclays were also interested at one point, wanting to bid with the private equity firm KKR. The card service provider remains Mastercard meanwhile; neither Amex nor Visa could prevail. The large US credit card issuer Capital One did not want to decide. It remains unclear whether JPMorgan will finally bring the Apple Card to Europe as well.
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